The technology sector, which has showed its immense strength against the trade and tariff threats recently on the FANG surge, has lost its ground following news of a potential curb in Chinese investment. In fact, the sector pushed Wall Street even lower on Jun 27 with the S&P 500 Technology Sector dropping 1.5% and Philadelphia semiconductor index sliding 2.5%.
The Trump administration is seeking to limit many Chinese companies from investing in U.S. technology firms and block additional technology exports to that country. The Treasury Department is working on the rules to block companies with at least 25% Chinese ownership from buying companies involved in "industrially significant technology.” The measures are expected to be announced by the end of this week and are intended to counter Beijing's Made in China 2025 strategic plan. Under this plan, China wants to become a global leader in 10 broad areas of technology, including robotics, aircraft and aircraft components, advanced rail equipment, electrical-generation and transmission equipment and pharmaceuticals and advanced medical devices.
As such, the potential move would hurt the tech sector more broadly than just the semiconductors and hit revenues, earnings and stock prices of the tech titans having significant exposure to China.
However, the outlook for the technology sector has been encouraging. The emergence of cutting-edge technology such as cloud computing, big data, Internet of Things, wearables, VR headsets, drones, virtual reality, and artificial intelligence as well as strong corporate earnings are acting as the key catalysts.
Additionally, the twin tailwinds of Trump’s tax reform plan and a rising interest rate scenario are pushing the stocks higher. Adding to the strength is a pickup in the economy and better job prospects that are giving a solid boost to economically sensitive growth sectors like technology, which typically perform well in a maturing economic cycle.
How to Buy the Dip
Given encouraging long-term trends, investors could definitely tap the current dip in the stocks. While there are many stocks in the space having a solid Zacks Rank #1 (Strong Buy) or 2 (Buy), we have highlighted six big technology names (market cap of more than $10 billion) that have seen their Rank surging to the top rank.
All these are backed by strong fundamentals compared to many others and have a potential to beat the ongoing trade turmoil. Any of these could for great picks going into the second half of the year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Adobe Systems Incorporated (ADBE - Free Report) – Market Cap: $119.3 Billion
This California-based company is one of the largest software companies in the world. The stock has an expected earnings growth rate of 53.58%, much higher than the industry average of 18.75%. Sales are also expected to grow at an above-industry average rate of 22.12%. Adobe has a Growth and Momentum Score of A each and shed 1.9% in yesterday’s trading session.
Microchip Technology Incorporated (MCHP - Free Report) – Market Cap: $21.9 Billion
This Arizona-based company develops, manufactures and sells specialized semiconductor products used by the customers for a wide variety of embedded control applications. The stock has an expected earnings growth rate of 20.56% for this year, much higher than the industry average of 15.44%. Sales are also expected to grow above-industry average at 48.55%. It is a triple play stock with a Value, Growth and Momentum Score of B, A, and A, respectively, and lost 3.05% on the day.
NetApp Inc. (NTAP - Free Report) – Market Cap: $20.5 Billion
This California-based company provides software, systems, and services to manage and share data on-premises, and private and public clouds worldwide. It has an estimated earnings growth of 16.67% for this year, slightly below the industry average of 18.44%, and revenue growth of 4.77%, slightly above the industry average of 3.58%. NetApp has a Growth and Momentum Score of A each and was down 2.04% on Jun 27.
Akamai Technologies Inc. (AKAM - Free Report) – Market Cap: $12.9 Billion
This Massachusetts-based company provides cloud services for delivering, optimizing, and securing content and business applications over the Internet in the United States and internationally. It has an estimated earnings growth of 24.87% for this year and revenue growth of 8.77%, above the industry average of 5.97%. The stock flaunts a top Momentum Score of A and plunged 4.31% on the day.
Match Group, Inc. (MTCH - Free Report) – Market Cap: $11.2 Billion
This Texas-based company offers subscription-based online dating websites and applications services. It has a whopping earnings growth estimate of 82.17% for this year, much higher than the industry growth of 24.87%. Revenue growth of 27.20% is also projected to be above the industry growth of 5.97%. Match Group has a Growth and Momentum Score of B and A, respectively. Shares of MTCH were down 2.95% in yesterday’s trading session.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions. New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>