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5 Tech Giants to Buy at Deep Discount Amid Recent Turmoil

Nalak Das
·7 min read

The year 2020 is likely to remain coronavirus-stricken as the availability of a vaccine by this year-end and its global implementation looks unlikely. Despite this gloomy picture, Wall Street has recovered impressively from the pandemic-led bear market.

At present, all the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — are in positive territory year to date. In fact, the Dow and the S&P 500 posted fresh all-time highs this week.

Notably, the predominant force, behind Wall Street's impressive recovery was the technology sector. However, during the last two and half months, the technology sector lost its pace of growth due to market participants' concern over the sector's overvaluation and the possibility of the availability of a COVID-19 vaccine that shifted investors' preference from growth-oriented technology stocks to cyclical reopening stocks.  

Consequently, several large-cap technology stocks with a favorable Zacks Rank are currently available at lucrative valuation. At this stage, investment in these stocks is likely to be prudent.

Recent Softness in Technology Sector   

The technology sector pulled down the overall market in September and October after being the predominant driver of the impressive showing from April to August. It was technology that had helped Wall Street to exit a coronavirus-induced short bear market and form a new bull market. However, on the due course of market's V-shaped recovery from its trough on Mar 23, technology stocks got overvalued, as stated by many financial experts.

Moreover, positive late-stage clinical trial data released by a few pharmaceutical and biotech companies  for their potential coronavirus vaccines significantly strengthened investors' confidence in reopening stocks.

Year to date, the technology sector has jumped 33.3% compared with 10.4% of the benchmark S&P 500 Index. However, in the past three months, the technology sector has gained 4.6% as against 5.3% of the benchmark. In the past month, technology dropped 1.1% compared with a decline of 1.2% of the S&P 500 Index.

Tech Momentum Likely to Continue

In the long term, the technology sector will remain the predominant force to drive the market. We must not forget that the growing demand for hi-tech superior products has been a catalyst for the sector in an otherwise tough environment. A series of breakthroughs in 5G wireless network, cloud computing, predictive analysis, AI, self-driving vehicles, digital personal assistants and IoT, have boosted the overall space.

As social distancing is keeping near and dear ones away, people, especially the citizens of the emerging and less-developed countries, are reaching out more than ever with smartphones, tablets or notebooks.

The thrust for digitization is likely to come from two sides. Individuals who enjoy immense benefits of digital platforms are less likely to go back to their old habits. The new way of connecting has opened up a new world for them. Also, business entities will be more interested in cloud computing, automation and artificial intelligence to establish smooth supply chain systems.  

Our Top Picks  

We have narrowed down our search to five technology stocks based on four criteria. First, we have selected tech behemoths (market capital > $20 billion) as these companies have a        well-established business model and strong brand value. Second, these stocks have strong short-term and long-term (3-5 years) growth potential.

Third, all these stocks witnessed robust earnings estimate revisions in the last 30 to 60 days, indicating solid business prospects. Finally, each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks in past month.

 

Alphabet Inc. GOOGL has been showing increased appetite in the Home Assistant space. It made its foray into this market in 2016 with the launch of Google Home. The company has been growing rapidly in this fast-growing highly-competitive cloud market. The Google search engine is the dominant player in both laptop and mobile platforms. Moreover, Alphabet is strongly positioned with the YouTube platform for online and mobile video.

The Zacks Rank #2 company has an expected earnings growth rate of 3.7% for the current year. Its long-term growth rate is 16.9% compared with 8.7% for the S&P 500 Index. The Zacks Consensus Estimate for the current year has improved by 13.5% over the last 30 days. The stock is currently trading at a 4.4% discount to its 52-week high price of $1,816.89 recorded on Nov 9.  

Microsoft Corp. MSFT has a dominant position in the desktop PC market, with its operating systems being used in the majority of PCs worldwide. The company has doubled down on the cloud computing opportunity. Moreover, it is one of the three largest providers of gaming hardware.

The Zacks Rank #2 company has an expected earnings growth rate of 17% for the current year (ending June 2021). Its long-term growth rate is 12.5% compared with 8.7% of the S&P 500 Index. The Zacks Consensus Estimate for the current year has improved by 6% over the last 30 days. The stock is currently trading at a 10.3% discount to its 52-week high price of $232.86 recorded on Sep 2.

Texas Instruments Inc. TXN designs, manufactures and sells semiconductors to electronics designers and manufacturers worldwide. It operates in two segments, Analog and Embedded Processing.

The Zacks Rank #2 company has an expected earnings growth rate of 4.4% for the current year. Its long-term growth rate is 9.3% compared with 8.7% of the S&P 500 Index. The Zacks Consensus Estimate for the current year has improved by 8.1% over the last 30 days. The stock is currently trading at a 7.2% discount to its 52-week high price of $164.63 recorded on Nov 9.

NVIDIA Corp. NVDA is gaining a decent market share among the gaming service providers. The strong line up of advanced graphics cards has made it a favorite graphics card provider among PC makers. Datacenter presents solid growth opportunity for the company. NVIDIA’s GPUs are rapidly gaining from the proliferation of artificial intelligence.

The Zacks Rank #1 company has an expected earnings growth rate of 57.2% for the current year (ending January 2021). Its long-term growth rate is 20.1% compared with 8.7% of the S&P 500 Index. The Zacks Consensus Estimate for the current year has improved by 0.2% over the last 60 days. The stock is currently trading at a 9.7% discount to its 52-week high price of $589.07 recorded on Sep 2.

Skyworks Solutions Inc. SWKS designs, manufactures, and markets a broad range of high-performance analog and mixed-signal semiconductors that enable wireless connectivity. The Zacks Rank #2 company has an expected earnings growth rate of 21.5% for the current year (ending September 2021).

Its long-term growth rate is 12.4% compared with 8.7% of the S&P 500 Index. The Zacks Consensus Estimate for the current year has improved by 9.6% over the last 30 days. The stock is currently trading at a 15.3% discount to its 52-week high price of $158.61 recorded on Oct 12.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>


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Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
 
Skyworks Solutions, Inc. (SWKS) : Free Stock Analysis Report
 
Texas Instruments Incorporated (TXN) : Free Stock Analysis Report
 
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
 
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