Companies in the tech space have been among the biggest beneficiaries of the COVID-19 pandemic and their stocks have been red hot over the past year. But as government rescue packages and the central bank’s accommodative monetary policy fuel a robust economic rebound, concerns over rising inflation and Treasury yields are motivating investors to sell overvalued tech stocks and buy non-tech stocks that have turnaround potential.
Acknowledging the better-than-expected vaccination drive, investors are now anticipating slowing growth in demand for tech products and services this year because the United States is returning to more normalized conditions for commerce. This has caused tech stocks to lag the broader market so far this year, which is evidenced by the Vanguard Information Technology Index Fund ETF’s (VGT) 3.5% gains compared to the S&P 500’s 10.5% returns over this period.
However, some major multinational companies have already adopted a remote work culture permanently. Furthermore, investors must acknowledge that the current wave of artificial intelligence (AI), 5G network, cloud computing and virtual reality advances are expected to continue driving the tech industry’s growth. This year could see more spending on cloud and edge computing infrastructure, and tech stocks should continue their accelerated growth even in the post-pandemic world. Given this backdrop, we think it is wise to scoop up Oracle Corporation (ORCL – Get Rating), Intel Corporation (INTC – Get Rating), SAP SE (SAP – Get Rating) and Telefon AB L.M. Ericsson (ERIC – Get Rating). They could offer handsome upside from their current price levels based on solid fundamentals and strong earnings momentum.
ORCL develops, hosts, and supports database and middleware software, application software, cloud infrastructure, hardware systems, and related services worldwide. It operates via four segments—Cloud services and license support, Cloud license and on-premises license, Hardware, and Services. The company has 7,300 Fusion enterprise resource planning (ERP) customers currently, and more than 23,000 NetSuite ERP customers in the Oracle Cloud.
Because the emergence of more infectious COVID-19 virus variants is causing a threat to the global recovery, Oxford University and ORCL have created a Global Pathogen Analysis System (GPAS) with the power of Oracle Cloud Infrastructure. On May 14, DISH Wireless, the connectivity major that is building the nation’s first cloud-native, OpenRAN-based 5G network, selected ORCL to enable a Service-Based Architecture (SBA) for its 5G core. Also, ORCL is rapidly escalating its cloud regions and unveiled the Vinhedo Cloud region in Brazil last week, thereby expanding to a dual cloud region in Brazil.
In its fiscal third quarter (ended February 28, 2021), ORCL’s revenues were up 3% year-over-year to $10.1 billion. Its cloud services and license support contributed 72% to the top-line as segment revenues increased 5% to $7.25 billion. Its adjusted operating margin came in at 47%. In fact, ORCL’s Gen2 Cloud Infrastructure business revenue grew at a rate more than 100% on the back of robust customer addition. The company’s highly profitable multibillion-dollar Fusion and NetSuite Cloud ERP applications businesses grew revenue 30% and 24%, respectively, during the quarter. While its non-GAAP EPS came in at $1.16, rising 20% compared to its year-ago quarter.
The permanent adoption of remote working environments has reinforced demand for cloud-based services, and organizations around the world are seeking increased scalability, business continuity and cost efficiency. Thus, analysts expect the company’s revenue to increase 5.8% in the current quarter. A $1.13 consensus EPS estimate for the current quarter represents a 9.2% improvement year-over-year. Notably, ORCL has surpassed consensus EPS estimates in each of the trailing four quarters. Analysts further expect ORCL’s current year revenue and EPS to grow 3.1% and 15.8%, respectively.
ORCL has registered a mere0.1% gain over the past month. However, it is also worth noting that the stock has returned more than 50% over the past year. ORCL opened 13 additional Cloud datacenter regions in 2020 and currently operates 30 regions globally–the fastest expansion by any major cloud provider. ORCL has increased its already aggressive expansion plan, and now expects to have 38 Cloud regions by the end of 2021.
ORCL’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
ORCL also has a B grade for Value, Stability and Quality. Of #125 stocks in Software – Application industry, ORCL is ranked #10.
In total, we rate ORCL on eight different levels. In addition to the POWR Ratings grades we’ve just highlighted, one can see the ORCL’s ratings for Growth, Momentum and Sentiment here.
INTC designs integrated digital technology platforms for smart and connected devices worldwide. By embedding intelligence in the cloud, network, and edge, INTC unleashes the potential of data to transform business. It operates through its PC Client Group, Data Center Group, Internet of Things Group, Mobile and Communications Group, Software and Services, and All Other segments.
On March 23, INTC CEO Pat Gelsinger unveiled his vision for “IDM 2.0,” a major evolution of Intel’s integrated device manufacturing (IDM) model. Gelsinger announced significant manufacturing expansion plans, beginning with an estimated $20 billion investment to build two new factories in Arizona, and the company’s plans to become a major provider of foundry capacity in the U.S. and Europe to serve customers globally. INTC reported $77.9 billion in revenue for its fiscal first quarter, ended March 27, 2021. This was relatively flat year-over-year, driven by strong PC demand. In fact, PC unit volumes were up 38% year-over-year, and notebook volumes set a record. The company also saw an initial recovery of Enterprise and Government sales in the Data Center Group (DCG). The company also shipped new CPU products during the quarter and announced key customer design wins. However, its EPS came in at $0.82, falling 37% versus the prior year value.
INTC struggled for most of 2020 due primarily to its seven–nanometer chip manufacturing hiccup. However, the company has…
Continue reading at STOCKNEWS.com