3 Top Tech Stocks To Watch This Week According To Analysts.
Tech stocks are flying high this year as organizations have been shifting to remote digital-based operations because of the pandemic. The current sentiment revolving around the tech industry has been mixed. With higher demand for the products and services of tech companies, many experts are speculating that it would be another smashing quarter for top tech stocks in the stock market. But with the November election less than two weeks away, investors have a lot to consider. And that includes how these tech companies might perform moving forward.
With Joe Biden leading the U.S. election polls, tech stock enthusiasts are in a rather anxious state. That’s considering that Democrat leaders are likely to scrutinize large tech companies should the party win the election. Regulatory concerns add to a view among some that valuations of tech stocks are rich and could therefore suffer from a correction.
Are Tech Stock Valuations Getting Too Far Ahead? Time To Buy Or Sell?
A slew of top tech stocks are gearing up report earnings in the coming days. But there have been uncertainties around the pack’s massive gains year-to-date and Congress’ crackdown on some of the largest tech companies, including Facebook (FB Stock Report) and Apple (AAPL Stock Report). The large-cap tech stocks could come under pressure.
Robust quarterly earnings results expected from Big Tech will “highlight the outsized strength these tech behemoths are seeing” but “ultimately add fuel to the fire in the Beltway around breakup momentum,” – Dan Ives, Wedbush analyst
Among the tech companies, cloud computing services remain a major story for the pack as their usage is increasingly important during the remote world of COVID-19. We are seeing many cases where enterprises accelerate their digital transformation and cloud strategy. After all, some companies have been talking about making remote work a permanent feature. Granted, nobody knows for sure if such plans will stick around after the pandemic is over. But it is natural that tech firms that provide the tools and services for people to work, learn, and socialize remotely have greatly benefited this year. With all that being said, are any of these top tech stocks to watch on your list this week?
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Top Tech Stocks To Buy [Or Sell]: Advanced Micro Devices
First, on the list of tech stocks, Advanced Micro Devices (AMD Stock Report) is slated to report its third-quarter earnings on October 27, after the closing bell. The company reportedly plans to aggressively expand its operation through a potential acquisition of Xlink (XLNX Stock Report). With AMD stock up 67% year-to-date, I guess it’s safe to say that markets are still counting on its Ryzen and EPYC processors to be the growth driver when it reports on Tuesday.
Despite AMD’s massive stock gains, many analysts believe that the stock could see continuing gains. Currently, AMD stock trades at a forward PE ratio of about 50. That number certainly looks high, but it’s not without reason. Analysts expect earnings growth to be about 72% for this year and 51% next year. At this rate, AMD stock would grow into its valuation in no time.
Nevertheless, the reality is that AMD is a key beneficiary from the rise of industries including gaming, virtual reality, and data centers. That’s because these use cases require lots of processing power. And that is exactly what AMD has to offer. With the secular growth in these areas, AMD stock could potentially go higher in the longer term. The more immediate question is, with the company releasing its earnings report tomorrow, could we see another jump if the company continues to top estimates?
Top Tech Stocks To Buy [Or Sell]: Alphabet Inc.
Inventors will be looking for signs of whether Alphabet (GOOGL Stock Report) can reverse its recent decline when it reports its third-quarter earnings on October 29. With so much positive commentary from analysts regarding its earnings per share (EPS) and revenue, can investors expect a rebound from the recent retreat?
“We like GOOGL stock most into the [quarterly reports] as it has the worst sentiment and investors know travel is still bad; we believe retail strength can offset, while recovery of brand advertising and a burgeoning Connected TV story at YouTube are under-appreciated,” – Daniel Salmon, BMO Capital Markets Analyst
Last quarter, Alphabet’s stock sold off after the company posted its first-ever drop in revenue. That came as customer companies trimmed their advertising budgets during the pandemic. While the company has been hurt by the COVID-19 pandemic, its cloud business remains strong due to the acceleration of the work-from-home economy. Analysts believe Google’s cloud revenue will be able to post strong gains, albeit at a slower rate than previous quarters. Cloud is becoming a more important segment for Alphabet. And growth in this segment could be a sign of bigger things to come for GOOGL stock.
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Top Tech Stocks To Buy [Or Sell]: Amazon Inc.
With Amazon’s (AMZN Stock Report) stock rallying over 70% this year, it’s not surprising why it’s the most commonly discussed tech stocks in the stock market today. With such an impressive run in its stock price, this makes it the best performing FAANG stock year-to-date. As the tech behemoth expects to release its earnings on October 29, many are paying close attention to AMZN stock. That’s despite the crackdown from Congress for being too influential.
Despite the amazing run in its stock price, Wall Street analysts are not done with it just yet. In fact, many analysts are increasingly bullish on Amazon, giving an average price target of more than $3,700 per share. That implies a nearly 20% upside potential upside from its closing price last Friday. While the pandemic may bring many sectors down to their knees, it’s actually generating tailwinds for the world’s largest e-commerce stock.
The truth is, the company’s Amazon Web Services and Amazon Prime were already flourishing before the pandemic. However, the crisis lit a fire under both businesses. Amazon sees that its revenue may rise 24%-33% in the third quarter from a year ago. Meanwhile, analysts are forecasting that revenue and earnings will rise by 32% and 38%, respectively, for the full year. These are strong numbers that justify the case for Amazon being a robust investment with or without the pandemic. At a price of about 58 times forward earnings, Amazon doesn’t look cheap relative to brick and mortar retailers. But if you are comparing it against sky-high cloud companies, that’s a steal. With this in mind, is AMZN stock a buy ahead of its earnings?