Daily Archives: March 1, 2019

Technology

5 Tech Stocks Investors Should Buy on the Rebound

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If investors have learned anything over the last few months, they have learned that seemingly unstoppable tech stocks have their limits. Even popular equities such as Amazon (NASDAQ:AMZN) and Netflix (NASDAQ:NFLX) saw shares plummet as investors dumped tech equities in droves.

Many stocks have seen a significant recovery since Christmas Eve. However, few have returned to pre-October highs. Many of these equities became victims of overselling. Pessimism can often take stocks down to low price-to-earnings (P/E) ratios. Such metrics usually indicate that some have become stocks to buy on sale rather than equities investors should put up for sale.

Many prominent tech stocks have likely reached that point. These five teck stocks offer both reasonable valuations and a commanding position within their niche of tech:

Apple (AAPL)

Apple (AAPL) tech stocks to buy

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Admittedly, even when Apple (NASDAQ:AAPL) supported its $1 trillion-plus market cap, it was not considered expensive from a P/E standard. However, sales of the iPhone have failed to keep up with growth expectations, and AAPL stock still plunged as a result. Now, the company must make its way forward without the iPhone driving a majority of its revenue.

Apple appears positioned to make that change. Even if it fails to innovate on its own, AAPL holds $245 billion in cash, more than the gross domestic product (GDP) of all but 45 of the world’s countries. This gives AAPL the power to buy what it cannot create, though it already may have found the next growth niche. Former Apple CEO John Sculley believes that the healthcare-related features of the Apple Watch will become the company’s most significant innovation since the iPhone.

While investors wait for healthcare or another innovation to drive revenues, they can buy AAPL stock at a reasonable valuation. Thanks to the drop in the stock price, the forward P/E stands at 13.7. Moreover, the double-digit growth that suddenly turned negative in 2018 should return this year.

I do not expect an immediate recovery for Apple. Investors will need to see a new product category take hold before interest in Apple stock returns. However, with a low valuation and double-digit earnings increases in store for AAPL, the stock price should move higher over time.

Baidu (BIDU)

tech stocks to buy bidu

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Despite negligible involvement with the United States, the U.S.-China trade war, as well as a general slump in tech stocks, took its toll on Baidu (NASDAQ:BIDU). As the Chinese-language counterpart to Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google search engine, the company conducts little direct or indirect activity outside of its home country. Nonetheless, BIDU stock has fallen about 43% from its 52-week high.

Despite this slump, the company beat earnings estimates in its last report and raised guidance. Moreover, the drop from last year has taken the forward P/E to about 12.8. Analysts predict profit growth will come in at a modest 2.7% this year. However, they also expect to see a 25.6% increase in earnings next year.

BIDU stock comes with some risk. Since American investors cannot buy shares directly in China-based companies, Baidu stock buys one into a Cayman Islands-based holding company entitled to a share of the company’s profits. Moreover, while the U.S.-China trade war could end soon, the uncertainty will linger until both countries come to an agreement.

Still, with Google blocked and Baidu serving as the primary search engine for China’s 1.39 billion population, I think the recovery of BIDU stock becomes only a question of when.

Facebook (FB)

tech stocks to buy fb

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In 2018, Facebook (NASDAQ:FB) suffered through its worst slump since soon after the 2012 IPO. Allegations related to enabling election interference as well as privacy concerns have weighed on the stock. The drop hit a crescendo with the single-largest one-day market cap loss in stock market history last summer. Moreover, Facebook’s failure to protect private data as well as compliance issues in the midst of the E.U.’s General Data Protection Regulation (GDPR) have also weighed on FB stock.

Despite these attributes, the buy case for FB stock remains. Even though FB has begun to recover from the 2018 slump, the stock trades at about 18.3 times earnings. Profits will probably see a modest decline this year. However, analysts forecast a 17.2% surge in profits in 2020, and further double-digit increases in subsequent years.

Moreover, FB stands out among tech stocks as the only mega-cap social media stock. It owns four of the six apps boasting one billion or more users. Furthermore, no site in this industry has challenged Facebook’s dominance. Twitter (NYSE:TWTR) will likely not venture beyond its microblogging niche. Snap’s (NYSE:SNAP) popularity among youth faces a serious challenge from the Facebook site Instagram.

Facebook will have to address its political and privacy-related challenges. However, with its dominance of the social media space unchallenged, FB stock will find itself slowed but not stopped by recent controversies.

