Fears over the emergence of Coronavirus as a global pandemic led to a record weekly slump in the U.S. market last week. As of Feb 28, the Dow Jones, the S&P 500, and the Nasdaq depreciated 11%, 8.6%, and 4.5%, respectively on a year-to-date (YTD) basis.
Though the Coronavirus has had a sector-wide impact, the U.S. tech sector has been more resilient compared with other sectors. The Technology Select Sector SPDR Fund XLK is down 3.6% YTD, while Energy Select Sector SPDR Fund, Financial Select Sector SPDR Fund, and Industrial Select Sector SPDR Fund have lost 24.6%, 13.6%, and 10.3%.
Buy Tech Stocks for Long-Term Investment
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, along with ongoing infusion of AI and machine learning, has been a major growth driver for the stocks.
The accelerated deployment of 5G technology — the next-generation wireless revolution — is likely to spur further growth. Moreover, blockchain, IoT, autonomous vehicles, AR/VR, and wearables are other growth prospects.
Additionally, tech companies are cash rich, which provides the cushion to remain afloat 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.
Furthermore, semiconductor industry — the backbone of the Technology sector — is anticipated to make a turnaround this year. According to World Semiconductor Trade Statistics (WSTS), annual global semiconductor sales are expected to witness growth of 5.9% in 2020 and 6.3% in 2021. Last year, the global semiconductor sales declined 12.1%, according to data compiled by The Semiconductor Industry Association (SIA).
Therefore, one can opt for tech stocks which have weathered the Coronavirus impact so far and have robust fundamentals. These stocks have greater possibilities to rise further once the impact of Coronavirus cools down.
Here, we have zeroed in on five tech stocks that could enrich your portfolio in 2020 and beyond.
These stocks also have favorable combinations of a Growth Score of A or B, and a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Per the Zacks’ proprietary methodology, stocks with such favorable combinations offer solid investment opportunities.
Tech Stocks that Weathered Coronavirus Impact
Dropbox, Inc. DBX offers platform that enables users to store and share files, photos, videos, songs and spreadsheets. A strong focus on product innovation and introduction of features like Dropbox Spaces, Paper and Extensions are anticipated to boost its userbase. Further, integration with leading applications like Zoom Video, Slack and Atlassian will likely expand the Dropbox paying user base, which reached 14.3 million in third-quarter 2019.
Dropbox currently sports a Zacks Rank #1 and has a Growth Score of A. Additionally, the long-term (3-5 years) expected EPS growth rate for the company is pegged at 22.2%. The stock has gained 9.2% year to date.
Dropbox, Inc. Price, Consensus and EPS Surprise
Dropbox, Inc. price-consensus-eps-surprise-chart | Dropbox, Inc. Quote
NVIDIA NVDA is gaining from solid growth in GeForce desktop and notebook GPUs, which is aiding its gaming revenues. Moreover, an increase in Hyperscale demand is a tailwind for this Zacks #2 Ranked stock’s data-center business. Additionally, ray-traced gaming, rendering, high-performance computing, AI and self-driving cars are key growth prospects.
NVIDIA has a Growth Score of A. Additionally, the long-term expected EPS growth rate for the company is pegged at 12.7%. The stock has rallied 14.8% so far this year.
NVIDIA Corporation Price, Consensus and EPS Surprise