The Nasdaq Composite jumped to new all-time records Tuesday as the big-tech giants prove the most immune to the coronavirus. Investors and Wall Street seem poised to continue to pile into tech stocks for safety from continued uncertainty surrounding the pandemic.
Stocks followed Tuesday’s climb, which came on the back of positive economic data and the easing of U.S.-China trade tensions, with drops over 2% Wednesday. The downturn ended the Nasdaq’s eight-day winning streak and marked its worst day since the big June 11 selloff. Yesterday’s downturn, like two weeks ago, stemmed from worries about a spike in coronavirus cases in the U.S. and elsewhere as economies reopen.
For instance, Disney DIS agreed to postpone the reopening of its California amusement park and Apple AAPL announced it would shut down more stores in the Houston area. Fears of a second lockdown might remain, but it’s unclear if there would be the political will to even attempt that unless things get far worse.
Stocks swung between small gains and losses through morning trading Thursday. And investors must remain vigilant and the coronavirus is certainly still a real concern. Yet there are signs of an economic recovery and as long as we remain in “don’t fight the Fed” mode the market could continue to climb. That said, it might be best to stick within the broader area that has helped drive the comeback from the market’s March 23 lows.
Big tech names such as Apple, Amazon AMZN, and Microsoft MSFT all hit new highs recently. But today let’s dive into three other large-cap tech stocks that have jumped to new records and look ready to expand within different tech industries…
Adobe might not be the biggest name in tech, but its various cloud-based creative software offerings are considered irreplaceable by many users and are sold on a subscription basis for individuals, businesses, and schools. ADBE’s suite of creative and design software includes Photoshop, Illustrator, Lightroom, and many others, and its bundle packages and its Creative Cloud offering can be viewed in a similar light as MSFT’s Office suite. The firm has also boosted its business-focused platforms and solutions for marketing, commerce, and more, and let’s not forget its PDF and e-signature space.
ADBE topped our Q2 fiscal 2020 estimates on June 11, with sales up 14% for the period ended on May 29 and adjusted earnings 34% higher. The firm’s Digital Media division jumped 18% and it bought back roughly 2.6 million shares during the quarter at a time when the likes of AT&T T put a halt to their programs. “The tectonic shift towards ‘all things digital’ across all customer segments globally will serve as a tailwind to our growth…” CEO Shantanu Narayen said in prepared remarks.
Adobe shares have popped 12% since its Q2 report as part of a 32% climb in 2020 that has seen it hit multiple new highs. The stock has now outpaced Netflix NFLX and AAPL in the last three years, up 200%. Our current Zacks estimates call for ABDE’s revenue to jump 14% in FY20 and another 15% in FY21, which would stretch its streak of double-digit growth to seven years. Meanwhile, its adjusted earnings are expected to jump 24% and 13%, respectively over this stretch. Adobe sports a “B” grade for Growth and an “A” for Momentum in our Style Scores system and is currently a Zacks Rank #3 (Hold) that longer-term investors might want to consider for its ability to expand within a niche cloud software space.
Nvidia is a GPU giant that has proven for years its strength in the booming gaming market and its more recent expansion into data centers and cloud computing has impressive Wall Street. NVDA topped our Q1 estimates on May 21, with revenue up 39%, driven by an 80% climb in data center revenue, which crossed the $1billion threshold for the first time. And NVDA’s new Ampere architecture is set to play a key role within AI-focused chips and in cloud computing
Nvidia in late April also closed its $7 billion acquisition—its largest ever—of Mellanox Technologies to help bolster its data center business and more. Nvidia’s earnings estimates have turned far more positive since its Q1 beats to help it earn a Zacks Rank #2 (Buy) right now. Our Zacks estimates call for its revenue to jump 42% and 33%, respectively in Q2 and fiscal 2021. Meanwhile, NVDA’s adjusted earnings are projected to soar 57% and 36.5% over this same stretch. And Nvidia’s adjusted FY22 EPS figure is projected to jump another 22% higher on 18% higher sales.
NVDA stock is now up 60% in 2020, against its industry’s 6% climb, and 135% in the last year. NVDA’s valuation picture is a bit stretched, but investors have been willing to pay a premium for Nvidia for five years now and its stock price sits just off its new highs. And Wall Street might continue to scoop up Nvidia for its longer-term growth outlook within cloud computing, gaming, and more. Plus, Nvidia pays a dividend, is part of an industry that rests in the top 8% of our Zacks industries, and boasts a strong balance sheet.
Zoom Video ZM
Zoom remains one of the unquestioned winners of the coronavirus stay-at-home economy for its ability to connect people via video, voice, chat, and content sharing. ZM, which went public in April 2019, is up 200% in the last 12 months and 280% in 2020, and notched another new high Thursday.
The cloud-based video firm on June 2 posted blowout Q1 results, topping our earnings estimate by 100%, while its revenue skyrocketed 169%. ZM closed the first quarter, ended on April 30, with around 265,400 customers with more than 10 employees, up 354% from the year-ago period. And customers contributing more than $100,000 in trailing 12-month sales climbed 90% to 769.
Peeking ahead, Zoom’s Q2 revenue is projected to climb 241%, with its FY21 sales set to surge 189%. ZM’s adjusted Q2 earnings are projected to soar over 462% to $0.45 a share, with its full-year figure expected to expand by 237%. Zoom’s impressive post-release earnings revisions help it grab a Zacks Rank #1 (Strong Buy) right now. The stock also earns an “A” grade for Growth and its Internet – Software industry rests in the top 20% of our more than 250 Zacks industries.
Some investors might think it’s too late to jump into Zoom, but people have been saying that for months now. The stock could pull-back in the near-term, but it is likely to remain a solid coronavirus play for its ability to explode while much of the economy contracts. There is also no guarantee that companies, especially in big cities with public transportation, will race back to the office even as the economy reopens. Plus, firms that find the remote environment relativity seamless might permanently cut back on rent and commercial real estate expenses. And let’s remember that Zoom was growing before the pandemic.
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