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Don't Be Fooled by High Yields, Buy These 5 Tech Stocks

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Technology, which was the most-loved sector amid the pandemic and proved its resilience, lost its momentum last month on surging yields. This is especially true as the sector relies on easy borrowing for superior growth and its value depends heavily on future earnings. Rise in long-term yields lowers the present value of companies’ future earnings.

Notably, the yields on 10-year US Treasury jumped to a pre-pandemic level above 1.77% early this week, touching a 14-month high. Per the latest CNBC survey, more than 60% of the respondents believe the 10-year Treasury yield will reach levels higher than 2% by the end of 2021.

Additionally, the central bank recently raised GDP growth projection from 4.2% to 6.5% for this year — the fastest pace since 1984. Inflation is expected to rise 2.4% this year and then slow next year to 2%. The Fed’s tolerance for faster inflation this year triggered further selling in the sector last week though Fed Chairman Jerome Powell viewed it to be temporary, given the COVID-19 disruption in the labor market.

However, the sector outlook remains solid on the global digital shift that has accelerated e-commerce for everything, ranging from remote working to entertainment and shopping. The rapid adoption of cloud computing, big data, Internet of Things, wearables, VR headsets, drones, virtual reality, artificial intelligence, machine learning, digital communication and 5G technology will continue to drive the sector higher.

Given this, investors should not be fooled by the technology sector sell-off, instead they should capitalize this opportunity to buy the highest-ranking stocks. While many stocks in the sector have declined in a month, most of them have a Zacks Rank #1 (Strong Buy), boast positive earnings estimate revision for the current fiscal year and have a strong Growth Score of B or better, suggesting the recent dip to be a good entry point. You can see the complete list of today’s Zacks #1 Rank stocks here.

Below, we have highlighted five of them:

Etsy Inc. ETSY – Down 16.6%

This e-commerce service provider operates a two-sided marketplace platform called Etsy.com. It is expected to see substantial earnings growth of 2.2% for this year and has a market cap of $25.1 billion. Etsy has a Growth Score of B.

MaxLinear Inc MXL – Down 15.2%

This company is a provider of radio-frequency analog and mixed signal semiconductor SoC solutions for broadband communication applications offering small silicon die-size, and low power consumption. The stock has an estimated earnings growth rate of 121.6% for this year and has a market cap of $2.4 billion. It carries a Growth Score of B.

Vicor Corporation VICR – Down 14.9%

This company designs, manufactures and markets innovative, high performance modular power components, from bricks to semiconductor-centric solutions, to enable customers to efficiently convert and manage power from the wall plug to the point-of-load. With a market cap of $3.6 billion, the stock has an estimated earnings growth of 204.9% for this year and has a Growth Score of B.

Alpha and Omega Semiconductor Limited AOSL – Down 11.3%

It is engaged in designing, developing and supplying a broad range of power semiconductors globally, including a portfolio of Power MOSFET and Power IC products. The company is expected to see massive earnings growth of 167% for fiscal year (ending Jun 2021) and has a market cap of $815.1 million. It has a Growth Score of A.

Kulicke and Soffa Industries Inc. KLIC – Down 5.7%

This is a leading provider of semiconductor packaging and electronic assembly solutions supporting the global automotive, consumer, communications, computing and industrial segments. Kulicke and Soffa Industries is expected to see massive earnings growth of 245.3% in the fiscal year (ending Sep 2021) and has a market cap of $2.9 billion. The stock has a Growth Score of A.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market. Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.

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MaxLinear, Inc (MXL) : Free Stock Analysis Report
Kulicke and Soffa Industries, Inc. (KLIC) : Free Stock Analysis Report
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