Technology stocks have witnessed a mixed earnings season so far. Although the coronavirus outbreak hit the U.S. technology stocks hard, the sector has been more resilient compared to others, primarily owing to the ongoing digital transformation and attractive prospects.
The Tech space displayed its flexibility and earnings power through solid performances of leaders like Intel (INTC - Free Report) , Microsoft and Alphabet.
Intel reported strong first-quarter 2020 results, courtesy of robust performances from its data-centric businesses, which jumped 34% year over year to $10.05 billion and accounted for 50.7% of its total revenues.
Both Microsoft’s and Alphabet division Google’s results reflected solid demand for cloud-computing services. While Azure's revenues surged 59% year over year in third-quarter fiscal 2020, Google Cloud recorded 52.1% year-over-year revenue growth in first-quarter 2020.
Contactless payment and delivery also gained a significant traction amid the coronavirus outbreak. Management at Apple stated that Apple Pay was offered to promote and support contactless payments by the likes of Trader Joe’s, Woolworths, Lawson’s, Sainsbury’s, Lidl and Carrefour.
Moreover, online food delivery provider Grubhub (GRUB - Free Report) witnessed a solid first quarter as Gross Food Sales and average order size increased despite the adverse impact of coronavirus on its corporate business.
Additionally, social-media companies, namely Facebook, Snap and Twitter registered growth in traffic and user engagement as more and more people stayed home due to lockdowns and adherence to shelter-at-home guidelines. However, the coronavirus affected advertising demand and spending, which hurt the industry players’ toplines.
Tech’s Teeming Catalysts for Progress
Although the coronavirus hindered growth prospects, yet tech companies are expected to continue benefiting from the rapid adoption of cloud computing, AI, IoT, cloud-based gaming, wearables and drones.
Work-from-home and online learning wave are also key drivers. Furthermore, a solid uptake of AI-infused virtual assistants steadily perks up demand for smart speakers like Amazon Echo and Google Home.
Moreover, the rising preference for online gaming, music and video-streaming services is a major lever.
How to Make the Right Pick?
With the presence of several industry participants, finding the right technology stocks with potential to beat on earnings can be daunting. Our proprietary methodology, however, makes this task fairly simple.
You could narrow down your choices by looking at the stocks that have the perfect combination of two key elements: a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP is our proprietary methodology for determining the stocks that have maximum chances of beating estimates at their next earnings announcement. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this apt mix of ingredients, the odds of a positive earnings surprise are as high as 70%.
Given below are five technology stocks that have a favorable combination to beat on earnings this reporting cycle:
Lausanne, Switzerland-based Logitech (LOGI - Free Report) has an Earnings ESP of +8.33% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company is scheduled to report fourth-quarter fiscal 2020 results on May 11. The Zacks Consensus Estimate for earnings increased a penny to 36 cents per share over the past 30 days.
Santa Cruz, CA-based Plantronics (PLT - Free Report) is scheduled to report fourth-quarter fiscal 2020 results on May 12.
The company has a Zacks Rank of 2 and an Earnings ESP of +329.63%.
The Zacks Consensus Estimate has been revised upward from a loss of 24 cents to earnings of 7 cents per share over the past month.
Santa Clara, CA-based NVIDIA (NVDA - Free Report) is set to report first-quarter fiscal 2021 results on May 21. The company has an Earnings ESP of +0.15% and is Zacks #2 Ranked.
The consensus estimate for earnings has stayed at $1.69 per share over the past 30 days.
San Jose, CA-based Cisco Systems (CSCO - Free Report) has a Zacks Rank #3 and an Earnings ESP of +1.65%. The company is scheduled to report third-quarter fiscal 2020 results on May 13.
The Zacks Consensus Estimate for earnings has declined a penny to 72 cents per share over the past 30 days.
Beijing, China-based Baidu (BIDU) is set to report first-quarter 2020 results on May 18. The company has an Earnings ESP of +10.27% and a Zacks Rank of 3.
The consensus estimate for earnings has been lowered a penny to 73 cents per share over the past 30 days.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>