Tech stocks are regaining momentum as businesses worldwide adopt hybrid working structures. Moreover, with robust digitization happening in almost every industry and 5G being deployed widely, tech companies are witnessing surging demand for their products and services. In fact, the robust demand for tech products and solutions and favorable policies for domestic semiconductor chip production have rekindled investors’ enthusiasm for the sector.
Surging investor optimism over the industry’s growth prospects is evident in the iShares U.S. Technology ETF’s (IYW) 7.5% returns over the past month versus the SPDR S&P 500 ETF Trust’s (SPY) 2% gains. In fact, the global tech industry is expected to grow at a 5% CAGR over the next three years.
Given this backdrop, we believe it would be wise to bet on established tech players Microsoft Corporation (MSFT – Get Rating), Cisco Systems, Inc. (CSCO – Get Rating), and Broadcom Inc. (AVGO – Get Rating) because they are continuously innovating and are positioned to continue growing.
MSFT develops and supports software, services, devices, and solutions worldwide. The company operates through three business segments—productivity and business processes; intelligent cloud; and more personal computing. It sells its products through OEMs, distributors, and resellers, and directly through digital marketplaces, online stores, and retail stores.
On June 2, 2021, MSFT collaborated with Morgan Stanley (MS) to accelerate the firm’s digital transformation and shape the future of innovation in the financial services industry. Combining MS’ financial services engineering expertise with MSFT’s cloud and industry-specific experience, the partnership is intended to develop and co-design secure and compliant application infrastructure with data privacy that will fuel its cloud transformation and enhance client, employee and developer experiences. By addressing increased cyberthreats and other challenges in the financial services industry, MSFT hopes this partnership will create additional collaboration opportunities in the financial services industry.
On May 13, Mars, Incorporated, a manufacturer of confectionery, pet food, and other food products, expanded its long-term relationship with MSFT in a new agreement to accelerate Mars’ digital transformation. Working with Accenture (ACN) as a partner to MSFT, Mars will leverage MSFT’s Microsoft Azure platform to optimize its operational speed and intelligent manufacturing supply chains across Mars’ portfolio and provide business insights that will help Mars accelerate its growth, profitability and customer experience. MSFT’s total revenue came in at $41.71 billion for its fiscal first quarter, ended March 31, 2021, which represents a 19.1% year-over-year rise. The company’s gross profit increased 19.2% year-over-year to $28.66 billion. Its operating income is reported at $17.05 billion, up 31.4% from the prior-year period. While its adjusted net income increased 38% year-over-year to $14.84 billion, its adjusted EPS increased 39.3% year-over-year to $1.95. As of March 31, 2021, the company had $13.70 billion in cash and cash equivalents.
A $1.92 consensus EPS estimate for the current quarter, ending June 30, 2021, represents a 31.5% improvement from the prior-year period. MSFT surpassed the Street’s EPS estimates in each of the trailing four quarters. The $44.29 billion consensus revenue estimate for the current quarter represents a 16.5% rise from the prior-year period. The stock’s EPS is expected to grow at a 17% rate over the next five years.
MSFT has climbed 34.6% over the past year and 29.7% over the past nine months. It closed yesterday’s trading session at $265.51.
MSFT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Stability, Sentiment, and Quality. To see additional POWR Ratings for MSFT’s Growth, Value, and Momentum, click here.
MSFT is ranked #18 of 128 stocks in the Software – Application industry.
CSCO designs, manufactures, and sells Internet Protocol (IP) based networking products and services related to the communications and information technology industry worldwide. The company offers enterprise network security, software development, data collaboration, cloud computing, and other related services. It sells its products and services directly, as well as through systems integrators, service providers, other resellers, and distributors.
On June 23, 2021, Vodafone Idea Limited (VIL), India’s leading telecom operator, collaborated with CSCO to design and build a cost-efficient network architecture across India to accelerate digital transformation and enhance the quality of experience for VIL customers. Using CSCO’s Ultra Packet Core will help VIL deploy a host of innovative new software applications and services that will provide enhanced performance and drive greater speed to market with emerging opportunities in 4G & 5G, cloud, and IoT. Also, it will…
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