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5 Large-Cap Technology Stocks to Buy This Earnings Season

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The U.S. stock market has been witnessing turbulence for the past three months due to the coronavirus outbreak. Notably, the three major U.S. indices — the Dow Jones, the S&P 500 and the Nasdaq Composite — have declined 19.3%, 15.3% and 7.9%, respectively, on a year-to-date basis.

Lockdown impositions across the world in a bid to curb the spread of COVID-19 have been taking a toll on the global economy. The pandemic has caused disruptions in major sectors and economic zones, resulting in a full-blown crisis due to the slowdown in productions and operations, and sluggish spending patterns.

As a result, the first-quarter corporate earnings are expected to have suffered significantly. According to the latest Zacks Earnings Outlook article, total earnings for the S&P 500 members will likely be down 14.1% year over year in the current reporting cycle.

Though the coronavirus outbreak has had a sector-wide impact, the U.S. tech sector seems more resilient compared with the other sectors. Per the Earnings Outlook article, tech sector earnings are expected to decline 1.8% on 2.5% higher revenues.

Why Tech Sector Could Outperform?

The coronavirus outbreak has, surprisingly, opened up newer avenues of growth for several industries in the broader tech sector. Due to the coronavirus-led global lockdown, the adoption rate of Internet-based services and apps has been increasing rapidly for the past few weeks since people are compelled to stay indoors.

Moreover, the work-from-home wave worldwide is bolstering demand for advanced technology-based virtual meetings and conference tools. Additionally, the work-and-learn from home necessity has propelled demand for PCs, notebooks, peripheral accessories, and cloud storage. (Read More: 6 Remote-Working Software Stocks to Ride on Virus-Led Lockdowns)

All these, in turn, are aiding growth in the high-speed Internet services space. Additionally, the rising demand for robust communication networks is another positive. Further, the growing proliferation of AI technology, and cloud computing products and services in managing this pandemic situation is a tailwind.

All these trends are stoking demand for semiconductor chips. Notably, Micron Technology (MU - Free Report) reported better-than-expected second-quarter fiscal 2020 results last month. The company stated that the lockdown situation has spurred significant chip demand from PC manufacturers and data-center operators.

Apart from these, the adoption rate of streaming services for entertainment has surged in this stay-at-home scenario.

All these positives will encourage investors to buy tech stocks.

As the first-quarter earnings season is underway, estimate-beating stocks will be the most important ones from an investment point of view. We believe investors should always hunt for such stocks before an earnings release. This strategy would place them ahead of time, and help bet on stocks that are rich in quality and have higher chances of beating earnings estimates.

Strategy to Pick Stocks

We have used several selection criteria for our picks. First, we selected large-cap (over $10 billion in market cap) stocks as these companies have been doing businesses for a long time and their stock prices are generally stable. Secondly, these stocks have strong fundamentals that help them stay afloat in a turbulent economic and business environment.

Third, all these stocks are expected to release earnings reports within the next 30 days and have a positive Earnings ESP.  Finally, each of our picks carries either a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Our research shows that for stocks with the combination of a Zacks Rank #3 or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%.

Our Picks

Citrix Systems, Inc. is a leading provider of virtualization, networking and cloud-computing solutions to more than 400,000 organizations worldwide. This Zacks Rank #2 company is scheduled to report first-quarter results on Apr 23. The company has an Earnings ESP of +1.58% for the to-be-reported quarter. In the last four quarters, it delivered positive earnings surprises on three occasions and missed in the other, the average positive beat being 6.3%.

Apple Inc.’s (AAPL - Free Report) business primarily runs around its flagship iPhone. However, the Services portfolio that includes revenues from cloud services, App store, Apple Music, AppleCare, Apple Pay, and licensing and other services has now become the latest cash cow.

The Zacks Rank #3 company delivered positive earnings surprises in each of the trailing four quarters, the average beat being 6.1%. Apple is expected to release results around Apr 30, after the bell.

Apple Inc. Price and Consensus

Apple Inc. Price and Consensus

Apple Inc. price-consensus-chart | Apple Inc. Quote

ServiceNow Inc. (NOW - Free Report) provides cloud-computing services that automate digital workflows to accelerate enterprise IT operations. The company, which is scheduled to report quarterly numbers on Apr 29, has an Earnings ESP of +1.47% for the first quarter. The Zacks Rank #3 company delivered positive earnings surprises in all of the last four quarters, the average beat being 13.8%.

EPAM Systems, Inc. (EPAM - Free Report) is well known for its software engineering and IT consulting services. The company has an Earnings ESP of +0.55% for first-quarter 2020. This Zacks Rank #3 company posted positive earnings surprises in each of the trailing four quarters, the average beat being 3.8%. EPAM is set to release results on May 7, before the opening bell.

Match Group, Inc. (MTCH - Free Report) is the world’s foremost provider of dating products and operates a portfolio of more than 45 brands. The company, scheduled to report quarterly figures on May 5, has an Earnings ESP of +1.94% for the March-end quarter. The Zacks Rank #3 company recorded positive earnings surprises in all of the last four quarters, the average beat being 20.2%.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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