After hitting all-time highs, the major stock market indexes saw a mild correction over the past week, reflecting investors’ concerns over the spread of the Delta variant of coronavirus and high inflation. The tech-heavy Nasdaq fell nearly 3% over the past week to close yesterday’s trading session at 14,274.98.
Because the market is expected to remain volatile, we think it could be wise to invest in quality large-cap tech stocks. That’s because large-cap stocks are known for withstanding market volatility and delivering stable returns, and the technology industry is showing much promise with the ongoing digital transformation across several industries. Because the demand for the internet of things (IoT) and artificial intelligence (AI)-based solutions, among other advanced technologies, is expected to continue rising, the tech industry is well-positioned to grow. According to Statista, there were 4.66 billion active internet users worldwide as of January 2021, representing 59.5% of the global population. This number is expected to rise further, which could lead to increasing demand for advanced technological solutions.
So, we think it could be wise to bet on fundamentally sound large-cap tech stocks Broadcom Inc. (AVGO), SAP SE (SAP), and QUALCOMM (QCOM) to capitalize on the industry tailwinds. Our POWR Ratings system has rated each of these stocks as Strong Buy.
Broadcom Inc. (AVGO)
With a $191.05 billion market cap, AVGO develops and supplies a range of semiconductor and infrastructure software solutions. The company serves critical markets, including data center, networking, enterprise software, broadband, wireless, storage, and industrial.
On June 15, 2021, AVGO introduced its new industry-first capabilities for Value Stream Management (VSM) in its ValueOps software portfolio, which combines Clarity’s proven investment planning features with the advanced Agile management capabilities of Rally software. Since ValueOps from AVGO is the first solution to extend the concept of a value stream beyond DevOps and operational roles, this is expected to give it an edge over its peers.
Alphabet Inc.’s (GOOGL) Google Cloud and AVGO announced a strategic collaboration in April 2021 to accelerate innovation and strengthen cloud services integration within AVGO’s core software franchises. The partnership is expected to help AVGO scale and innovate faster to meet the growing needs of digital businesses globally.
AVGO’s top line surged 15.1% year-over-year to $6.61 billion for the fiscal second quarter, ended May 2, 2021, driven primarily by solid demand for semiconductors across its multiple end markets. The company’s non-GAAP net income came in at $2.98 billion, up 28.3% year-over-year. Its adjusted EBITDA for the quarter increased 23.4% year-over-year to $3.96 billion. And its non-GAAP EPS increased 28.8% from the same period last year to $6.62.
Analysts expect AVGO’s revenue to increase 14.1% year-over-year to $27.25 billion in its fiscal year 2021. Its EPS is expected to come in at $6.85 for the current quarter ending July 31, 2021, representing a 26.9% year-over-year rise. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 48.9% to close yesterday’s trading session at $465.67.
AVGO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has a B grade for Growth, Stability, Sentiment, and Quality. We’ve also graded AVGO for Value and Momentum. Click here to access all the AVGO ratings. AVGO is ranked #4 of 99 stocks in the B-rated Semiconductor & Wireless Chip industry.
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SAP SE (SAP)
Headquartered in Walldorf, Germany, SAP is a leading company in the enterprise application software space. It has a $171.03 billion market capitalization. The company operates through three segments: The applications, technology & services segment, and the SAP Business Network. SAP has been ranked the #1 software company in the Dow Jones Sustainability Index for 14 years.
Last month, SAP unveiled the first step toward creating the world’s largest business network with SAP Business Network, which will bring together Ariba Network, SAP Logistics Business Network, and SAP Asset Intelligence Network. The company’s CEO, Christian Klein said, “Our new vision will build the world’s largest business community, enabling customers to easily connect with companies across supply chains and creating networked economies across industries.”
SAP announced in May 2021 that refrigeration and air conditioning technology manufacturer BITZER had implemented the SAP Ariba Buying solution. In addition, Toyota Material Handling U.S.A. and Veolia North America, along with hundreds of companies across the globe, also implemented the company’s SAP Ariba and SAP Fieldglass solutions to digitalize procurement and external workforce management. This represents SAP’s expanding consumer base.
For the first quarter, ended March 31, 2021, SAP’s non-IFRS revenue from its cloud and software segment came in at €5.43 billion ($6.40 billion), compared to €5.40 billion ($6.37 billion) in the prior-year quarter. The company’s non-IFRS operating profit increased 17.5% year-over-year to €1.74 billion ($2.5 billion). SAP’s non-IFRS EPS was €1.40 ($1.65), up 64.7% year-over-year.
The company’s revenue is expected to increase 3.9% year-over-year to $33.78 billion in its fiscal year 2022. Analysts expect SAP’s EPS to increase 5.8% year-over-year to $1.45 for the about-to-be-reported quarter, ended June 30, 2021. It surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has rallied 14% over the past six months to close yesterday’s trading session at $144.81.
SAP’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary ratings system. The stock has an A grade for Sentiment, and a B grade for Value, Stability, and Quality.
QUALCOMM Incorporated (QCOM)
One of the world’s leading wireless technology innovators, San Diego, Calif.-based QCOM is at the forefront of the launch and expansion of technologies like 5G. The company operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI). It has a $156.56 billion market capitalization.
The company has announced a $0.68 per common share quarterly cash dividend, payable on September 23, 2021. QCOM has consistently increased its dividend for the past 18 years. This reflects its solid financial strength.
In March, QCOM’s subsidiary, Qualcomm Technologies, Inc., completed the acquisition of the world-class CPU and technology design company NUVIA. The acquisition is expected to expand the company’s portfolio because Qualcomm Technologies expects to integrate next-generation CPUs across a broad portfolio of products, including powering flagship smartphones, digital cockpits, advanced driver assistance systems, and infrastructure networking solutions.
The company is scheduled to release its financial results for the third quarter (ended June 30, 2021) on July 28. QCOM’s non-GAAP revenues increased 52.2% year-over-year to $7.93 billion in the second quarter, ended March 28, 2021. The company’s non-GAAP EBT increased 113.2% year-over-year to $2.53 billion. Its non-GAAP net income came in at $2.19 billion, representing a 115.3% year-over-year rise. QCOM’s non-GAAP EPS was $1.90, up 115.9% year-over-year.
For the quarter ending September 30, 2021, analysts expect QCOM’s revenue and EPS to increase 30.4% and 40.7%, respectively, year-over-year to $8.48 billion and $2.04. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has soared 50.5% over the past year to close yesterday’s trading session at $138.79.
It’s no surprise that QCOM has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock has a B grade for Growth, Value, Sentiment, and Quality. Click here to see the additional POWR Ratings for QCOM (Stability and Momentum).
QCOM is ranked #5 in the Semiconductor & Wireless Chip industry.
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AVGO shares rose $1.58 (+0.34%) in premarket trading Tuesday. Year-to-date, AVGO has gained 8.59%, versus a 14.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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