Nvidia (NVDA)

tech stocks to buy nvda

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Until the last quarter of 2018, Nvidia (NASDAQ:NVDA) appeared unstoppable. Having parlayed its gaming capabilities into data center, artificial intelligence (AI) and virtual reality (VR) applications, it supplanted Intel (NASDAQ:INTC) as the most important of the tech stocks in the semiconductor space.

However, once the crypto craze died off, the air of invincibility around NVDA stock died with it. Too many chips flooded the market, and NVDA plummeted along with most other tech stocks. The 2016-18 bull market in NVDA also had reached extremes. The P/E ratio had approached 60, and profit growth, while impressive, did not back up that growth.

Still, even without crypto, Nvidia’s involvement in AI, VR and gaming still make it arguably the most critical equity in the semi space. As our own James Brumley points out, Nvidia chips power the world’s fastest supercomputers. Their tech has also moved ahead of peers on the AI front.

Nvidia’s financial metrics have also become more favorable for buyers. The forward P/E ratio has fallen to a more reasonable 21.5. Profits will shrink this year as the industry continues to work off the oversupply in chips. However, they also believe the end of the chip glut will bring a 32.8% increase in profits next year. Although profiting from NVDA stock will take time, I think a wider adoption of data centers, AI and VR will help NVDA surpass its 2018 highs.

Qualcomm (QCOM)

qcom tech stocks to buy

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Over the last few years, Qualcomm(NASDAQ:QCOM) has become better-known for its patent disputes with Apple and its failed attempt to buy NXP Semiconductor (NASDAQ:NXPI) than for smartphone chips. However, amid its controversies, it still collects royalties on its 3G and 4G chips. Now, the Snapdragon 855 looks poised to help Nvidia profit from the rollout of 5G phones powered by Android.

5G will force phone upgrades over the next few years. Also, because 5G will enable more Internet of Things (IoT) devices, revenues and profit growth could go well beyond predicted levels.

Moreover, thanks to the failed merger, Qualcomm will buy back $30 billion worth of QCOM stock this year. If a smaller supply is not enough to persuade buyers, QCOM also includes a 4.7% dividend yield. Also, this payout has risen for eight straight years, even amid the patent dispute and the failed buyout.

Several other metrics favor buyers. As a result of last fall’s slump in tech stocks, QCOM trades at 12.2 times forward earnings. Wall Street expects tepid growth this year. However, they forecast 12.4% earnings growth in 2020, and double-digit increases in future years. Due to its critical involvement in 5G, Qualcomm will play a crucial role in upgrades over the next few years. The growing revenues and profits from these purchases should upgrade the price of QCOM stock as well.

Source: Investor Place

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7 March Madness Stocks to Consider for the Big Dance

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The Big Dance is just around corner. I’m talking about March Madness, of course. The winner-take-all, single-elimination tournament to decide the champion of the 2019 NCAA Men’s Basketball season. Millions of viewers. Sixty eight teams. Dozens of venues. Six rounds. One winner.

Some call it the most exciting times of the year for sports fans. It may be. But the fact that the stock market tends to perform really well during March Madness isn’t up for debate. Stocks often tend to rise during the March Madness tournament, which spans throughout all of March and spills into April. They also tend to rise during that stretch by more than any other stretch during the year.

Maybe it’s just a coincidence. Maybe not. But, there are unarguably a handful of March Madness stocks which do directly benefit in a big way from the Big Dance.

Which stocks fall under that umbrella? Let’s take a look at seven March Madness stocks to track as the Big Dance plays out in March and April.

March Madness Stocks to Watch: Nike (NKE)

Of all March Madness stocks, the one to watch most is Nike (NYSE:NKE).

The athletic apparel giant has its fingertips all over the Big Dance. Nike consistently outfits somewhere north of 40 of the 68 teams that play in March Madness, representing about 60% of the tournament’s participants. That means that six out of every 10 jerseys, shoes, warm-ups and more in March Madness sports a Swoosh or Jumpman logo. So, for the millions of viewers who tune into March Madness every year, the Nike brand is everywhere. It also helps that this year’s top four teams (Gonzaga, Virginia, Duke and Kentucky) are all Nike schools.

