The resumption of economic activities has led investors to shift their focus to cyclical stocks to capitalize on their solid growth prospects. Consequently, many highly priced technology stocks have lost investors’ love lately and are trading at reasonable prices now. Concerns about rising inflation are also playing a major role in investors’ decisions to rotate away from expensive tech stocks. Tech stocks’ weakness is evident in the Technology Select Sector SPDR Fund’s (XLK) 9.2% gains over the past three months compared to the SPDR S&P 500 Trust ETF’s (SPY) 11.1% returns.
Nevertheless, we think the tech sector holds immense growth potential. In addition to the continued, global digital transformation, increasing use of advanced technologies such as artificial intelligence (AI), Internet of Things (IoT) and augmented reality (AR) in almost all industries could keep driving the sector’s growth.
QUALCOMM Incorporated (QCOM)
Established wireless technology company QCOM is engaged in the develops, launches and expands technologies like fifth generation (5G). It is also engaged in the development and commercialization of foundational technologies and products that are used in mobile devices and other wireless products, including network and broadband gateway equipment, consumer electronic devices, and other connected devices worldwide.
QCOM, along with United States Cellular Corporation (USM), Telefonaktiebolaget LM Ericsson (ERIC) and Inseego Corp. (INSG), announced on May 6, 2021 that they have successfully achieved a 5G extended-range milestone over millimeter Wave (mmWave) on a commercial network. Since 5G mmWave is a robust and crucial solution to meet the increasing traffic demand and expand broadband services, this is expected to lead to increasing demand for QCOM’s products and services.
QCOM’s revenue surged 52% year-over-year to $7.93 billion in the second quarter, ended March 28, 2021. Its earnings before taxes grew 256% year-over-year to $2.13 billion. Its net income came in at $1.76 billion, which represents a 276% year-over-year increase. The company’s EPS was $1.53, up 273% year-over-year.
In terms of forward non-GAAP PEG, QCOM’s 0.72x is 60.4% lower than the 1.82x industry average. In terms of forward GAAP P/E ratio also, the stock’s 19.79x is 39% lower than the 32.44x industry average.
Analysts expect its EPS to increase 94.2% year-over-year to $1.67 for the current quarter, ending June 30, 2021. It surpassed consensus EPS estimates in each of the trailing four quarters. Its revenue is expected to increase 48.5% year-over-year to $32.16 billion in 2021. The stock has soared nearly 56.1% over the past year to close yesterday’s trading session at $134.34.
QCOM’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. The company has an overall B rating, which equates to Buy in our proprietary ratings system. The stock has a B grade for Growth, Value, Sentiment and Quality.
NETGEAR, Inc. (NTGR)
NTGR designs, develops, and markets networking and Internet connected products for consumers, businesses, and service providers. It operates in two segments–connected home, and small and medium business. The company offers smart home products and value-added service offerings. It also provides…
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