Stocks tumbled Friday on growing coronavirus fears, as Wall Street worries how travel restrictions to and from China might impact the global economy. The Dow, S&P 500, and Nasdaq all fell over 1% in morning trading in what has been a rough week.
The coronavirus has now infected nearly 10,000 people, which is more than SARS did roughly 20 years ago, and killed at least 213. And the World Health Organization declared it a public-health emergency of international concern Thursday as it spreads to more countries.
With that said, Q4 earnings season has seen some standout reports this week alone, including Tesla TSLA and Amazon AMZN. On top of that, corporate earnings are expected to return to growth in 2020. Plus, U.S. GDP climbed 2.3% in 2019, the Fed maintained its low interest rates, and U.S. unemployment remains near 50-year lows.
Clearly, there appears to be a backdrop for U.S. stocks to continue to climb in 2020. But the coronavirus has shaken things up, especially in the near-term. So let’s look at three blue-chip tech stocks that we found with our Zacks Stock Screener that investors might want to buy amid coronavirus worries…
Apple is an obvious choice given its blowout Q1 2020 results and stellar year-plus run. AAPL’s size will help it withstand China-based uncertainty and its $207 billion in cash on hand will see it continue to buy back billions of dollars worth of its own stock, especially if it slides on virus-focused fears. The firm also returned to growth in its vital iPhone unit, with sales up roughly 8%, driven by a strong showing from the iPhone 11. And analysts expect this fall’s iPhone 12 will feature some of Apple’s most game-changing updates in years, including its first 5G offering.
Wall Street was also pleased with the continued expansion of services and wearables, up roughly 18% and 37%, respectively. AAPL’s goal is to generate more revenue from its 1.5 billion active devices. Apple Music, Netflix NFLX-challenger Apple TV+, its app store, news service, and others will likely drive growth for years to come. Apple said on its earnings call that it hit 480 million paid subscriptions and now hopes to hit 600 million before the end of calendar 2020, up from its previously stated goal of 500 million.
Apple is currently a Zacks Rank #2 (Buy), pays a dividend, and has seen its fiscal 2020 and 2021 earnings estimates surge since it reported. AAPL’s valuation is stretched, alongside the S&P 500. But our Zacks estimates call for its 2020 revenues to surge 9.3% and another 8% in 2021. Plus, its adjusted earnings are set to pop 15.5% and 14% during this same stretch.
Microsoft is another one of the firms in the exclusive $1 trillion market cap club that wowed Wall Street earlier this week. MSFT crushed our bottom-line estimate by over 10% for the fourth straight period and its revenue surged 14%. The company’s sales growth was driven by 27% expansion in its Intelligent Cloud unit and 39% expansion in Commercial Cloud. Its Office-heavy Productivity and Business Processes unit also surged 17%.
Like Apple, MSFT earns a Zacks Rank #2 (Buy) after analysts quickly raised their bottom-line estimates for fiscal 2020 and 2021. Microsoft also sports a “B” grade for Growth and an “A” for Momentum in our Style Scores system. MSFT’s adjusted earnings are now projected to surge 16.6% and 12.1%, respectively, in FY20 and FY21. On top of that, its full-year sales are set to jump 12.6% and 11.4% during this same stretch
Microsoft is a stock that could help investors weather a possible virus-based pullback. Last fall, MSFT executives announced that they raised the firm’s dividend by 11% and approved a new share repurchase program. The company is also part of an industry that rests in the top 21% of our more than 250 Zacks industries, which is often helpful. And MSFT is poised to expand its legacy businesses, including a new next-generation gaming push, as it challenges Amazon for cloud supremacy.
Intel is the largest semiconductor maker in the U.S. by revenue and it will remain a key cog in the ongoing tech revolution for years. INTC is much smaller than AAPL and MSFT in terms of market cap, at $274.8 billion. Yet, like its peers, Intel topped our quarterly estimates recently and saw its earnings revisions surged upward after its Q4 report on January 23. The chip giant also raised its 2020 outlook as part of what looks like a broader industry-wide chip comeback this year, which includes the likes of Nvidia NVDA and others.
INTC’s Q4 revenue surged 8% from the year-ago period to a company record $20.2 billion. The firm’s data-centric business helped drive its quarterly growth. Looking ahead, Intel’s full-year fiscal 2020 revenue is projected to jump 2.2% to help lift its bottom-line by 2.5%. Intel also saw its Q1 earnings estimate soar 25%, with its FY20 figure up nearly 6% and its FY21 up 9%.
Intel’s positive earnings revisions help it grab a Zacks Rank #2 (Buy) right now. The stock also sports a “B” grade for Value and an “A” for Growth. INTC stock has surged 30% in the last six months to top its industry’s 23% climb and it recently hit its highest point since the early 2000s. The company also announced that it raised its annualized dividend by 5%. And CEO Bob Swan said that the firm is exceeding its own expectations one year into its new long-term financial plan.
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