The year 2020 was supposed to be the year of the 5G revolution, but the COVID-19 pandemic delayed the transition. This has created a perfect opportunity for investors to consider buying electronics and communication stocks that would benefit from the 5G, data center, internet of things (IoT), and electric vehicle trend.
Both small and large technology companies have already been benefiting from the accelerated pace of digital transformation the pandemic triggered. The changing business models and launch of new products to help industries and individuals avoid the virus should also keep technology companies thriving next year.
In addition to benefiting from the technology revolution, Dell Technologies Inc (DELL – Get Rating), Amphenol Corporation (APH – Get Rating), Arrow Electronics, Inc. (ARW – Get Rating), and Acacia Communications, Inc. (ACIA – Get Rating) are poised to benefit from other profit generating initiatives.
DELL is a consumer and enterprise brand known for its PCs and servers. Fighting its way through industry consolidation, changing technology trends, and competition from giants like HP (HPQ) and IBM (IBM), DELL has become a leader in the server market and ranks third in the PC market behind HPQ and Lenovo.
Like many of its peers, DELL is undergoing restructuring, but cost-cutting is not the goal. The company is planning to spin-off its software arm VMware (VMW), which came under its umbrella with the $67 billion EMC merger in 2016. This spin-off would generate significant value for shareholders. DELL would use the proceeds from the spin-off to pay off a portion of its massive $43 billion debt and improve its credit rating.
VMware’s market valuation of $59.3 billion is higher than DELL’s $49.1 billion, which means investors value the software business more. DELL stock has surged 27% year-to-date, outperforming stocks of HPQ and IBM, which fell 7.8% and 6.8%, respectively. DELL stock surged primarily on the news of the VMWare spin-off, which would likely happen next year.
DELL is rated a “Strong Buy” in our POWR Ratings system, reflecting its prospects and recent market performance. It has grades of “A” for Trade Grade, Peer Grade, and Buy & Hold Grade. The stock is also ranked #1 in the 28-stock Technology – Hardware industry.
While DELL surged on the back of its spin-off plan, the electric vehicle (EV) wave helped APH surge. APH provides connectors and sensors for cars, from which it earns 19% of its revenue. It also serves the broadband communication, commercial aerospace, industrial, information technology and data communication, military, mobile device, and mobile network markets. But it is the EV trend that has made APH a highly-watched stock.
APH stock has completely recovered from its March sell-off and is set to make new highs as the EV market surges. S&P Global Market Intelligence (MI) expects worldwide EV sales to surge threefold to 6.2 million by 2024. This growth will be driven by policy support, stricter carbon emission rules, and the declining price of electricity storage units or batteries. However, the pandemic has..
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