All three major indexes climbed 1% through early afternoon trading Tuesday, driven by strong gains from the likes of Apple AAPL, Amazon AMZN, Spotify SPOT, and others. The Nasdaq Composite touched a new all-time intraday high Tuesday and has now surged 12% in 2020 as big-tech proves immune to the coronavirus economic downturn.
The jumps come on the back of solid IHS Markit data that pointed to improving business activity in the U.S. private sector in June. On top of that, President Trump helped calm nerves about growing trade tensions between the U.S. and China.
Stocks are up to start the week, after posting gains last week despite growing concerns about spikes in coronavirus cases as economies around the world reopen. And May’s better-than-expected retails sales helped highlight this point.
Investors need to remain focused on what happens next on the pandemic front. Nonetheless, Wall Street might stay in don’t fight the Fed mode, which means it still appears to be a solid time to buy stocks, especially if you know where to look.
Tech is perhaps too obvious of an answer, but that doesn’t make it wrong. For instance, the S&P 500 remains down around 3.5% on the year despite its rally, while the Dow is still off 9%. So today we dive into three tech stocks that provide exposure to growth that also pay a dividend amid these still uncertain times.
Applied Materials AMAT
Applied Materials is a leading semiconductor equipment firm that stands to benefit from the growth of big-data, artificial intelligence, and much more. AMAT is also focused on determining what’s next as classic Moore’s Law scaling slows. The firm’s Q2 fiscal 2020 sales jumped 12% and its adjusted earnings surged 27% in mid-May, even as coronavirus concerns mounted in the industry.
Shares of Applied Materials are now up 30% since May 1 to push it into positive territory in 2020. AMAT stock has climbed 45% in the last 12 months, yet it sits 10% below its 52-week highs, which could give it more room to run. And the stock presents strong value compared to its Semiconductor Equipment – Wafer Fabrication industry, trading at 3.2X forward 12-month Zacks sales estimates vs. 7.5X. This also marks a discount against its own one-year highs of 3.7X.
AMAT’s 1.43% dividend yield tops its industry’s 1.07% average, with its next quarterly dividend payable on Sept. 10 to shareholders of record as of Aug. 20. On top of its solid valuation and dividend, our Zacks estimates call for AMAT’s Q3 sales to pop 18%, with its FY20 revenue projected to climb 14%. Applied Materials, which is a Zacks Rank #3 (Hold) right now, is also expected to see its adjusted earnings climb 28.4% in Q3 and over 25% in 2020. And CEO Gary Dickerson last quarter said its “supply chain is recovering, and underlyingdemand for our semiconductor equipment and services remains robust.”
Lam Research LRCX
Lam Research is a global supplier of wafer fabrication equipment and services for the semiconductor industry. The firm’s fiscal 2019 sales slipped 13% as part of a rough stretch for the broader and historically cyclical chip space. LRCX returned to sales growth in the Q2 and Q3 of its fiscal 2020, with sales up roughly 2.5%. And Lam Research on March 3 released what it calls the most “innovative etch product that has been developed in the last 20 years.” The new Sense.i platform will help produce finer 3D details on chips amid ever more complex smartphones and other devices.
Peeking ahead, the firm’s revenue is projected to surge 15.3% and 22.2%, respectively in Q4 FY20 and Q1 of fiscal 2021. This is expected to push its FY20 sales up nearly 4%, with FY21 projected to jump another 10% higher. At the bottom end of the income statement, Lam Research’s adjusted earnings are expected to climb 16% in the fourth and 32% in Q1.
LRCX’s earnings estimates have remained unchanged recently to help it hold a Zacks Rank #3 (Hold). Meanwhile, the stock is up 9% in 2020 and 75% in the last 12 months to crush the broader tech market’s 23% expansion. Plus, LRCX shares have 7% more room to climb before they have to break through its 52-week highs. The stock also trades at a nearly a 50% discount against its industry and has consistently raised its dividend payout in recent years. Lam Research’s 1.47% dividend yield tops its industry’s 1.07% and blows by Nvidia’s NVDA 0.17%.
Microsoft shares have outgained all of the FAANG stocks over the last two years and MSFT hit another new high Tuesday. The tech giant’s run, which has boosted its market cap to over $1.5 trillion, has been driven by its cloud computing expansion. MSFT is now a leader within the booming growth industry alongside Amazon, with its quarterly Intelligent Cloud revenue up 27% for the second period in a row last quarter.
Microsoft’s cloud division pulled in the most of its three units in Q3 FY20, and its other two units are still thriving. The firm’s Office-heavy Productivity and Business Processes segments continue to grow and its Office 365 suite remains vital to businesses, governments, schools, and consumers. More recently, its Teams platform has grabbed the stay-at-home spotlight alongside the likes of Slack WORK and Zoom ZM. And its consumer electronics and video gaming businesses are poised to expand.
Microsoft is positioned to weather nearly any economic storm, as it held over $137 billion in cash and equivalents at the end of last quarter. It has also bought back a ton of stock and upped its dividend, with its current 1% yield well above the 10-year U.S. Treasury’s 0.71%. MSFT’s revenue is projected to jump 12.5% in FY20 and another 10% next year. And its adjusted EPS figures are projected to surge 20% and 9.4%, respectively over this stretch. Microsoft is a…
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