The S&P 500 has continued to hum along in 2019, up roughly 12%, as it tries to erase the fourth quarter downturn that was driven, in part, by large-cap tech stocks like Apple AAPL and Amazon AMZN. As the rebound pushes forward, it seems likely that money will continue to flow into strong, consistent companies with businesses that can withstand near-term headwinds.
Therefore, some of the world’s leaders in technology, which have dominated Wall Street in recent years, are back on the menu. Tech has been at the helm of our historic bull market, and in our increasingly interconnected and digital world, it is likely that the industry remains a long-term growth driver.
Clearly, some of the volatility has made some investors more skeptical, with bearish traders quick to draw similarities between this latest tech rally and the infamous dot-com bubble of the late 90s and early 2000s. Yet, unlike the dot-com bubble, sustainable revenue and earnings expansion has fueled tech.
There are, of course, concerns about a global economic slowdown. This might mean that investors interested in tech search for companies that have proven their strength for years and look poised for solid expansion. With that said, let’s check out three blue-chip tech stocks to consider buying right now.
1. Cisco Systems, Inc. CSCO
Cisco is a historic networking and tech firm that has expanded into the internet of things and more in recent years, offering clients the chance to connect everything from transportation fleets to assembly lines. Shares of CSCO have surged 23% this year to crush the market and its industry’s 17% average climb to help them rest just below their 52-week high of $54.23 per share.
Looking ahead, our current Zacks Consensus Estimates call for Cisco’s current quarter earnings to surge 16.7% on the back of 3.4% revenue growth. The company’s full-year fiscal 2019 revenue and earnings are projected to jump 4.7% and 17.7%, respectively, with an additional 10% bottom-line expansion expected in 2020.
CSCO has also experienced a ton of positive earnings estimate revisions activity for both 2019 and 2020 recently, against almost zero downward changes. This recent positivity helps Cisco sport a Zacks Rank #2 (Buy) at the moment. Cisco is also a dividend payer that lifted its quarterly payout to $0.35 per share, up 6% from the year-ago period and 20% on a two-year stack. Ciscohas a dividend yield of 2.5% and its trading just below its industry’s average forward P/E at 18.2X forward 12-month Zacks Consensus EPS estimates.
2. Hewlett Packard Enterprise HPE
Hewlett-Packard HPQ spun off Hewlett Packard Enterprise in the fall of 2015. HPE offers its business clients everything from management software to hybrid cloud solutions and has also expanded into IoT related hardware, software, and security solutions. Shares of Hewlett Packard Enterprise have surged roughly 17% to start the year to outpace the S&P’s 12% climb. Despite the climb, HPE stock still rests 14% below its 52-week high at $15.40 per share.
Investors should also note that HPE currently sports “B” grades Value and Momentum in our Styles System and is trading at 9.1X forward 12-month Zacks Consensus EPS estimates right now. This represents a discount compared to its industry’s 14.9X average and its own three-year median of 11.1X. Meanwhile, the firm’s positive earnings estimate revision activity helps it earn a Zacks Rank #2 (Buy).
HPE also pays an annualized dividend of $0.45 per share, with an approximately 3% yield. Meanwhile, HPE is expected to see its adjusted Q2 fiscal 2019 earnings jump 5.9%. Peeking further ahead, the firm’s current full-year earnings are projected to pop 4.5%, with its 2020 EPS figure expected to climb 7.7% above our 2019 estimate.
3. Facebook FB
Facebook’s 2018 setbacks have been well documented and now the firm faces charges of discrimination from the U.S. Department of Housing and Urban Development due to its ad-targeting system. Despite the setbacks, Facebook’s global monthly active user total climbed 9% in Q4 to reach 2.32 billion. Mark Zuckerberg’s firm has also seen its Instagram platform become more popular and the CEO recently detailed plans about how Facebook could start to focus on private encrypted messaging, payments, and other services in a move that would see it transition toward Tencent’s TCEHY WeChat model. Facebook’s longer-term earnings estimate revision activity has also trended up in a big way recently to help FB earn Zacks Rank #2 (Buy).
Facebook’s first quarter revenues are projected to jump 25% to reach $14.96 billion, with fiscal 2019’s top-line expected to expand by over 23%. Peeking even further ahead, FB’s adjusted 2020 earnings are projected to climb 17% on the back of 20.6% revenue growth.
Overall, the company’s share of total U.S. digital ad spending is expected to pop slightly this year to 22.1%, according to eMarketer—Google GOOGL controls roughly 40%. Facebook’s position as the second largest digital advertiser could become even more lucrative as non-ad supported platforms like Netflix NFLX and Amazon Prime, make consumers more difficult to reach. FB is also trading at 21.2X 12-month Zacks Consensus EPS estimates, which falls far below its three-year high of 44.3X and its three-year median of 27.7X.
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