After reporting record gains over the past year, the tech industry is looking at a still more profitable 2021. The tech-heavy Nasdaq composite surged 44.1% over the past year, while the S&P 500 IT index rallied 40.6% over the same period. While these numbers reflect investor sentiment over the trailing 12 months, the highly volatile global markets as a result of the COVID-19 pandemic has wiped out some of this industry’s gains in periods of panic selloffs.
Many investors are speculating that a trend reversal in this sector is in the offing owing to a vaccine-driven economic recovery. However, the rising productivity and deftness of the remote working culture have been lauded by most organizations, implying a permanent shift in the work culture globally. Enterprise Technology, a research firm, predicts that at least half of the work force will continue working from home in 2021, while Facebook CEO entrepreneur Mark Zuckerberg expects at least 50% of its workforce to work remotely over the next 5-10 years.
This is good news for tech giants such as Apple, Inc. (AAPL), Broadcom Inc. (AVGO), and Micron Technology, Inc. (MU), which have capitalized on this trend by launching state-of-the-art devices and gadgets that are tailor made for remote working.
Apple, Inc. (AAPL)
AAPL has been one of the best performing technology companies for quite some time. It is the largest company in terms of market capitalization (more that over $2.2 trillion) and is one of the big five (of FAANG) tech companies in the United States.
In this age of digitization, AAPL is actively taking steps to be emerge as one of the top IT companies with an integrated software ecosystem, with higher protection against cybercrime. To this end, the company has launched a new generation of Macbooks with self-developed M1 chips, designed for higher efficiency and safety. Though priced slightly above its previous range, these products have been extremely successful in the markets, while giving the company a solid entry point to the chip manufacturing industry.
The company is reportedly planning to launch self-driving cars in 2024, the news of which was made public on December 22nd. The stock has surged 3.7% to date, following the press release. While the company has so far been focused on tech hardware and software so far, entering the booming EV markets might push it to allow it to reach new highs. While many people are concerned about regarding the potential supply chain and logistics problems AAPL might face in while entering a new industry, the company’s ample resources and distinguished brand loyalty should give it an edge over other EV start-ups.
AAPL’s revenues have improved slightly year-over-year in the fiscal fourth quarter ended September 26, 2020. Gross margin has increased 1.5% from the year-ago value to $24.69 billion. Its EPS for fiscal 2020 ended September 26, 2020 has risen 10.4% year-over-year to $3.31.
A consensus EPS estimate of $0.88 for the ongoing quarter ending March 31, 2021 represents indicates a 37.5% rise year-over-year. EPS is expected to increase 9.3% this year, and a rate of 12.7% per annum over the next five years. Analysts expect the company’s revenues to increase 25.5% in the current quarter, and 5.3% in 2021.
AAPL has gained more than 145% since hitting its 52-week low of $53.15 in March. The stock hit its 52-week high of $138.79 on December 29th.
How does AAPL stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
B for Peer Grade
A for Industry Rank
A for Overall POWR Rating.
It was currently ranked #1 of 46 stocks in the Technology – Hardware industry.
Broadcom Inc. (AVGO)
AVGO is one of the biggest semiconductor manufacturing companies operating in the United States, with a market capitalization of more than over $180 billion. With a global market presence, AVGO specializes in developing semiconductor solutions for complex digital and analog devices. The company also develops infrastructure software solutions and internet protocol (IP) licensing services.
Amid the ongoing industry disruption with since the advent of the 5G technology, AVGO has been focused on research and development to launch high-end semiconductors and related processors. Over the past month, the company has launched multiple platform solutions and services, along with hyperscale data centers. This is expected to help AVGO process huge volumes of data simultaneously, and to as well as capitalize on the ongoing infrastructure transformation to accommodate 5G.
On January 4th, AVGO announced the pricing of multiple senior notes offerings, which is expected to raise approximately $9 billion in total cumulatively. The company plans to repay previously issued senior notes with the as well as fund its tender offer bids with through the net proceeds of these offerings. This move will not only help AVGO reduce its net interest burden, thereby improving its credit rating and market credibility, but should also cover a portion of its research and development expenses.
AVGO’s revenues have increased 12% year-over-year to $6.47 billion in the fiscal fourth quarter ended September 30November 1, 2020. Non-GAAP net income has risen 19.8% from the year-ago value to $2.89 billion, while non-GAAP EPS has improved 17.8% from the prior-year quarter to $6.35.
The consensus EPS estimate for the current quarter ending January 31, 2021 represents indicates a 24.8% rise year-over-year. The consensus revenue estimate of $6.61 billion for the ongoing quarter indicates a 12.8% improvement from the same period last year. AVGO gained more than 185% to hit its 52-week high of $444.59 yesterday, since hitting its 52-week low of $155.67 in March.
AVGO’s POWR Ratings reflect this promising outlook. It is rated “Strong Buy” with an “A” for Trade Grade, Buy & Hold Grade and Industry Rank, and a “B” for Peer Grade. In the 99- stock Semiconductor & Wireless Chip industry, it is currently ranked #3.
Micron Technology, Inc. (MU)
MU designs and manufactures semiconductors for memory and storage products. The company operates through four segments – Compute and Networking Business Unit, Mobile Business Unit, Storage Business Unit and Embedded Business Unit. It has a long-standing partnership with one of the biggest processor and chip manufacturing companies, Intel Corporation (INTC), reflecting its popularity in the industry.
Over the past three months, MU has increasingly upgraded its products to fit into the Internet of Things (IoT) ecosystem. It has launched multi chip packages, flash memory processors and cloud based virtual SIM over this period. The company expanded its operations to the second largest internet market India in October last year, through a strategic collaboration with Indian IT giant Tata Communications.
MU’s revenues have increased 12.3% year-over-year to $5.77 billion in the fiscal first quarter ended December 31, 20201. Its gross margin has improved 27.1% from the year-ago value to $1.74 billion, while net income has risen 63.5% from the same period last year to $803 million. Its EPS has increased 65.1% from the prior-year quarter to $0.71.
MU’s EPS is expected to rise 40% in the current quarter ending February 28, 2021, and 36.7% in fiscal 2021. The company has an impressive earnings surprise history as well; it beat the Street EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $5.50 billion for the ongoing quarter indicates a 14.7% improvement year-over-year. MU has gained more than 150% since hitting its 52-week low of $31.13 in March last year.
It is no surprise that MU is rated “Strong Buy” in our POWR Ratings system, with an “A” for Trade Grade, Buy & Hold Grade, and Industry Rank. It is currently ranked #7 in the Semiconductor & Wireless Chip industry.
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AAPL shares were trading at $131.43 per share on Friday afternoon, up $0.51 (+0.39%). Year-to-date, AAPL has declined -0.95%, versus a 1.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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