Technology stocks are anticipated to see a sluggish first quarter primarily due to softness in the semiconductor space.
Semiconductors, which are the building blocks of most emerging technologies like AI and IoT, reported weak sales in January and February. The decline can be attributed to falling memory prices (both DRAM and NAND) as well as lower demand from smartphone OEMs.
Moreover, negative tariff impact due to the U.S.-China trade war and China’s slowing economy rattled the space. Notably, China is one of the biggest markets for semiconductors, while the United States is the largest semiconductor manufacturing country.
Further, the PC Market stayed sluggish in first-quarter 2019 after a dull last few quarters. Although consumers are rapidly retiring their PCs, replacement seems to have taken a backseat, inducing a fall in PC shipments.
Per Gartner, PC shipments declined 4.6% year over year to 58.5 million units due to shortage of Intel’s (NASDAQ:INTC) CPU coupled with soft consumer demand. According to IDC, first-quarter PC shipments declined 3% to 58.5 million.
The gloomy situation was reflected by Micron’s (NASDAQ:MU) weak financial results for second-quarter fiscal 2019 that ended on Feb 28, 2019, as well as muted guidance from Samsung (KS:005930) and German chip maker Infineon Technologies
Growth Drivers Aplenty
Nevertheless, the accelerated deployment of 5G technology — the next-generation of wireless connectivity — is likely to spur growth.
Moreover, rapid adoption of cloud computing, AI, IoT, cloud-based gaming, wearables and drones is expected to drive growth for industry participants offering non-volatile memory and sensors needed for connected and smart home devices.
Additionally, the emergence of virtual assistants with AI techniques continues to fuel demand for smart speakers like Amazon (NASDAQ:AMZN) Echo and Google (NASDAQ:GOOGL) Home.
Furthermore, increasing video streaming has been driving user engagement, which is in turn, attracting advertising dollars. Notably, real-time analysis of user data supported by AI tools is helping advertisers target the right audience, which is boosting their Return on Investment (ROI).
How to Make the Right Pick?
With the existence of a number of industry players, finding the right technology stocks that have the potential to beat earnings can be daunting. Our proprietary methodology, however, makes it fairly simple.
You could narrow down the list of choices by looking at stocks that have the combination of a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP is our proprietary methodology for determining stocks that have the best chance to surprise with their next earnings announcement. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
Our Choices
Given below are five technology stocks that have the right combination of elements to post an earnings beat this quarter:
San Jose, CA-based Xilinx (NASDAQ:XLNX) is set to report fourth-quarter fiscal 2019 results on Apr 24. The company has an Earnings ESP of +1.75% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sunnyvale, CA-based Juniper Networks (NYSE:JNPR) has a Zacks Rank #2 and an Earnings ESP of +10.00%. The company is scheduled to report first-quarter 2019 results on Apr 25.
Juniper Networks, Inc. Price and EPS Surprise
Maynard, MA-based Acacia Communications (NASDAQ:ACIA) has a Zacks Rank #2 and an Earnings ESP of +5.73%. Acacia is set to report first-quarter 2019 results on May 2.
Acacia Communications, Inc. Price and EPS Surprise
Acacia Communications, Inc. Price and EPS Surprise | Acacia Communications, Inc. Quote
Chicago, IL-based Gogo (NASDAQ:GOGO) has a Zacks Rank #2 and an Earnings ESP of +7.99%. The company is set to report first-quarter 2019 results on May 9.
Menlo Park, CA-based Facebook (NASDAQ:FB) has a Zacks Rank #3 and an Earnings ESP of +8.88%. The company is scheduled to report first-quarter 2019 results on Apr 24.
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Facebook, Inc. (FB): Free Stock Analysis Report
Juniper Networks, Inc. (JNPR): Free Stock Analysis Report
Acacia Communications, Inc. (ACIA): Free Stock Analysis Report
Gogo Inc. (GOGO): Free Stock Analysis Report
Intel Corporation (INTC): Free Stock Analysis Report
Micron Technology, Inc. (MU): Free Stock Analysis Report
Xilinx, Inc. (XLNX): Free Stock Analysis Report
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