The looming threat of recession is on the rise due to COVID-19 outbreak induced weakening in macroeconomic environment. The coronavirus crisis has sent ripples across the U.S. stock market, with the S&P 500, Nasdaq and the Dow Jones declining 21.4%, 19.3% and 26.4%, respectively, year to date.
The coronavirus pandemic continues to spread, with death toll in the United States alone hitting 75, as of Mar 17, 2020, according to a Statista report. Globally, the virus is estimated to have caused over 7,900 deaths.
Precautionary measures are being undertaken worldwide to deal with the pandemic. Companies are urging employees to work from home. Schools, colleges, other education institutions, have been shut down. Theaters, malls and public recreation places have been closed to minimize the risk of spread. Although the panoptic impact of the crisis has only aggravated apprehensions regarding an imminent recession, the U.S. tech sector has been more resilient compared with the others.
The Technology Select Sector SPDR Fund (XLK) is down 15.4% YTD, while Energy Select Sector SPDR Fund, Financial Select Sector SPDR Fund, and Industrial Select Sector SPDR Fund have lost 53.4%, 31.9%, and 28.3%, respectively.
Tech Stocks Worth Taking a Look
The tech sector’s resiliency can be attributed to the massive long-term growth prospects of tech stocks. The sector remains attractive owing to continuous digital transformations. Rapid adoption of cloud computing, and ongoing integration of AI and machine learning (ML), has been acting as a major catalyst.
The accelerated deployment of 5G technology is likely to be a tailwind. Moreover, blockchain, IoT, autonomous vehicles, AR/VR, and wearables are other positives. In fact, COVID-19 induced Work-from-home wave favors the prospects of technology companies providing the required hardware including office equipment, software, networking infrastructure and network security.
Additionally, the tech companies are cash rich, which provides them buoyancy amid adverse business environment. Per their latest quarterly results, the FAAMG stocks (Facebook, Amazon, Apple, Microsoft, and Alphabet’s Google) have a cumulative cash and short-term investments of more than $460 billion.
With fears of an imminent recession, investors can take refuge in recession-resistant tech stocks that have robust fundamentals despite anticipated decline in IT spending. These stocks have better prospects once the impact of coronavirus cools down given the accelerated measures to contain the virus.
Buy These 5 Recession-Proof Tech Stocks Now
We have selected five tech stocks that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The five picks also have good dividend pay outs and market cap greater than $5 billion. Both these factors provide resilience to a company’s financial position amid a crisis and imply that the companies are more mature, with established customer base and relatively stable revenues, earnings, and cash flow.
Microsoft MSFT is well poised to beat the coronavirus-induced recession fears, on the back of robust adoption of Azure cloud platform. Moreover, work from home surge is expected to bolster adoption of its enterprise communication offerings including Teams. This, in turn, will provide it competitive edge in the enterprise communication market against Slack and Zoom.
This Zacks Rank #1 stock is also well-poised to gain from a growing user base of different applications like Office 365 commercial, Dynamics and Outlook mobile.
The company has a market cap of $1.115 trillion and dividend yield of 1.39%.
Microsoft Corporation Price and Consensus
Microsoft Corporation price-consensus-chart | Microsoft Corporation Quote
The Zacks Consensus Estimate for Microsoft’s fiscal 2020 earnings is pegged at $5.62 per share, indicating 18.3% growth from the year-ago reported figure.
Intel INTC is benefiting from its data-centric focus. Strong adoption of its second-gen Xeon scalable processors and solid demand from cloud service providers is expected to drive data centric business revenues.
This Zacks #1 Ranked company is planning nine product releases on 10 nm this year. Moreover, it is adding 25% wafer capacity across its 14 nm and 10 nm nodes in 2020.
The company has a market cap of $214.19 billion and dividend yield of 2.64%.
Intel Corporation Price and Consensus
Intel Corporation price-consensus-chart | Intel Corporation Quote
The Zacks Consensus Estimate for Intel’s 2020 earnings is pegged at $4.97 per share, suggesting growth of 2.1% from the year-earlier reported figure.
SAP SE SAP gains traction from robust adoption of S/4HANA, C/4HANA, Fieldglass, Concur and SuccessFactors Employee Central solutions. The company’s alliances with Microsoft, Accenture and Verizon favour business prospects. It is harnessing the power of ML to enhance enterprise applications. This, in turn, is enabling the company to bolster adoption of its solutions and provide clientele with data-driven business insights.
Moreover, with SAP Machine Learning and SAP Leonardo Machine Learning to its credit, this company currently flaunting a Zacks Rank of 1, offers platforms that aid enterprises and users develop robust ML tools in the cloud.
The company has a market cap of $122.89 billion and dividend yield of 1.17%.
SAP SE Price and Consensus
SAP SE price-consensus-chart | SAP SE Quote
The consensus mark for SAP’s 2020 earnings stands at $6.17 per share, indicating an improvement of 7.9% from the prior-year quarter.
Applied Materials AMAT is well poised to gain from integration of advanced ML capabilities across its semiconductor fabs to enhance automated defect analysis.
The company, currently sporting a Zacks Rank #1, has developed an automated defect classification technology that utilizes different imaging techniques to identify and eliminate defects in chip manufacturing.
Moreover, the company’s commitment toward development of new AI and ML powered computing materials and designs, hold promise.
The company has a market cap of $41.2 billion and dividend yield of 1.87%.
Applied Materials, Inc. Price and Consensus
Applied Materials, Inc. price-consensus-chart | Applied Materials, Inc. Quote
The consensus mark for its earnings for fiscal 2020 is pegged at…
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