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4 Stocks to Buy as Nasdaq Hits Record High on Tech Rally

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·7 min read
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The rally in the Nasdaq Composite continued further, with the index scoring a record close on Tuesday. The index gained 0.79%, outperforming the Dow Jones Industrial Average and the S&P 500, which closed up at 0.20% and 0.51% yesterday, respectively.

The Federal Reserve chairman Jerome Powell’s positive remark about inflation pressures mainly lifted investor sentiment. Notably, Powell testified before the House of Representatives on Tuesday, where he acknowledged that the recent high inflation will be temporary.

The Fed chief stated that the recent surge in inflation is driven by the heightening consumer demand for categories that are closely tied to the economic reopening, such as airline tickets and hotel prices which were hard hit by the government-imposed restrictions last year due to the COVID-19 pandemic. He assured the house that the hyperinflation situation, similar to the 1970s and early 1980s is very, very unlikely.

Big Tech Stocks Drive Nasdaq Higher

Tuesday’s rally was driven by the technology sector that includes the big tech stocks, Amazon AMZN, Apple AAPL and Microsoft MSFT. Shares of Amazon, Apple and Microsoft gained 1.5%, 1.3% and 1.1%, respectively, yesterday.

Notably, the U.S. stock market has been in a recovery mode since last April, after crashing in March due to the pessimism surrounding the coronavirus crisis. However, it is the technology sector which has played a crucial role in Nasdaq’s faster recovery compared with the Dow Jones and the S&P 500.

Tech stocks constitute more than 50% of weightage in the Nasdaq Composite index. The Technology Select Sector SPDR XLK, the most important component of the broad market index, has a positive one-year return of 41.5%.

What’s Pushing Tech Stocks Higher?

The technology sector has been robustly resilient to the negative impact of the pandemic-induced disruptions, aided by advanced technologies, including Machine Learning (ML), Artificial Intelligence (AI), Augmented Reality (AR), cloud computing, blockchain and robotics.

The adoption rate of Internet-based services and apps has been increasing rapidly as people are compelled to stay indoors. Also, the global work-from-home wave is bolstering demand for advanced technology-based virtual meetings and conference tools.

Additionally, the work-and-learn-from-home necessity has propelled demand for PCs, notebooks, peripheral accessories, and cloud storage. All of these, in turn, are fueling growth for high-speed Internet services.

Moreover, rising demand for robust communication networks is another positive. Further, the growing proliferation of AI technology, and cloud computing products and services in managing this pandemic situation is a tailwind. All these trends are stoking demand for semiconductor chips.

In addition, the long-term growth prospects of tech companies look promising owing to the continued digital transformations. The accelerated deployment of 5G technology — the next-generation wireless revolution — is likely to spur further growth. Apart from this, blockchain, Internet of Things, autonomous vehicles, AR/VR and wearables offer significant growth opportunities.

Invest in Tech Stocks for Long-Term Gains

Considering the healthy growth prospects of tech companies, investing in this space for long-term gains holds promise. Amid the economic and financial instabilities, it is a prudent idea to pick solid growth companies as these are financially stable, reaping profits in established markets. These stocks, with their healthy fundamentals, help investors hedge their investments from any economic downturns.

Furthermore, the technology sector is likely to benefit the most from the reopening of the U.S. and global economies.

Here we have zeroed in on four Nasdaq-traded tech stocks that are well poised to benefit from this space’s spectacular growth prospects.

These stocks also have favorable combinations of a Growth Score of A or B, and a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Per the Zacks’ proprietary methodology, stocks with such favorable combinations offer solid investment opportunities.

Our Picks

Zoom Video Communications ZM continues to add a record number of subscribers and expand its enterprise customer base amid the pandemic-induced remote-working and online-learning wave. Easy to deploy, use, manage and solid scalability make Zoom Video’s software popular among customers.

Furthermore, this Zacks Rank #1 company’s efforts to eliminate the security and privacy loopholes, and the launch of hardware and solutions like Zoom From Home, Zoom Phone Appliances and Zoom Events will likely help expand its clientele.

