The technology industry has been one of the biggest gainers over the past year, driving the stock markets amid an economic recession. The popularity of tech companies can in no small measure be attributed to the surging demand their products and services experienced last year as remote lifestyles took hold amid the coronavirus pandemic.
Technology stocks’ outperformance of the broader market over the past year is evidenced by the Technology Select Sector SPDR ETF’s (XLK) 37.5% gains versus the SPDR S&P 500 ETF Trust’s (SPY) 16.9% returns over this period. As a result, major tech giants are now trading at lofty valuations. This disconnect between the stock market and the real economy has raised concerns regarding a potential stock market bubble.
While the coronavirus vaccination process has begun worldwide, vaccinating entire populations is challenging and may take a long time. Moreover, with a remote working culture expected to continue even in the post-vaccine world, the tech industry’s growth should continue.
Because some of the tech giants are currently under federal scrutiny for antitrust allegations and monopolistic behavior, and because most of the big tech players are trading at high valuations, we think it could be wise to bet on stocks in the tech space that are currently trading at reasonable valuations.
Sony Corporation (SNE – Get Rating), HP Inc. (HPQ – Get Rating) and Amkor Technology, Inc. (AMKR – Get Rating) have delivered impressive returns over the past quarters, but are still trading at P/E ratios below 15. Given the favorable industry backdrop and their global market presence, these stocks appear to have plenty of upside.
SNE is one of the largest creative entertainment companies in the world. It was the first Japanese company to be listed on the New York Stock Exchange 50 years ago. The company develops and markets electronic equipment, instruments, and devices for the consumer, professional, and industrial markets worldwide.
SNE’s trailing-12-month GAAP P/E of 14.01x is 44.6% lower than the industry average of 25,28x. In terms of trailing-12-month price/cash flow, the stock is currently trading at 8.23x, which is 31.6% lower than the industry average of 12.04x.
On December 9, Sony Pictures Entertainment Inc. (SPE), a wholly owned subsidiary of SNE, announced that it had agreed to acquire 100% of Ellation Holdings, Inc., which operates the anime business Crunchyroll, for a total purchase price of $1.175 billion. Crunchyroll is a U.S. distributor and, publisher focused on streaming anime, manga, and dorama. It serves around 90 million registered users in more than 200 countries. The acquisition provides SNE with an opportunity to broaden its content partners’ distribution and expand fan-centric offerings to consumers.
Earlier this month, Sony Electronics Inc. introduced new BRAVIA XR 8K LED, 4K OLED and 4K LED television models powered by the Cognitive Processor XR. This product lineup is expected to take the industry to the next level by delivering an immersive cinematic experience.
SNE’s operating income has risen 13.9% year-over-year to ¥317.76 billion in the fiscal second quarter ended September 30, 2020. Its EBIT grew 14.3% from the same period last year to ¥299.60 billion, while net income increased 146.5% from the year-ago value to ¥374.34.
Analysts expect SNE’s revenues to rise 21.2% year-over-year to $19.08 billion in the current quarter ending March 31, 2021. A consensus EPS estimate of $0.29 for the current quarter represents a 190% improvement year-over-year. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 29.9% over the past six months.
How does SNE stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
B for Industry Rank
A for Overall POWR Rating
The stock is also ranked #1 of 23 stocks in the Entertainment – Media Producers industry.
Based in Palo Alto, California, HPQ is a printing and personal systems technology company that offers personal computing and access devices, imaging and printing products and related technologies through its three segments: Personal Systems, Printing. and Corporate Investments.
HPQ’s trailing-12-month non-GAAP P/E of 11.02x is 62.5% lower than the industry average of 29.36x. In terms of forward non-GAAP P/E, the stock is currently trading at 9.46x, which is 67.6% lower than the industry average of 29.17x.
In late October, HPQ made significant advancements in
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