Of course, this is huge for Nike basketball mind-share. That’s big for Nike’s entire business. Nike dominates the basketball market, and this dominance is a big driver behind Nike’s nearly $40 billion revenue base. As such, continued dominance in basketball will keep Nike atop the entire the athletic apparel market.

Adidas (ADDYY)

Although Nike is king in the basketball market, Adidas (OTCMKTS:ADDYY) is gradually making moves in this market which are becoming increasingly apparent during March Madness.

In 2015, Adidas outfitted just 11 of the 68 teams in March Madness. In 2017, Adidas outfitted 15 of the teams. This year, that number could very well be higher. Importantly, one of the nation’s top teams — Kansas — is an Adidas school.

As is the case for Nike, basketball is a huge market for Adidas, and a healthy presence in the Big Dance is a net positive for Adidas basketball mind-share. The benefits here are smaller than they are over at Nike, given smaller overall presence. But, if an Adidas team makes some serious noise in the Big Dance (like Kansas), then that could be a huge medium to long term win for ADDYY stock.

Under Armour (UAA)

When it comes March Madness stocks and athletic apparel brands, Nike is king, Adidas is a solid second place and Under Armour (NYSE:UAA) is the dark horse with a lot of potential.

Back in 2015, Under Armour outfitted just six of the 68 teams in the Dance. In 2017, that number doubled to 12. This year, that number could be even bigger. Texas Tech, an Under Armour school, has a fringe-top-10 basketball team this year. Meanwhile, both Maryland and Wisconsin — also Under Armour schools — are top 20 teams, and Cincinnati is a top 25 team. Thus, Under Armour has four teams this year which could make some serious noise in March.

If any of them do, that could be big for UAA stock. Under Armour has struggled in the basketball market ever since early red-hot success with NBA superstar Steph Curry faded. Surprise college basketball success in the 2019 Dance could reinvigorate the now-stalled-out Under Armour basketball growth trajectory. If it does, that could create sizable tailwinds for UAA stock.

CBS (CBS)

Any discussion of March Madness stocks would be incomplete without CBS (NYSE:CBS), the network which hosts a healthy portion of the Dance’s 63 nationally televised games, including the most watched ones.

March Madness coverage averages millions of viewers per game, and most data indicates that those numbers are only going up. A healthy majority of those games air on CBS. Moreover, viewership goes up as the tournament narrows down, and some numbers point to the final games in the Big Dance averaging 15 million-plus viewers. All those final games are televised through CBS.

As such, CBS has a lot to gain through ad revenue and partnerships during March Madness. There’s reason to believe this year will have unusually large March Madness viewership, given the plethora of young talent across college basketball this year, the extreme level of parity among the teams, and the enormous hype surrounding college basketball’s best player, Zion Williamson. If March Madness does score unusually large viewership ratings this year, the biggest winner will be CBS stock.

AT&T (T)

There are 63 nationally televised games in March Madness. CBS doesn’t air all of them. In fact, a majority of the tournament’s early games are aired by Turner Sports, which is owned by AT&T(NYSE:T).

Through TBS, TNT and truTV, Turner Sports actually airs a majority of March Madness games in the first and second rounds, as well as half the games in the Sweet 16 and Elite 8. To be sure, those games average less viewers than the Final Four and Championship Game. Nonetheless, they still average millions of viewers per game, and represent a sizable ad revenue opportunity for AT&T.

As stated earlier, this year’s Dance could have unusually large viewership due to various factors, one of which is an unusually large amount of parity among this year’s field of teams. Higher parity usually lends itself to closer early round games, and also more upsets. That usually lends itself to higher viewership in the earlier rounds. As such, AT&T could actually be a big March Madness winner this year.

Coca-Cola (KO)

One company that consistently has its finger tips all over March Madness is Coca-Cola(NYSE:KO).

The beverage giant is one of the Dance’s official NCAA Corporate Champions, and that means that Coca-Cola TV ads and in-arena ads will be all over the place during March Madness. That’s a win for mind-share. It’s also worth noting that Coca-Cola owns Powerade, the sports drink brand which is typically front-and-center during the entire March Madness tournament.

This year is especially important for Coca-Cola. The company is under intense pressure regarding the health of some of its core drinks, including the staple Coca-Cola carbonated beverage. Thus, it has an opportunity this year to reduce that pressure via effective March Madness marketing. If they do, sales in North America could get a nice lift, and that could power gains in KO stock for the rest of the year.

Source: Investor Place