The tech-heavy Nasdaq has outperformed the S&P 500 and Dow Jones Industrial Average over the past month, gaining 6.7%. This outperformance has been driven primarily by solid corporate earnings reported by some index heavyweights, and investors’ optimism over the recovery of tech stocks that witnessed a sell-off lately.
Tech stocks, which are typically more growth-oriented, have managed to improve their financials in the last quarter, as evidenced by the better-than-expected and higher-than-year-ago revenues and earnings reported by most of the tech companies that have so far reported quarterly results.
With most tech players now raising their earnings forecasts, the index is expected to maintain its momentum in the near term. Thus, we believe prominent Nasdaq stocks Broadcom Inc. (AVGO) and Gilead Sciences Inc. (GILD) are well positioned to soar.
Broadcom Inc. (AVGO)
Incorporated in 2018, AVGO is focused on technology leadership and category-leading semiconductor and infrastructure software solutions. The company operates through two segments, Semiconductor Solutions and Infrastructure Software. It provides data center networking and storage, enterprise, mainframe and cyber security software focused on automation, monitoring and security, smartphone components, telecoms and factory automation solutions.
This month, AVGO and Google Cloud entered a strategic collaboration with the purpose of accelerating digital transformation and cloud services integration. This should enhance AVGO’s software solutions and drive greater operational efficiency.
In January, AVGO announced the introduction of the world’s first Wi-Fi 6E phone, the Samsung Galaxy S21 Ultra, which is enabled by the BCM4389 chip. This partnership should enable AVGO to provide an uninterrupted service and connectivity experience to Galaxy users.
AVGO’s net sales increased 14% year-over-year to $6.65 billion in the fiscal year 2021 first quarter ended January 31, 2021. It reported $2.97 billion of net income, while its adjusted EBITDA increased 20.7% year-over-year to $3.94 billion over the period. The company’s EPS increased 25.9% from its year-ago value to $6.61.
A $6.42 consensus EPS estimate for the current quarter ending April 2021 represents a 24.9% improvement year-over-year. Also, the company beat the Street’s EPS estimates in three of the trailing four quarters. The consensus $6.51 billion revenue estimate in the current quarter represents a 14.2% increase from the same period last year. The stock has gained 78.2% over the past year.
AVGO’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
AVGO is also rated a B in Growth, Stability, and Quality. Within the B-rated Semiconductor & Wireless Chip industry, it is ranked #4 of 98 stocks.
To see additional POWR Ratings for Value, Momentum, and Sentiment for AVGO, Click here.
Note that AVGO is one of the few handpicked stocks currently in the Reitmeister Total Return portfolio. Learn more here.
Gilead Sciences, Inc. (GILD)
GILD is a research-based biopharmaceutical company that develops and commercializes medicines in the areas of unmet medical needs in the United States and internationally. It provides therapies for the treatment of human immunodeficiency virus (HIV) infection, and for hematology, oncology, and cell therapy. Buoyed by a still-growing market for its remdesivir drug, the only COVID-19 antiviral treatment, the company has been able to generate substantial revenues.
This month, GILD announced that the U.S. Food and Drug Administration (FDA) has granted accelerated approval to its Trodelvy drug for adult patients with locally advanced or metastatic triple-negative breast cancer. So far, this disease has very few treatment options and the approval should help the company meet the needs of patients with advanced urothelial cancer.
In the fourth quarter, ended December 31, 2020, GILD’s total revenue increased 26.2% year-over-year to $7.42 billion. Its product gross margin increased 1190 basis points from its year-ago value to 87.5%, while its operating margin grew year-over-year to 47.1%. The company’s EPS increased 99% year-over-year to $2.19 over the same period.
Analysts expected GILD’s revenue for the current quarter, ended March 31, 2021, to be $6.74 billion, representing 21.6% year-over-year growth. Also, the company beat the Street’s EPS estimates in three of the trailing four quarters. Its EPS is likely to increase 58.6% for the next quarter, ending June 2021, to $1.76. GILD has gained 12.9% year-to-date.
It is no surprise that GILD has an overall A rating, which translates to Strong Buy in our proprietary grading system. The stock also has an A grade for Value and a B grade for Growth, Sentiment, and Quality. In the Biotech industry, it is ranked #3 of 491 stocks.
In total, we rate GILD on eight different levels. Beyond what we’ve stated above, we have also given GILD grades for Momentum and Stability. Get all the GILD ratings here.
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AVGO shares were trading at $466.25 per share on Tuesday afternoon, down $5.60 (-1.19%). Year-to-date, AVGO has gained 7.32%, versus a 12.00% rise in the benchmark S&P 500 index during the same period.
About the Author: Samiksha Agarwal
Samiksha Agarwal has always had a keen interest in financial markets. This has led her to a career as a financial journalist. Through her extensive knowledge of fundamental analysis, her goal is to help investors identify untapped investment opportunities in the stock market. More...
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