Should We Buy Tech Stocks On The Dip?
Tech stocks have been resilient in the wake of the coronavirus pandemic. Since most people have been asked to stay at home to curb the spread of the novel coronavirus, technology has become more ingrained into every aspect of our life. Despite tech stocks leading the stock market surge since late March, some of them appear to be showing signs of running out of steam on Thursday. This came after concerns of a resurgence of new cases across the US.
The five most valuable tech companies lost more than $269 billion in value on Thursday, amid the steepest decline for US stocks since mid-March. Among them, Microsoft (MSFT Stock Report) took the biggest hit, shedding more than $80 billion in value as shares dropped more than 5%. While many are panic-selling, could this be a fresh new opportunity like the one we saw in March? After all, tech stocks are relatively more coronavirus proof than other industries. That said, the major movement we saw on Thursday might simply be due purely to market sentiment. And that actually won’t hurt the business at all (at least not immediately).
Thursday’s market plunge saw the Nasdaq Composite Index dropped 5.3%, while the Dow Jones Industrial Average and the S&P 500 fell 6.9% and 5.9% respectively. Since the start of the pandemic, the new normal has largely fueled the bullish environment surrounding tech stocks. Now that tech stocks are taking a hit again, let’s take a closer look at a few tech stocks that might be worth adding to your portfolio given the recent dip.
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Best Tech Stocks To Buy Right Now [Or Sell] : Apple
Shares of Apple (AAPL Stock Report) have reached an all-time high this week. On Thursday, the company outperformed the Dow thanks to bumps in the price targets of some analysts. But shares were still down amid the broader market sell-off. The price-target bumps came after optimism on mobile phone registration data for April and May in China, which showed a recovery in smartphone demand. Sentiments were further enhanced after Bank of America (BAC Stock Report) also got in the action, raising its target price to $390.
Is AAPL Stock A Buy At $350?
Looking back at the past decade, Apple’s growth story essentially boiled down to one product, the iPhone. While the iPhone has brought substantial business, investors aren’t planning to depend on the iPhone sales to grow forever. In fact, Apple’s growth in this decade will likely come primarily from services. Yes, that’s right. Apple has an installed base of more than 1.5 billion active devices. This provides a massive opportunity for the company to sell any services to its user base. The reason to push the services segment out is because it has a higher gross margin than Apple’s hardware products. In fiscal 2019, services gross margin was 64% compared to products gross margin of 32%.
In addition, there’s one area of Apple product’s business that investors should be particularly excited about; the wearables. This segment comprises the Apple Watch, AirPods and Beats headphones. Wearables revenue surge 41% year over year to $24.5 billion in fiscal 2019. While this segment is still much smaller than the services segment, it’s growth rate is faster than services, making it an important catalyst for Apple. Assuming both Apple’s hardware and software business can remain competitive, does a $350 price tag still look compelling to you?
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Best Tech Stocks To Buy Right Now [Or Sell]: Zoom Video Communications
When nearly every other tech stock went down on Thursday, Zoom Video Communications (ZM Stock Report) closed up about 0.5%. Unless you have been living under a rock, ZM stock was one of the first coronavirus proof stocks to continue beating the market in these troubling times. The company’s recent fiscal report and updated guidance also helped propel ZM stocks to greater heights.
On June 2, Zoom reported its first quarter fiscal result 2021 for the three month period ended April 30. Zoom’s revenue skyrocketed 169% to hit $328.2 million and adjusted earnings soared from $0.03 to $0.2 per share. With such an impressive result, it is no surprise that ZM stock has gone up by 223% year to date as the shift to working from home boosted demand for its services. Despite some security issues surrounding the software, Zoom has released a new security update to mitigate the issues.
With video conferencing on the rise, ZM stock has the potential to see continuous gains. But the question here is, is Zoom’s current price tag justifiable? Can ZM stock continue to defy the stock market and continue its uptrend? From its highly bullish momentum, Zoom remains the one of best tech stocks to watch.
