The tech sell-off has been ongoing for some time as investors rotate away from the expensive tech players to relatively cheaper outdoor and cyclical stocks that are expected to gain significantly from a faster-than-expected macroeconomic recovery. This is evidenced by the Nasdaq Composite’s marginal gains over the past three months versus the broader S&P 500 index’s 7.6% returns over this period.
However, the tech sector is likely to remain vibrant in a post-pandemic economy because almost every industry is adopting innovative technology to increase their efficiency and market shares. This, combined with the continuation of remote working arrangements given their advantages over working on-premises, is expected to drive the tech industry going forward. Thus, analysts expect many technology companies to generate strong growth even in the post-pandemic world.
Given this backdrop, Reddit community WallStreetBets (WSB) is betting on overshadowed tech companies Advanced Micro Devices, Inc. (AMD), Skillz Inc. (SKLZ), and Corsair Gaming, Inc. (CRSR). Consequently, Wall Street analysts expect these stocks to gain more than 30% over the next 12 months.
Advanced Micro Devices, Inc. (AMD)
AMD is a semiconductor manufacturing company that operates in two segments– Computing and Graphics, and Enterprise, Embedded and Semi-Custom. WSB is betting on AMD to capitalize on the rising demand for semiconductors. AMD is achieving rising sales volume and its increasing market share.
On April 20, AMD launched an upgraded version of its Radeon software, with several new features and capabilities that are designed to provide gamers an immersive, complete virtual reality and gaming experience. With online gaming having become one of the most popular entertainment options since last year, the software upgrade should allow AMD to strengthen its position as one of the leading gaming software developers. And on March 23, AMD stated that its new AMD EPYC 7003 series CPUs is the world’s best performing CPU to date.
The company is currently acquiring Xilinx, Inc. (XLNX). The transaction is expected to be concluded by year’s end. Xilinx’s computing platform combined with AMD’s products is expected to have applications in data center businesses, gaming and hardware sectors, as well as the automotive, aerospace and defense industries.
Shares of AMD have gained 49.6% over the past year. Of the 16 Wall Street analysts that rated the stock, nine rated it Buy, six rated it Hold, and one rated it Sell. AMD has a $106.14 median 12-month price target, representing a 35% potential upside. The price target forecast ranges from a low of $70 to a high of $135.
AMD’s revenues increased 93% year-over-year to $3.45 billion in the first quarter ended March 31. Its operating income rose 274% from its year ago value to $662 million, while its net income improved 243% from the same period last year to $555 million. Its EPS came in at $0.45, up 221% from the prior-year quarter.
Analysts expect AMD’s revenues to rise 86.8% year-over-year to $3.61 billion in the fiscal second quarter, ending June 2021. The $0.54 consensus EPS estimate for the current quarter represents a 200% rise from the same period last year. The company has an impressive earnings surprise history as well; it beat the Street’s EPS estimates in each of the trailing four quarters.
Skillz Inc. (SKLZ)
SKLZ is the world’s first publicly traded esports company. The stock went public through a reverse merger with Flying Eagle Acquisition Corp. in December last year. SKLZ gained $158.50 million in PIPE investments from various financial institutions. The online gaming industry is projected to be valued at $150 billion by 2025. SKLZ is one of the most discussed stocks in the WSB chatroom.
SKLZ raised $768 million in gross proceeds through a combined public offering of $32 million shares in March. The company is expected to use the offering’s proceeds for working capital expenses and to fund its general corporate spending.
SKLZ reported record revenues at $83.70 million in the fiscal first quarter, ended March 31, representing a 92% rise year-over-year. This can be attributed to an 81% rise in paying monthly active users (MAUs). Its gross marketplace volume came in at $566.60 million, up 85% from the prior year quarter. Its gross profits increased 95% from the same period last year to $79.40 million.
A $369.16 million consensus revenue estimate for fiscal 2021 indicates a 60.4% improvement year-over-year. Also, analysts expect the company’s EPS to rise 17.5% in the current year.
SKLZ gained 2.7% intraday to close yesterday’s trading session at $16.96. Analysts expect SKLZ to hit $29 in the next 12 months, indicating a 71% potential upside.
Corsair Gaming, Inc. (CRSR)
CRSR is a gaming and streaming components and systems manufacturer with an international market presence. The company went public on September 23, with a pre-IPO valuation of $1.70 billion. It offered approximately 14 million shares priced at $17 per share. WSB has dubbed the stock the ‘next millionaire maker big play,’ motivating several retail investors to go long on CRSR.
The stock has gained 22.6% over the past six months. Of seven Wall Street analysts that rated CRSR, six rated it Buy, while one rated it Hold. Analysts expect the stock to hit $49.43 in the next 12 months, indicating a 51.7% potential upside.
CRSR’s net revenues for the first quarter ended March 31, 2021 came in at $ 529.40 million, up 71.6% year-over-year. This can be attributed to a 131.9% rise in revenues from the Gamer and Creator Peripherals segment, and a 51.9% rise in Gaming Components and Systems segment revenues. Its operating income improved 404.5% from the same period last year to $67.30 million. Its adjusted net income stood at $58.20 million, representing a 420.4% rise from the year-ago value. And its EPS improved 4,600% from the prior year quarter to $0.47 over this period.
CRSR has launched several state-of-the-art gaming PCs personalized gaming keyboards, mice and other accessories over the past couple of months. These product launches are expected to boost CRSR’s financials significantly in the near term.
The Street expects CRSR’s EPS to rise 21.2% year-over-year to $1.56 in its fiscal year 2021. Also, the company beat consensus EPS estimates in each of the past three quarters. CRSR’s annual revenues are expected to rise 14.3% from the same period last year to $1.95 billion in the current year.
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AMD shares were trading at $78.03 per share on Wednesday afternoon, down $0.58 (-0.74%). Year-to-date, AMD has declined -14.92%, versus a 11.73% 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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