After promising vaccine news from Pfizer, Inc. (PFE) and BioNTech SE (BNTX) earlier this week, popular tech stocks plummeted as investors started envisioning a decline in demand for stay at home products and services. As the virus eventually comes under control, the growth prospects for many of these companies takes a hit.
However, given the threat of a second wave hitting the United States after taking effect in European countries, the demand for these products should continue for the next few months at least. Plus, it will take some time for the vaccine to not only get FDA approval, but to be administered to the general public. So, this tech sell off is expected to be short lived.
As a surge in coronavirus cases is expected in the winter months, this will once again increase our dependence on digital platforms, boosting the performance of technology stocks in the upcoming months. Hence, buying tech stocks such as Analog Devices, Inc. (ADI), Garmin Ltd. (GRMN), and NICE Ltd. (NICE) can prove to be fruitful.
Analog Devices, Inc. (ADI)
ADI designs and markets software, integrated circuits, algorithms, and subsystems. The company offers services in the industrial, automotive, consumer, and communications sectors in the United States, Europe, and Asia, through its website and third-party distributors.
On October 22nd, ADI announced that it had partnered with NEC Corporation to provide a 5G Network Massive MIMO Antenna Radio Unit for Rakuten Mobile. With demand for 5G specific infrastructure growing rapidly, this collaboration should allow ADI to establish itself as a major supplier of 5G infrastructure ahead of the 5G boom.
ADI has recently collaborated with Microsoft Corporation (MSFT) to produce Microsoft’s 3D time-of-flight (ToF) sensor technology. As high-performance applications are in demand, this collaboration will significantly expand ADI’s industry reach and increase its revenue.
ADI’s revenue increased 11% sequentially to $1.46 billion in the third quarter that ended August 2020. Adjusted operating margin rose 150 basis points to 42.3% over this period, while cash flow from executed employee stock plans increased 39.6% year-over-year to $26,000.
The consensus EPS estimate of $1.26 for the quarter ending January 2021 indicates a 22.3% improvement year-over-year. Moreover, ADI beat the street EPS estimates in three out of trailing four quarters, which is impressive. The consensus revenue estimate of $1.41 billion for the next quarter indicates 8.3% growth year-over-year. The stock has gained 14.3% year-to-date.
How does ADI stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
B for Industry Rank
A for Overall POWR Rating
The stock is also ranked #3 out of 86 stocks in the Semiconductor & Wireless Chip industry.
Garmin Ltd. (GRMN)
GRMN is a designer, developer, manufacturer, marketer, and distributor of communication, navigation and information devices. The company operates globally through five segments - Auto, Aviation, Marine, Outdoor, and Fitness. It offers global positioning system receivers and aviation products independent dealers and distributors.
On October 27th, GRMN launched GPSMAP x3 chartplotter series to transform the way cruisers and sailors see above and below water. This new user-friendly feature is expected to be well perceived in the market, thereby boosting the company’s revenues significantly.
On October 22nd, GRMN introduced Instinct Esports Edition, a GPS smartwatch for esports athletes and enthusiasts. Given surging demand for health and fitness technologies, with the launch of this product, the company is expected to witness an increase in user base and thereby, revenues.
GRMN’s revenue increased 18.7% year-over-year to $1.11 billion in the third quarter that ended September 2020. Gross profit grew 17.7% from the year-ago value to $667.98 million. Operating income rose 21.3% from the prior-year quarter to $317.10 million, while EPS increased 36.6% year-over-year to $1.64.
The consensus EPS estimate of $1.4 for the current quarter ending December 2020, indicates an 8.5% improvement year-over-year. GRMN has an impressive earnings surprise history as well, as it beat the street EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $1.19 billion for the ongoing quarter indicates 7.5% growth year-over-year. The stock has gained 18.2% year-to-date.
GRMN’s promising outlook is reflected in its POWR Ratings. It is rated a “Strong Buy” with an “A” for Trade Grade, Buy & Hold Grade, and Peer Grade and a “B” for Industry Rank. Among the 30 stocks in the Technology - Hardware industry, it’s ranked #1.
NICE Ltd. (NICE)
NICE is an enterprise software solutions provider operating through two segments - Customer Engagement, and Financial Crime and Compliance. It provides AI driven smarter processes and adaptive workforce engagement solutions. The company has a strategic collaboration with Information Services Group, Inc. to expand the automation ecosystem.
On November 9th, NICE announced a strategic partnership with NTT DATA Germany to provide customer experience solutions to clients in Germany, Austria, and Switzerland. This gives the company access to a larger market, boosting its growth.
NICE has recently announced a new Robotic Process Automation offer to help organizations quickly power their business. This will allow the company to accelerate their business growth and further strengthen their financial position.
NICE’s revenue increased 3.4% year-over-year to $393.18 million in the second quarter that ended June 2020. Gross profit rose 3.1% from the year-ago value to $257.44. Operating income grew 4.9% from the prior-year quarter to $56.14 million, while EPS rose 4.4% year-over-year to $0.71.
The consensus EPS estimate of $6.31 for next year indicates a 12.3% improvement year-over-year. Moreover, NICE beat the street EPS estimates in each of the trailing four quarters, which is impressive. The consensus revenue estimate of $1.80 billion for the next year indicates 9.3% growth from the same period last year. The stock has gained 54.2% year-to-date.
It’s no surprise that NICE is rated “Strong Buy” in our POWR Ratings system. It has an “A” for Trade Grade, Buy & Hold Grade, and Peer Grade. Among the 23 stocks in the Software – Security industry, it is ranked #1.
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ADI shares were trading at $137.38 per share on Wednesday afternoon, up $1.56 (+1.15%). Year-to-date, ADI has gained 17.46%, versus a 12.41% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.
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