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Technology on Solid Footing: 5 Stocks With More Room to Run
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Tech stocks have been investors’ darlings this year despite the coronavirus outbreak. In fact, social distancing norms enacted globally to mitigate the spread of the virus compelled people to stay at home, binge online and work as well as learn from home.
This new lifestyle has boosted various corners of the technology sector, ranging from enterprise cloud computing, cyber security, remote communications, video gaming and e-commerce to online payments. The broader tech ETF Technology Select Sector SPDR Fund (XLK - Free Report) has gained 19.3% past month versus 15.3% gains in the S&P 500.
Has the Rally Been Uninterrupted?
Sailing hasn’t been all that smooth for the tech sector so far as it also hit some rough waters in between. President Donald Trump’s forewarning of a temporary suspension of immigration due to virus spread dealt a blow to the tech stocks in mid-April. The U.S. tech sector is heavily reliant on immigrants.
Then, there was a sharp drop (down 7.6%) in shares of Amazon (AMZN - Free Report) on May 1 due to earnings weakness and weak outlook. Since Amazon was one of the key contributors of the April rally, such underperformance wasn’t taken lightly by investors. As a result, the tech-heavy Nasdaq took a beating to start the month.
Have Patience, Tech Appears to Have More Room to Run
Forget Amazon as we already had a bunch of inspiring big tech earnings this season from the likes of Facebook , Microsoft (MSFT - Free Report) and Alphabet (GOOGL - Free Report) .
Some corners of the technology industry – cloud computing, internet and video gaming – are already benefiting from the stay-at-home trends. But those corners that were the social-distancing victims may also turn around with the full reopening of economies.
One such area is smartphones. Micron Technology (MU - Free Report) — one of the world’s largest producers of DRAM and NAND flash memory chips that are the key building blocks in smartphones and cloud computing technologies — lately indicated that demand for smartphones in China has started to rebound post-coronavirus lockdown. This is great news for semiconductor companies as well as the likes of Apple (AAPL - Free Report) . Apple CEO Tim Cook also took notice of recovering demand in China through April.
Widening the presence and stepping beyond the core operation has become the big tech companies’ mantra in recent times. In a bid to be part of the hot video-gaming industry (which has seen immense growth amid lockdowns), Facebook too launched its first game streaming app, Facebook Gaming, on Apr 21. Such initiatives will pay off in the medium term.
Strong Fundamentals of the Tech Sector
Tech earnings are likely to grow 2.8% in Q1 of 2020 on 6.2% higher revenues. This is in contrast to a 12.5% slump in S&P 500 earnings on 2.1% increase in revenues. The technology sector is among the very few outperformers in the otherwise-downbeat earnings trends.
Tech companies are cash-rich. Microsoft has been the most cash-rich company globally, with about $137.6 billion in cash balance. Tech sector’s debt profile is also impressive. Debt/equity ratio of the sector is 0.15x versus 0.72x of the S&P 500-based ETF (IVV - Free Report) .
Tech Stocks That May See More Upside
These stocks have seen the upcoming quarter’s earnings estimates going up by at least 5% in the past four weeks. Their price as a percentage of 52-week high-low (H-L) range remains lesser than or equal to 90%. A value of 100 indicates that the stock is trading at a 52-week high and vice versa. The past four-week share price rally is greater than equal to 15%. The stocks also have a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
The Zacks Rank #1 developer and distributer of high-performance compound semiconductor substrates, as well as opto-electronic semiconductor devices comes from a favorable Zacks industry (placed at the top 19% of total 250+ industries in the Zacks universe). Price as a percentage of 52-week H-L range is 85.60%, indicating an upside possible for the stock. Upcoming quarter’s earnings estimates rose 61.67%.
The Zacks Rank #3 provider of software-as-a-service and solutions for the Internet of Thingscomes from a favorable Zacks industry (top 15%). Earnings estimate went up by 42.86% in the past four weeks. Price as a percentage of 52-week H-L range is 72.78%.
Workiva Inc (WK - Free Report) — Up 15.3% Past Month
The Zacks Rank #2 company offers a cloud-based and mobile-enabled platform for enterprises to collect, manage, report and analyze critical business data in real time. It has a Zacks Rank #2. It comes from a favorable Zacks industry (top 15%). Earnings estimate went up by 11.88% in the past four weeks. Price as a percentage of 52-week H-L range is 34.45%.
Blackline Inc (BL - Free Report) — Up 18.5% Past Month
The Zacks Rank #2 provider of cloud-based solutions for Finance & Accounting which centralize and streamline financial close operations and other key F&A processes for midsize and large organizations comes from a favorable sector (top 15%). Earnings estimate rose by 20.34% in the past four weeks. Price as a percentage of 52-week H-L range is 70.83%.
MACOM Technology Solutions Holdings Inc (MTSI - Free Report) — Up 37.15% Past Month
The Zacks Rank #2 company is a provider of power analog semiconductor solutions to varied markets. It belongs to a favorable Zacks industry (top 48%). Earnings estimate went up by 69.95% in the past four weeks. Price as a percentage of 52-week H-L range is 87.93%.
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.
