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This story originally appeared on StockNews
Even though the tech sector is volatile due to investors’ sector rotation and concerns over rising inflation, many tech stocks are well positioned to gain from an increasing demand for advanced tech solutions from almost all industries. So, we think that Investors who are seeking to capitalize on the industry’s impressive future growth—ignoring the short-term price fluctuations—could bet on large-cap stocks Apple (AAPL), Amazon (AMZN), and QUALCOMM (QCOM). Wall Street analysts expect these stocks to deliver solid returns in the near term. Read on.
After exponential gains last year thanks to the COVID-19 pandemic-driven increased dependence on tech solutions since the beginning of the year, the technology industry has been witnessing high volatility due to investors’ rotation out of the sector and into cyclical stocks to capitalize on the recovering economy and due to fears of rising inflation.
Nevertheless, the tech industry is well positioned to gain due to rapid adoption of advanced technologies such as artificial intelligence (AI), Internet of Things (IoT), augmented reality (AR) and 5g network. The expected continuation of remote working (a key part of organizations’ hybrid working models) should also lead to an increase in demand for advanced software, cybersecurity solutions and cloud computing. Indeed, the tech industry is expected to hit a$5 trillion market value by year’s end.
The tech-heavy Nasdaq Composite’s 7% returns over the past month reflect investors’ renewed interest in the tech space. Given the industry’s promising prospects, analysts are highly optimistic about the near-term performance of large-cap tech stocks Apple Inc. (AAPL), Amazon.com, Inc. (AMZN), and QUALCOMM Incorporated (QCOM). Given these companies’ market dominance, we think their stocks are well positioned to withstand any short-term market volatility and deliver solid returns.
Apple Inc. (AAPL)
One of the most popular tech companies, AAPL is known for its innovative products. It designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. In addition, the company offers various services, such as Apple Arcade, Apple Music, Apple News+ and Apple TV+.
On June 7, 2021, AAPL unveiled new tools and technologies designed to help developers create more engaging app experiences. Susan Prescott, Apple’s vice president of Worldwide Developer Relations, said: “With the robust set of tools included in Xcode Cloud, continuing innovation in the Swift programming language, a wide range of new APIs, and even more ways to reach users—Apple’s platforms have never been stronger.”
AAPL’s net sales increased 53.6% year-over-year to $89.58 billion for fiscal second quarter ended March 27, 2021. Its operating income grew 114% year-over-year to $27.50 billion. Its net income increased 110.1% year-over-year to $23.63 billion. Also, its EPS came in at $1.40, up 118.7% year-over-year.
For its fiscal year 2021, analysts expect AAPL’s EPS and revenue to increase 58.2% and 28.9%, respectively, year-over-year to $5.19 and $353.95 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 51.6% over the past year to close Friday’s trading session at $127.35.
Wall Street analysts expect the stock to hit $157.88 in the near term, which indicates a potential 24% upside.
Amazon.com, Inc. (AMZN)
Ecommerce giant AMZN sells consumer products and subscriptions. The company operates through three segments: North America, international, and Amazon Web Services (AWS). In addition, it offers Amazon Prime, a membership program, which provides free shipping of various items and access to streamed movies and TV episodes and other content.
Amazon Web Services, Inc. (AWS) announced on June 11 that it will open an infrastructure region in Israel in the first half of 2023 because it was selected as a primary cloud provider for the Israeli government’s digital transformation, enabling customers to run workloads and store data in Israel while serving end-users with even lower latency. This move could increase AMZN’s customer base.
AMZN’s net sales increased 43.8% year-over-year to $108.52 billion for the first quarter ended March 31, 2021. Its operating income grew 122.2% year-over-year to $8.86 billion, while its net income increased 219.8% year-over-year to $8.12 billion. Also, its EPS came in at $1.91, up 215.2% year-over-year.
Analysts expect AMZN’s EPS to be $55.87 for its fiscal year 2021, which represents a 33.6% year-over-year increase. It surpassed consensus EPS estimates in each of the trailing four quarters. The company’s revenue is expected to increase 29.5% year-over-year to $115.13 billion for the quarter ending June 30, 2021. The stock has rallied 30.8% over the past year to close Friday’s trading session at $3,346.83.
Analysts expect the stock to hit $4,295.17 in the near term, indicating a potential 28.3% upside.
QUALCOMM Incorporated (QCOM)
Established wireless technology company QCOM is engaged in the development, launch and expansion of technologies like fifth generation (5G). It also develops and commercializes foundational technologies and products that are used in mobile devices and other wireless products, including network and broadband gateway equipment, consumer electronic devices, and other connected devices worldwide.
QCOM, along with United States Cellular Corporation (USM), Telefonaktiebolaget LM Ericsson (ERIC) and Inseego Corp. (INSG), announced on May 6 that they have successfully achieved a 5G extended-range milestone over millimeter Wave (mmWave) on a commercial network. Since 5G mmWave is a robust and crucial solution to meet an increasing traffic demand and expand broadband services, this advance is expected to drive increasing demand for QCOM’s products and services.
QCOM’s revenue surged 52% year-over-year to $7.93 billion in the second quarter ended March 28, 2021. Its earnings before taxes grew 256% year-over-year to $2.13 billion. Its net income came in at $1.76 billion, which represents a 276% year-over-year increase. The company’s EPS came in at $1.53, up 273% year-over-year.
Analysts expect its EPS to increase 94.2% year-over-year to $1.67 for the current quarter ending June 30, 2021. It surpassed consensus EPS estimates in each of the trailing four quarters. Its revenue is expected to increase 48.5% year-over-year to $32.16 billion in 2021. The stock has soared nearly 60.2% over the past year to close Friday’s trading session at $134.62.
Wall Street analysts expect the stock to hit $169.42 in the near term, which indicates a potential 25.8% upside.
AAPL shares were trading at $128.54 per share on Monday morning, up $1.19 (+0.93%). Year-to-date, AAPL has declined -2.82%, versus a 13.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal’s fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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