The Dow, the S&P 500, and the Nasdaq all climbed in morning trading Thursday after they recorded their first back-to-back gains in a month on Wednesday. The positivity comes as Wall Street hopes the roughly $2 trillion stimulus package, which is expected to be officially passed soon, will help stabilize the economy as the coronavirus spreads.
Investors are pleased with the $2 trillion stimulus that is set to provide direct payments to Americans, beef up unemployment insurance, provide loans to companies, and extend additional resources to health-care providers. The Senate approved, in a 96-0 vote, the bill that will now move to the House, where many expect it to pass on Friday.
Wall Street clearly thinks that this stimulus will help curb the coronavirus impact on the economy that saw a record 3.28 million workers apply for unemployment benefits last week, which ended a decadelong job expansion.
Along with $2 trillion stimulus package, the Fed on Monday said it would purchase practically unlimited amounts of government debt to help provide liquidity and extend loans to big and small businesses. That said, it is likely still too early to call a bottom—which is often only truly possible in hindsight—even as stocks climb for the third day in a row.
But longer-term investors shouldn’t try to call a bottom because they could miss out on some of the market’s best days. And if you are looking a year or more down the road it seems hard to believe stocks won’t look discounted at their current levels, even amid coronavirus uncertainty.
So let’s dive into three blue chip tech stocks that might be worth buying at the moment as the Fed and the U.S. government try to provide a boost to the economy as the coronavirus spreads.
Sometimes the obvious answer is the right one because Microsoft is about as blue chip as they come. MSFT did warn Wall Street in late February that setbacks in China would likely cause it to miss its personal computing sales guidance. This would have been considerably more of a gut punch to Microsoft before its cloud computing business began to boom. Plus, MSFT’s Q3 fiscal 2020 guidance remained unchanged for its other units.
Microsoft’s cloud segment and its flagship Azure unit compete directly against Amazon’s AMZN AWS for cloud supremacy. Despite the coronavirus warning and the current economic downturn, MSFT’s longer-term earnings revisions remain largely positive, which helps the stock earn a Zacks Rank #2 (Buy) right now. Our estimates call for MSFT’s sales to jump 12.3% and 11.4%, respectively in fiscal 2020 and 2021, with its adjusted EPS set to pop 18.5% and 12.3%.
Along with this continued growth, which are both impressive for a company of its size and age, MSFT is part of a highly-ranked Zacks industry and its 1.33% yield tops the 10-year U.S. Treasury’s 0.82%. The company also consistently raises its dividend payout.
Investors might also want to think about buying the safe haven-style stock soon if this current rally does have legs because MSFT has jumpedd 13% this week. Luckily it still rests roughly 18% off its 52-week highs. And its valuation pictures looks as goods as it has in the last 12 months.
IBM is aiming to do what Microsoft has already done: become a cloud powerhouse. The firm further signaled this commitment to Wall Street in January when it announced that Ginni Rometty would step down. IBM’s new chief executive, Arvind Krishna, has already played a key role in eshifting the firm’s focus to cloud, AI, and quantum computing.
Last quarter, IBM also surprised investors when it posted fourth quarter revenue growth, after five straight periods of declining sales. Plus, its cloud leg was the star of the show, with revenue up 21% to account for over 30% of total sales.
Peeking ahead, IBM’s adjusted fiscal 2020 earnings are projected to jump 4%, with 2021 expected to come in another 6.3% higher. Meanwhile, its revenue is expected to pop over 1% this year and next. IBM, which is currently a Zacks Rank #3 (Hold), boasts a dividend yield of 5.9%. This blows away the S&P 500’s 2.24% average, as well as Qualcomm’s QCOM 3.68% and Oracle’s ORCL 1.94%.
That said, IBM stock has lagged its big tech peers in recent years. But that doesn’t mean IBM stock couldn’t be headed for a run. Like MSFT, IBM stock has bounced off its recent lows and still rests nearly 30% below its early-February highs. IBM is also trading at 7.8X forward 12-months Zacks earnings estimate. This marks a solid discount compared to its industry’s 14.6X average and its own three-year median of 10.4X, which helps it earn a “B” grade for Value in our Style Scores system.
Apple is another somewhat obvious choice here and it actually helped kick off the coronavirus selloff when it warned on February 17 that it would likely fall short of its quarterly sales guidance. The iPhone giant cited a downturn in both production and demand in China. But as things slowly start to return to a semi-normal state in China, Apple closed many of its other stores, alongside the likes of Nike NKE and other retailers.
Apple does look set to take a hit in its key iPhone unit, which is already somewhat reflected in our Zacks estimates that call for AAPL’s sales to climb just 3.3% this year—down big in the last month. The tech firm’s bottom line is still expected to climb over 9.3% this year and its top and bottom-lines are projected to surge 13.5% and 21.2%, respectively in 2021. Along with possible pent up demand, Apple has been expanding its non-iPhone business recently.
AAPL’s goal is to generate more revenue from its 1.5 billion active devices, highlighted by its app store, Apple Music, its new Netflix NFLX and Disney DIS challenger Apple TV+, news service, and more. Apple, which is currently a Zacks Rank #3 (Hold), has also expanded its wearables segment.
Therefore, longer-term investors might be happy to scoop up AAPL stock 22% off its highs, despite its recent climb. AAPL’s valuation also appears a tad more attractive and its dividend yield sits at 1.21%. And let’s not forget that stocks are forward-looking. For instance, Apple shares soared in 2019 on the expectations of a return to iPhone growth in 2020.
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