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3 Growth Tech Stocks to Buy Now After MSFT, AAPL Beat Earnings

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Benjamin Rains
·8 min read
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Stocks surged Thursday to bounce back after Wednesday’s significant pullback that was likely driven by profit taking from a market that hit record highs earlier in the week. This week has also seen Microsoft MSFT, Apple AAPL, and other big names post strong quarterly earnings.

Fourth quarter earnings results continue to top expectations. More importantly, companies have provided upbeat guidance and executives have voiced positive sentiment for 2021.

Meanwhile, 2020 GDP data released Thursday showed that the U.S. economy contracted by 3.5% last year. This marked the first drop since the financial crisis. Luckily, momentum continues to head in the right direction, with the U.S. economy projected to climb by over 4% in 2021 (also read: A Positive and Reassuring Earnings Picture).

Wall Street and everyone else hopes that the vaccine will help the economy look something like it did prior to the pandemic by the summer. There is also plenty of pent-up demand, which is great news for the consumer spending-dependent U.S. economy. And investors are still betting that there will be more coronavirus stimulus under the Biden administration.

Clearly, some might be worried about an overheated market, and others are possibly put off by the very public short squeezes happening with GameStop and other stocks. The S&P 500 is up around 15% since right before the November election and valuations are elevated.

That said, the recent pullback was likely a welcome sign and the Fed recently committed to keeping interest rates near zero. This means that investors need to find returns somewhere.

All of these factors add up to a bullish case for 2021 and that means investors might want to add stocks. And despite the talk and some shifts out of tech into other sectors and cyclicals, technology appears poised to drive the market and our lives going forward…

Snap Inc. SNAP

Snap, famous for its disappearing photo and video sharing social media app, has soared 180% the last year and 134% in the past six months. The stock currently trades for around $54 per share and it has hovered above its 50-day moving average over the last few months as it cools down after its massive post-Q3 release surge. Wall Street has gravitated to its ability to boost its ad business by attracting what Snap calls an “unduplicated and hard-to-reach audience.”

Snapchat ended 2019 with 218 million daily active users, up 17%, while sales jumped 45%. Snap then closed Q3 with 249 million DAUs and it swung from an adjusted loss to positive earnings, with revenue up 52%. Along with its ability to connect users with friends and family, it’s prepared to thrive in the future of entertainment and it has capitalized on a younger audience that consumes entertainment in new ways.

Snap announced in November its new Spotlight feature that aims to take on TikTok. The company also constantly releases various augmented reality offerings and Lenses, and its Discover page is a hit with advertisers. On top of that, it has partnerships with Disney DIS, the NFL, celebrities like Kevin Hart, and more for Shows. Snap said total daily time spent watching Shows surged by 50% last quarter.

Snap also dove into the mobile gaming market in 2019. The firm has built an array of offerings for the modern entertainment age, where people of all ages are glued to their smartphones. This has attracted advertisers that must search harder to find consumers as people disconnect from ad-supported legacy media in favor of Netflix NFLX and Spotify SPOT.

Snap has claimed that in the U.S. it continues “to reach more than 90% of 13 to 24 year-olds and more than 75% of 13 to 34 year-olds.” Those are mind-blowing numbers and that key demographic is harder to reach than ever. And it has remained out of the government spotlight, unlike Facebook FB. In fact, Facebook has ripped off many of Snapchat’s features over the years and any trouble FB faces might help Snap in the long run.

Zacks estimates call for Snap’s Q4 revenue to climb 51% to help lift its adjusted earnings by 67%. Snap’s FY20 sales are projected to climb 43% to $2.5 billion and then jump another 43% in FY21 to reach $3.5 billion. These estimates would represent four-straight years of between 41% to 45% top-line expansion, which is pretty impressive. Snap is also projected to slightly cut its adjusted loss to -$0.15 a share in 2020, with it then projected to soar to +$0.16 in 2021.

Snap’s positive earnings revisions help it grab a Zacks Rank #2 (Buy) right now, alongside its “A” grade for Growth in our Style Scores system. Plus, 20 of the 28 brokerage recommendations Zacks has for Snap come in at a “Strong Buy.” Snap is set to release its Q4 FY20 financial results on Thursday, February 4. And the long-term bull case for Snap is that it provides exposure to digital ad spending, mobile entertainment, and overall smartphone addiction.