The Zacks Consensus Estimate for fiscal 2022 earnings moved 27% north to $4.66 per share in the past 30 days. The stock has a Growth Score of A and has an estimated long-term earnings growth rate of 15.6%.

Zoom Video Communications, Inc. Price and Consensus

Zoom Video Communications, Inc. Price and Consensus
Zoom Video Communications, Inc. Price and Consensus

Zoom Video Communications, Inc. price-consensus-chart | Zoom Video Communications, Inc. Quote

NVIDIA NVDA is also benefiting from the pandemic-induced work-from-home and learn-at-home wave. The company is poised to gain from solid demand for GeForce desktop and notebook GPUs, which is anticipated to boost its gaming revenues. Additionally, a surge in Hyperscale demand is a tailwind for this Zacks Rank #2 company’s data-center business.

Apart from this, the Arm acquisition is anticipated to aid NVIDIA in offering end-to-end ecosystem of technology across the data center, IoT, autonomous vehicles and mobile domains. NVIDIA is now well positioned to upscale its inference technology, drivers, and accelerators by utilizing Arm’s robust architecture and chip designs.

The stock flaunts a Growth Score of A. The Zacks Consensus Estimate for fiscal 2022 earnings has been revised upward by 16.4% in the past 30 days to $15.84 per share, which calls for an increase of 48.7% on a year-over-year basis. Moreover, the long-term earnings growth rate is pegged at 17.6%.

NVIDIA Corporation Price and Consensus

NVIDIA Corporation Price and Consensus
NVIDIA Corporation Price and Consensus

NVIDIA Corporation price-consensus-chart | NVIDIA Corporation Quote

Apple is riding on solid demand for its 5G-enabled iPhone 12 as well as iPad, Mac and wearables. The momentum in the Services segment has been a key catalyst. Besides, this Zacks Rank #2 company recently unveiled a plethora of software, including iOS 15, iPadOS 15, macOS Monterey and watchOS 8.

Furthermore, the pandemic-led work-and-learn-from-home trend is driving sales for its Macbook. Robust adoption of the new MacBook Air and MacBook Pro is acting as primary tailwind for this Zacks Rank #2 company. Strong customer satisfaction and sales expansion globally are other positives.

The company has a Growth Score of B. The Zacks Consensus Estimate for fiscal 2021 earnings has been revised upward by 7 cents to $5.17 per share in the past 30 days, suggesting a 57.6% year-over-year increase. The long-term earnings growth expectation for the company is 12.5%.

Apple Inc. Price and Consensus

Apple Inc. Price and Consensus
Apple Inc. Price and Consensus

Apple Inc. price-consensus-chart | Apple Inc. Quote

Micron Technology MU is gaining from solid demand for memory chips from PC and smartphone manufacturers, cloud-computing providers and acceleration in 5G adoption.

The company has been witnessing stronger memory-chip demand from PC manufacturers and data-center operators. Furthermore, 5G adoption beyond mobile is anticipated to spur demand for memory and storage, particularly in IoT devices and wireless infrastructure. Also, focus on improving its cost structure and increasing the mix of high-value solutions in the company’s portfolio will likely boost margins.

Currently, Micron carries a Zacks Rank of 2 and has a Growth Score of B. The Zacks Consensus Estimate for fiscal 2021 earnings has moved seven cents north in 30 days’ time to $5.55 per share, calling for 26% year-over-year growth. The long-term earnings growth rate is pegged at 15.7%.

Micron Technology, Inc. Price and Consensus

Micron Technology, Inc. Price and Consensus
Micron Technology, Inc. Price and Consensus

Micron Technology, Inc. price-consensus-chart | Micron Technology, Inc. Quote

Breakout Biotech Stocks with Triple-Digit Profit Potential

The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.

Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report

Apple Inc. (AAPL) : Free Stock Analysis Report

Microsoft Corporation (MSFT) : Free Stock Analysis Report

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

NVIDIA Corporation (NVDA) : Free Stock Analysis Report

Technology Select Sector SPDR ETF (XLK): ETF Research Reports

Zoom Video Communications, Inc. (ZM) : Free Stock Analysis Report

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