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The Zacks Analyst Blog Highlights: Microsoft, IBM, Apple, Nike and Disney

Zacks Equity Research

For Immediate Release

Chicago, IL – March 27, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Microsoft MSFT, IBM IBM, Apple AAPL, Nike NKE and Disney DIS.

Here are highlights from Thursday’s Analyst Blog:

3 Blue-Chip Tech Stocks to Buy on Stimulus Hopes

The Dow, the S&P 500, and the Nasdaq all climbed in morning trading Thursday after they recorded their first back-to-back gains in a month on Wednesday. The positivity comes as Wall Street hopes the roughly $2 trillion stimulus package, which is expected to be officially passed soon, will help stabilize the economy as the coronavirus spreads.

Investors are pleased with the $2 trillion stimulus that is set to provide direct payments to Americans, beef up unemployment insurance, provide loans to companies, and extend additional resources to health-care providers. The Senate approved, in a 96-0 vote, the bill that will now move to the House, where many expect it to pass on Friday.

Wall Street clearly thinks that this stimulus will help curb the coronavirus impact on the economy that saw a record 3.28 million workers apply for unemployment benefits last week, which ended a decade-long job expansion.

Along with $2 trillion stimulus package, the Fed on Monday said it would purchase practically unlimited amounts of government debt to help provide liquidity and extend loans to big and small businesses. That said, it is likely still too early to call a bottom—which is often only truly possible in hindsight—even as stocks climb for the third day in a row.

But longer-term investors shouldn’t try to call a bottom because they could miss out on some of the market’s best days. And if you are looking a year or more down the road it seems hard to believe stocks won’t look discounted at their current levels, even amid coronavirus uncertainty.

So let’s dive into three blue chip tech stocks that might be worth buying at the moment as the Fed and the U.S. government try to provide a boost to the economy as the coronavirus spreads.

Microsoft

Sometimes the obvious answer is the right one because Microsoft is about as blue chip as they come. MSFT did warn Wall Street in late February that setbacks in China would likely cause it to miss its personal computing sales guidance. This would have been considerably more of a gut punch to Microsoft before its cloud computing business began to boom. Plus, MSFT’s Q3 fiscal 2020 guidance remained unchanged for its other units.

Microsoft’s cloud segment and its flagship Azure unit compete directly against AWS for cloud supremacy. Despite the coronavirus warning and the current economic downturn, MSFT’s longer-term earnings revisions remain largely positive, which helps the stock earn a Zacks Rank #2 (Buy) right now. Our estimates call for MSFT’s sales to jump 12.3% and 11.4%, respectively in fiscal 2020 and 2021, with its adjusted EPS set to pop 18.5% and 12.3%.

Along with this continued growth, which are both impressive for a company of its size and age, MSFT is part of a highly-ranked Zacks industry and its 1.33% yield tops the 10-year U.S. Treasury’s 0.82%. The company also consistently raises its dividend payout.

Investors might also want to think about buying the safe haven-style stock soon if this current rally does have legs because MSFT has jumped 13% this week. Luckily it still rests roughly 18% off its 52-week highs. And its valuation pictures looks as goods as it has in the last 12 months.

IBM

IBM is aiming to do what Microsoft has already done: become a cloud powerhouse. The firm further signaled this commitment to Wall Street in January when it announced that Ginni Rometty would step down. IBM’s new chief executive, Arvind Krishna, has already played a key role in eshifting the firm’s focus to cloud, AI, and quantum computing.

Last quarter, IBM also surprised investors when it posted fourth quarter revenue growth, after five straight periods of declining sales. Plus, its cloud leg was the star of the show, with revenue up 21% to account for over 30% of total sales.

Peeking ahead, IBM’s adjusted fiscal 2020 earnings are projected to jump 4%, with 2021 expected to come in another 6.3% higher. Meanwhile, its revenue is expected to pop over 1% this year and next. IBM, which is currently a Zacks Rank #3 (Hold), boasts a dividend yield of 5.9%. This blows away the S&P 500’s 2.24% average.

That said, IBM stock has lagged its big tech peers in recent years. But that doesn’t mean IBM stock couldn’t be headed for a run. Like MSFT, IBM stock has bounced off its recent lows and still rests nearly 30% below its early-February highs. IBM is also trading at 7.8X forward 12-months Zacks earnings estimate. This marks a solid discount compared to its industry’s 14.6X average and its own three-year median of 10.4X, which helps it earn a “B” grade for Value in our Style Scores system.

Apple

Apple is another somewhat obvious choice here and it actually helped kick off the coronavirus selloff when it warned on February 17 that it would likely fall short of its quarterly sales guidance. The iPhone giant cited a downturn in both production and demand in China. But as things slowly start to return to a semi-normal state in China, Apple closed many of its other stores, alongside the likes of Nike and other retailers.

Apple does look set to take a hit in its key iPhone unit, which is already somewhat reflected in our Zacks estimates that call for AAPL’s sales to climb just 3.3% this year—down big in the last month. The tech firm’s bottom line is still expected to climb over 9.3% this year and its top and bottom-lines are projected to surge 13.5% and 21.2%, respectively in 2021. Along with possible pent up demand, Apple has been expanding its non-iPhone business recently.

AAPL’s goal is to generate more revenue from its 1.5 billion active devices, highlighted by its app store, Apple Music, its new Disney challenger Apple TV+, news service, and more. Apple, which is currently a Zacks Rank #3 (Hold), has also expanded its wearables segment.

Therefore, longer-term investors might be happy to scoop up AAPL stock 22% off its highs, despite its recent climb. AAPL’s valuation also appears a tad more attractive and its dividend yield sits at 1.21%. And let’s not forget that stocks are forward-looking. For instance, Apple shares soared in 2019 on the expectations of a return to iPhone growth in 2020.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Click to get this free report Microsoft Corporation (MSFT) : Free Stock Analysis Report NIKE, Inc. (NKE) : Free Stock Analysis Report International Business Machines Corporation (IBM) : Free Stock Analysis Report Apple Inc. (AAPL) : Free Stock Analysis Report The Walt Disney Company (DIS) : Free Stock Analysis Report To read this article on Zacks.com click here.