Image: Bigstock
Technology on Solid Footing: 5 Stocks With More Room to Run
Tech stocks have been investors’ darlings this year despite the coronavirus outbreak. In fact, social distancing norms enacted globally to mitigate the spread of the virus compelled people to stay at home, binge online and work as well as learn from home.
This new lifestyle has boosted various corners of the technology sector, ranging from enterprise cloud computing, cyber security, remote communications, video gaming and e-commerce to online payments. The broader tech ETF Technology Select Sector SPDR Fund (XLK - Free Report) has gained 19.3% past month versus 15.3% gains in the S&P 500.
Has the Rally Been Uninterrupted?
Sailing hasn’t been all that smooth for the tech sector so far as it also hit some rough waters in between. President Donald Trump’s forewarning of a temporary suspension of immigration due to virus spread dealt a blow to the tech stocks in mid-April. The U.S. tech sector is heavily reliant on immigrants.
Then, there was a sharp drop (down 7.6%) in shares of Amazon (AMZN - Free Report) on May 1 due to earnings weakness and weak outlook. Since Amazon was one of the key contributors of the April rally, such underperformance wasn’t taken lightly by investors. As a result, the tech-heavy Nasdaq took a beating to start the month.
Have Patience, Tech Appears to Have More Room to Run
Forget Amazon as we already had a bunch of inspiring big tech earnings this season from the likes of Facebook , Microsoft (MSFT - Free Report) and Alphabet (GOOGL - Free Report) .
Some corners of the technology industry – cloud computing, internet and video gaming – are already benefiting from the stay-at-home trends. But those corners that were the social-distancing victims may also turn around with the full reopening of economies.
One such area is smartphones. Micron Technology (MU - Free Report) — one of the world’s largest producers of DRAM and NAND flash memory chips that are the key building blocks in smartphones and cloud computing technologies — lately indicated that demand for smartphones in China has started to rebound post-coronavirus lockdown. This is great news for semiconductor companies as well as the likes of Apple (AAPL - Free Report) . Apple CEO Tim Cook also took notice of recovering demand in China through April.
Widening the presence and stepping beyond the core operation has become the big tech companies’ mantra in recent times. In a bid to be part of the hot video-gaming industry (which has seen immense growth amid lockdowns), Facebook too launched its first game streaming app, Facebook Gaming, on Apr 21. Such initiatives will pay off in the medium term.
Strong Fundamentals of the Tech Sector
Tech earnings are likely to grow 2.8% in Q1 of 2020 on 6.2% higher revenues. This is in contrast to a 12.5% slump in S&P 500 earnings on 2.1% increase in revenues. The technology sector is among the very few outperformers in the otherwise-downbeat earnings trends.
Tech companies are cash-rich. Microsoft has been the most cash-rich company globally, with about $137.6 billion in cash balance. Tech sector’s debt profile is also impressive. Debt/equity ratio of the sector is 0.15x versus 0.72x of the S&P 500-based ETF (IVV - Free Report) .
Tech Stocks That May See More Upside
These stocks have seen the upcoming quarter’s earnings estimates going up by at least 5% in the past four weeks. Their price as a percentage of 52-week high-low (H-L) range remains lesser than or equal to 90%. A value of 100 indicates that the stock is trading at a 52-week high and vice versa. The past four-week share price rally is greater than equal to 15%. The stocks also have a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
AXT Inc. ATXI — Up 61.77% Past Month
The Zacks Rank #1 developer and distributer of high-performance compound semiconductor substrates, as well as opto-electronic semiconductor devices comes from a favorable Zacks industry (placed at the top 19% of total 250+ industries in the Zacks universe). Price as a percentage of 52-week H-L range is 85.60%, indicating an upside possible for the stock. Upcoming quarter’s earnings estimates rose 61.67%.
Inseego Corp (INSG - Free Report) — Up 54.2% Past Month
The Zacks Rank #3 provider of software-as-a-service and solutions for the Internet of Thingscomes from a favorable Zacks industry (top 15%). Earnings estimate went up by 42.86% in the past four weeks. Price as a percentage of 52-week H-L range is 72.78%.
Workiva Inc (WK - Free Report) — Up 15.3% Past Month
The Zacks Rank #2 company offers a cloud-based and mobile-enabled platform for enterprises to collect, manage, report and analyze critical business data in real time. It has a Zacks Rank #2. It comes from a favorable Zacks industry (top 15%). Earnings estimate went up by 11.88% in the past four weeks. Price as a percentage of 52-week H-L range is 34.45%.
Blackline Inc (BL - Free Report) — Up 18.5% Past Month
The Zacks Rank #2 provider of cloud-based solutions for Finance & Accounting which centralize and streamline financial close operations and other key F&A processes for midsize and large organizations comes from a favorable sector (top 15%). Earnings estimate rose by 20.34% in the past four weeks. Price as a percentage of 52-week H-L range is 70.83%.
MACOM Technology Solutions Holdings Inc (MTSI - Free Report) — Up 37.15% Past Month
The Zacks Rank #2 company is a provider of power analog semiconductor solutions to varied markets. It belongs to a favorable Zacks industry (top 48%). Earnings estimate went up by 69.95% in the past four weeks. Price as a percentage of 52-week H-L range is 87.93%.
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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