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Technology stocks helped drive the historic bull market that the coronavirus brought to an abrupt end. Some of these same tech powers, and the industry in general, have picked up right where they left off during the market’s two-month rally.
The S&P 500 has surged 32% from its March 23 lows, as Wall Street looks ahead to a coronavirus recovery. On top of that, investors remain in ‘don’t fight the Fed’ mode as the central bank does all it can to support the market, as the U.S. government provides economic stimulus.
Meanwhile, stocks jumped to start the week on the back of positive coronavirus vaccine news. This came as economies around the world slowly begin to reopen from their coronavirus-induced lockdowns.
That said, the full impact of the coronavirus shutdown won’t be seen until second quarter earnings, and the economic data seems sure to get worse. Still, as stocks jump, for all the reasons we mentioned, investors might want to consider buying some of the safer tech plays.
These come in the form of blue-chip giants such as Amazon (AMZN) , which hit new highs Wednesday, as its e-commerce and cloud spaces prove somewhat immune to the coronavirus. So here are 3 blue-chip tech stocks that investors might want to buy…
FB hit new highs Wednesday after it announced its new Shops offering that will enable users and businesses to essentially create a streamlined version of their e-commerce sites directly on Facebook and some of its other services. FB’s latest e-commerce push comes as retailers around the world struggle, and is part of its larger push, through Marketplace and Instagram, to compete in a growing market against Amazon, eBay (EBAY) , Etsy (ETSY), and others.
Facebook in April said it would pay $5.7 billion for roughly 10% of Indian telecom powerhouse Jio Platforms Ltd. The move is bet on the huge Indian market where FB already has over 400 million WhatsApp users. Plus, the social media power posted solid Q1 results, with daily active users up 11% to 1.73 billion. This growth helped Facebook’s Q1 revenue pop 18% to reach $17.74 billion. And executives also calmed Wall Street nerves about its advertising sales during the coronavirus.
Despite its 60% climb since mid-March and sitting right near new highs, FB stock is trading at a discount against its own one-year highs. Facebook’s balance sheet is also strong and its cash pile will help it weather any coronavirus storms and continue its expansion into e-commerce, augmented reality, and more.
FB is currently a Zacks Rank #3 (Hold) that longer-term investors might want to look at because its nearly 2.6 billion monthly users makes it an advertising titan, especially in an age where people pay not to see ads on Netflix (NFLX) and elsewhere.
Apple is clearly another safe tech bet at the moment despite pandemic-related iPhone setbacks. AAPL beat our Q2 fiscal 2020 estimates at the end of April, driven by growth in its non-iPhone units. Apple’s services division saw its revenue jump roughly 17%. Meanwhile, its wearables unit climbed 23% to a new quarterly record. Perhaps more importantly, given the unprecedented times, Apple closed the period with $193 billion in cash and marketable securities, alongside total debt of $110 billion. This left it with $83 billion in net cash.
Apple also lifted its quarterly dividend by 6% and its current 1.03% yield easily tops the 10-year U.S. Treasury’s 0.66%. On top of all of that, Apple’s board authorized a $50 billion increase to the stock buyback program, at a time when fellow giants such as AT&T (T) suspended their repurchase programs.
Shares of Apple have surged 40% since March 23 and it currently sits just 3% below its 52-week highs. AAPL is a Zacks Rank #2 (Buy) right now that sports “B” grades for both Value and Growth in our Style Scores system. Even near its highs, longer-term investors will likely look back in a year from now and wish they could buy Apple at its current price.
Microsoft is another obvious pick that also topped our quarterly earnings and revenue estimates at the end of April, with sales up 15%. Cloud computing was the star of the show once again, with Intelligent Cloud sales up 27% for the second quarter in a row. MSFT’s cloud segment pulled in $12.3 billion, which was the most of its three units. Meanwhile, its Office-heavy Productivity and Business Processes jumped 15%, with personal computing up 3%.
Microsoft’s cloud business is an industry leader alongside Amazon. And its Office 365 suite remains vital to businesses, governments, schools, and consumers. More recently, its Teams business has stood out during the stay-at-home environment, and it looks ready to take on smaller rivals like Slack (WORK) and Zoom (ZM) . On top of that, Microsoft held over $137 billion in cash, cash equivalents, and short-term investments at the end of last quarter.
MSFT’s dividend yield rests at 1.1% right now, and it might continue to buy back stock. Looking ahead, Microsoft’s current full-year revenue is projected to jump 12.4% and another 10% next year. MSFT’s adjusted earnings are projected to surge 20% and 9.2%, respectively. And Microsoft, which is a Zacks Rank #2 (Buy) right now, has seen its stock price climb 36% since the market’s lows and it’s currently trying to break through to new highs.
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