The Dow, S&P 500, and the Nasdaq all fell over 3.3% through mid-afternoon trading Monday. The pullback comes as Wall Street grows concerned about the spread of the coronavirus outside of China, highlight by South Korea, Italy, and Iran.
The downturn comes one week after Apple AAPL said that it will likely fall short of its own quarterly revenue guidance due to downturns in China. Meanwhile, the yield on the 10-year U.S. Treasury note fell to 1.36% and gold prices hit seven-year highs, as investors dive into the safe-haven assets.
The coronavirus has hovered over the market for the last month and investors must remain diligent. However, the S&P 500 did hit a new high last week and the overall backdrop for U.S. stocks remains strong (also read: How To Double Your Stock Returns In 2020).
With this in mind, investors might want to add some stable, large-cap tech giants to their portfolios to help combat some of the newer coronavirus worries.
AT&T is transforming for the cord cutting age, which includes its $85 billion Time Warner acquisition. The telecom giant will roll out its new HBO Max streaming TV service in May to help it better compete against Netflix NFLX and Disney DIS in the future of entertainment. AT&T topped our Q4 earnings estimates in late January. Prior to that, it reached a deal with activist investor Elliott Management to commit to further cost cutting measures and stock buybacks, as it continues to pay down debt.
Wall Street has rewarded AT&T for its commitments to securing its post-cable, streaming future and its pivot to cost cutting. T shares have surged 23% in the last year and 10% in the past six months to crush its industry’s average. The stock slipped less than 1% Monday and rests near its 52-weeks highs. Plus, AT&T still has room to climb before it reaches its five-year highs. AT&T is currently a Zacks Rank #3 (Hold) that boasts an overall “B” VGM grade and a $274 billion market cap.
AT&T’s broadband internet business looks poised to grow and its 5G roll out should start to heat up soon, as it races to offer customers the next-generation of wireless service alongside Verizon VZ and the newly merged T-Mobile TMUS and Sprint. Despite its run, AT&T is trading at a discount compared its industry, the market, and its own three-year highs. Along with buybacks, AT&T boasts a 5.40% dividend yield. This tops VZ’s 4.2% and is strong for a company that stands to expand within growth-areas such as 5G and streaming TV.
International Business Machines IBM
IBM signaled to Wall Street that it is committed to its cloud computing transition when it announced in late January that Ginni Rometty would step down as CEO. Arvind Krishna will take over IBM, which has previously evolved with the modern tech times during its storied history. IBM stock surged after the news and is still up 10% in 2020 despite a recent market-based pullback. IBM shares are now up 6% in the last year and have plenty of room to climb before they run into their five-year highs.
Prior to the CEO transition news, IBM on January 21 beat our quarterly earnings estimates and posted surprise Q4 revenue growth, after five straight quarters of declining sales. Last quarter, IBM’s cloud revenue surged 21% to account for over 30% of total sales. Alongside cloud, Red Hat’s sales jumped 24% to help justify why IBM acquired the open-source software firm for $34 billion. And IBM’s new CEO has already played a key role in turning the company’s focus to cloud, AI, and quantum computing in the big data era.
Looking ahead, IBM’s revenue and earnings are projected to climb in 2020 and 2021, with bigger growth expected on the bottom line. IBM’s earnings revisions activity helps it earn a Zacks Rank #2 (Buy) at the moment. The firm also boasts an “A” grade for Value in our Style Scores system. And IBM’s 4.32% dividend yield, which easily tops Qualcomm’s QCOM 2.85% and Oracle’s ORCL 1.76%, helps provide investors solid income.
Microsoft is a $1.3 trillion powerhouse that continues to wow Wall Street with its successful expansion into cloud computing. Last quarter, MSFT topped our bottom-line estimate by over 10% for the fourth straight quarter and its revenue surged 14%. The company’s sales growth was driven by 27% expansion in its Intelligent Cloud unit and 39% growth in Commercial Cloud. Meanwhile, its Office-heavy Productivity and Business Processes unit popped 17% and its Windows-based More Personal Computing unit was no slouch.
The company’s longer-term earnings estimates revisions have trended completely upward since Microsoft release its Q2 fiscal 2020 results at the end of January. This positivity helps MSFT earn a Zacks Rank #1 (Strong Buy) and an “A” grade for Momentum in our Style Scores system. Microsoft’s adjusted earnings are now projected to surge 19% and 12.1%, respectively in fiscal 2020 and 2021. And the company’s revenue is set to jump 13.1% and 11.4% during this same stretch.
Microsoft’s 1.14% dividend yield is the lowest on the list today, but that is largely a function of its outsized climb. MSFT stock has skyrocketed 55% in the last year and 170% in the last three, which comes in well above its industry’s’ 54% run. Plus, MSFT executives consistently raise their dividend and they approved a new share repurchase program last fall.
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AT&T Inc. (T) : Free Stock Analysis Report
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