Qualcomm, AMAT Stock Among The 5 Best Tech Stocks To Buy Or Watch Now


The best tech stocks to buy or watch aren’t hard to find, as long as you’re fishing in the right pond. Whether it’s a widely held name like Qualcomm stock or a lesser-known name like Cadence Design Systems stock, the best tech stocks share many common traits.




X



The best tech stocks boast strong fundamentals along with leading price performance in their industry group. Many also show favorable fund ownership trends.

Qualcomm (QCOM) is holding gains well after gapping out of a lengthy consolidation in early November. An Accumulation/Distribution Rating of B+ indicates continued strong demand for shares in recent weeks.


Why This IBD Tool Simplifies The Search For Top Stocks


Meanwhile, Cadence Design Systems (CDNS) is testing support at its 10-week moving average for the first time after a breakout from a base in October.

So what does fishing in the right pond mean? It means targeting top stocks showing resilience and holding near highs. Use IBD Stock Checkup to quickly identify industry group leaders with the potential to be stock market leaders.

Best Tech Stocks To Watch

Screening for the best tech stocks to buy or watch is as easy as looking at the MarketSmith Growth 250, a daily screen of high-quality stocks. Click on any column header to sort the screen as you wish, either by those closest to their highs, stocks with the highest Composite Rating, or stocks trading up in price with the heaviest volume.

The best tech stocks to buy or watch aren’t guaranteed to be huge stock market winners. But they do have qualities seen in past stock market winners before big price gains.

The best tech stocks to buy or watch now include Qualcomm, Cadence Design Systems, Microsoft (MSFT), Advanced Micro Devices (AMD) and Applied Materials (AMAT).

The technology sector is loaded with stocks with outstanding fundamentals. Many sell at a hefty premium, but a high valuation is warranted due to strong growth prospects.

Qualcomm Stock

The chip giant’s Nov. 3 earnings report turned a lot of heads. Strong results fueled a breakout from a 40-week consolidation. With the stock market under distribution and in a correction phase, Qualcomm is showing strength and support after the breakout. It’s holding gains nicely as it holds above the 10-week line.

Quarterly profit jumped 76% from the year-ago quarter. Revenue increased 12% to $9.34 billion, helped by a 56% jump in smartphone chip sales. Revenue guidance for the current quarter was also strong at $10 billion to $10.8 billion, above the consensus at the time of $9.68 billion.

Qualcomm’s Internet of Things business, which provides low-power chips to connect devices to the internet, also showed strong growth, with revenue up 66% to $1.5 billion.

RF front-end chips, required to connect to 5G networks, grew 45% to $1.24 billion. The company said expects to provide chips for as many as 550 million 5G smartphones in 2022, down slightly from prior guidance.

Composite Rating: 98

Latest-quarter EPS % change: +76%

Latest-quarter sales % change: +12%

Five-year EPS growth rate: 7%

Annual return on equity: 122%

Up/down volume ratio: 1.4

AMD Stock

Advanced Micro Devices is testing support at its 10-week line after a breakout from a double-bottom base with a  114.59 buy point. Even though it’s well past the 5% buy zone from that entry, AMD stock is worth watching, especially if it can bounce off the 10-week line with conviction. That would put the stock in an alternate buy zone. If it doesn’t bounce, it just means a new base is in the works, and it will take a big longer for a new entry to present itself.

AMD reported another quarter of strong revenue growth on Oct. 26, helped by strong demand for server chips and game consoles. Q4 sales guidance was also strong.

“AMD had another record quarter as revenue grew 54% and operating income doubled year-over-year,” said AMD president and CEO Dr. Lisa Su. “3rd Gen EPYC processor shipments ramped significantly in the quarter as our data center sales more than doubled year-over-year.

In late November , Su said she she expects the company’s $35 billion acquisition of Xilinx to close by the end of the year.

Composite Rating: 99

Latest-quarter EPS % change: +78%

Latest-quarter sales % change: +54%

Five-year annualized EPS growth rate: 135%

Annual return on equity: 36%

Up/down volume: 1.2

Microsoft Stock

The software giant reported reported bullish earnings on Oct. 26. For the current quarter, Microsoft forecast sales of $50.15 billion to $51.05 billion. The midpoint of $50.60 billion was nicely above the Refinitiv consensus of $48.92 billion


Get Free IBD Newsletters: Market Prep | Tech Report | How To Invest


“We delivered a strong start to the fiscal year with our Microsoft Cloud generating $20.7 billion in revenue for the quarter, up 36% year over year,” Chief Financial Officer Amy Hood said in the earnings press release.

Microsoft’s Productivity and Business Processes unit also saw strong growth, with revenue up 22% to $15 billion. The division includes Office productivity software as well as the Dynamics and LinkedIn businesses.

Microsoft is testing its 10-week line after a breakout from a flat base with a 305.94 buy point. A bounce off the support level would put MSFT stock in an alternate buy zone.

Composite Rating: 94

Latest-quarter EPS % change: +25%

Latest-quarter sales % change: +22%

Three-year annualized EPS growth rate: 21%

Annual return on equity: 47%

Up/down volume ratio: 1.1

Cadence Design Systems Stock

The provider of electronic design automation software is also testing support at its 10-week line after a recent breakout. While many cloud software stocks have sold off sharply, CDNS stock continues to trade well with a relative strength line near highs.


See Which Stocks Are In The Leaderboard Portfolio


Cadence stock fell sharply on Dec. 14, hurt by a downgrade from JPMorgan to neutral from overweight, but the stock found support at the 50-day moving average.

Cadence has outstanding mutual fund sponsorship. Two funds in IBD’s Mutual Fund Index, Fidelity Contrafund (FNCTX) and JPMorgan Large-Cap Growth Fund (OLGAX), are current owners.

Composite Rating: 95

Latest-quarter EPS % change: +14%

Latest-quarter sales % change: +13%

Five-year EPS growth rate: 24%

Annual return on equity: 34%

Up/down volume ratio: 1.1

Applied Materials Stock

The chip-equipment broke out of a 30-week consolidation around the time Qualcomm broke out. AMAT stock didn’t make much progress, though, but its technical picture still looks fine as it retests a prior buy area around 146 and its 10-week line.

The company on Nov. 18 reported a 55% surge in quarterly profit, with revenue up 31% to $6.12 billion.

“Applied delivered strong growth in fiscal 2021, with overall orders up by 62% year over year and Semiconductor Systems orders up 78%,” said Bob Halliday, Senior Vice President and CFO. “The momentum continued as our Semiconductor Systems backlog increased during the fourth quarter from $5.5 billion to $6.7 billion, and we see this strength sustaining into 2022.”

Composite Rating: 95

Latest-quarter EPS % change: 55%

Latest-quarter sales % change: +31%

Five-year annualized EPS growth rate: 17%

Annual return on equity: 55%

Up/down volume ratio: 1.3

Follow Ken Shreve on Twitter @IBD_KShreve for more stock market analysis and insight.

YOU MIGHT ALSO LIKE:

Join IBD Live For Stock Ideas Each Morning Before The Open

Best Growth Stocks To Buy And Watch: See Updates To IBD Stock Lists

Stay In Sync With The Market With IBD’s ETF Market Strategy

Get Free IBD Newsletters: Market Prep | Tech Report | How To Invest





Source link