Taiwan Semiconductor Manufacturing Company TSM

Taiwan Semiconductor has cemented itself as an integral player in the semiconductor market. TSMC is the world’s largest semiconductor manufacturer, with 56% market share. Chip firms turn to foundries such as TSMC for their integrated circuit production because the costs and time involved are enormous.

Analysts say that TSM has started to leave Intel INTC behind with its 5-nanometer tech that’s helped it land deals with titans like Nvidia NVDA and Qualcomm QCOM. The firm is even helping produce Apple’s new in-house processors.

TSMC could become more valuable as the U.S. and other countries reevaluate some of their ties directly to China. TSM also stands to capitalize on the transition to 5G and the continued tech revolution. TSMC topped our Q4 estimates in mid-January and said that “strong demand for our industry-leading 5-nanometer technology, driven by 5G smartphone launches and HPC-related applications,” helped lift sales.

Zacks estimates call for its revenue to climb 21% this year and another 18% next year, with its adjusted earnings projected to climb 18% and 14%, respectively. TSM’s positive EPS revisions help it hold a Zacks Rank #2 (Buy) right now. On top of that, its 1.1% dividend yield blows away many other growth-focused tech players and matches the 10-year U.S. Treasury.

Taiwan Semiconductor also sports “B” grades for Growth and Momentum and its Circuit Foundry industry grabs the No. 7 spot out of over 250 Zacks industries right now. TSM shares have jumped 122% over the last year to outpace its industry. This climb includes a 50% surge in the past three months. The stock rests about 5% off its recent records after a pullback and it trades in-line with the broader tech sector and far below Nvidia and Advanced Micro Devices AMD in terms of forward earnings.

Micron MU

Micron is one of the largest makers of DRAM and NAND memory chips in the world and it has roared back over the past six months within the cyclical space. The memory chip firm returned to growth in Q3, with sales up 14% and fourth quarter revenue up 24%.

Most recently, MU topped our first quarter FY21 estimates on January 7 and provided strong guidance. Overall, Micron stands to benefit from strong demand from 5G, cloud computing, automotive, and elsewhere this year and beyond.

Micron stock has surged 60% in the past three months after it began to break out of a rough stretch in August of 2020. MU shares are now up 625% over the last five years to more than double the semiconductor industry’s average, and it might be poised to keep on climbing given its outlook.

Micron’s run has stretched its valuation to its highest levels in years. However, given the memory space’s commodity-like standing within semiconductors, it still trades at a solid discount to its industry overall. And 14 of the 21 brokerage recommendations that Zacks has for Micron come in a “Strong Buy” with three more at a “Buy.”

Zacks estimate calls for MU’s fiscal 2021 sales to jump 16%, with FY22 projected to climb over 25% higher to $31.1 billion. On the bottom end, MU’s adjusted earnings are projected to surge by 36% this year and an eye-popping 98% in fiscal 2022.

Micron has clearly regained momentum within the cyclical space and its positive EPS revisions to help it land a Zacks Rank #1 (Strong Buy) right now. And investors might be pleased that it sits roughly 10% off its recent highs at around $80 a share, with the stock up 6% through morning trading Thursday.

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Microsoft Corporation (MSFT) : Free Stock Analysis Report

Micron Technology, Inc. (MU) : Free Stock Analysis Report

NVIDIA Corporation (NVDA) : Free Stock Analysis Report

Intel Corporation (INTC) : Free Stock Analysis Report

Apple Inc. (AAPL) : Free Stock Analysis Report

The Walt Disney Company (DIS) : Free Stock Analysis Report

Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report

QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report

Netflix, Inc. (NFLX) : Free Stock Analysis Report

Taiwan Semiconductor Manufacturing Company Ltd. (TSM) : Free Stock Analysis Report

Facebook, Inc. (FB) : Free Stock Analysis Report

Snap Inc. (SNAP) : Free Stock Analysis Report

Spotify Technology SA (SPOT) : Free Stock Analysis Report

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