Technology

Huge Overseas Revenues Helping 3 Red-Hot Momentum Stocks

Lee Jackson

Published: November 28, 2017 9:55 am

Last Updated: January 12, 2020 5:59 am

Though it is a given the Federal Reserve will raise rates in December, and probably another three times next year, the dollar is poised to finish the year lower, and interest rates are still at extremely low levels. In fact, the spread between the five-year U.S. Treasury note and the 30-year bond is a measly 73 basis points, or less than three-quarters of 1%. While not great for savers, it has been a boon to multinationals that do much of their business and sales overseas.

A new Jefferies research report makes the case that this current state of affairs will continue to provide a nice tailwind for companies that do sizable overseas business, and the prospects for the fourth quarter and 2018 look bright. The report said this:

While all eyes are on the progress of the Tax Reform this week, the outlook for S&P 500 multinational revenues continues to brighten, making investment life just that little bit easier going into year-end. European macro data releases show no sign of slowing, while the dollar has failed to rally despite an imminent rate hike. Ironically, the main risk for the multinationals comes from the possible introduction of an excise tax.

Jefferies highlighted three Buy-rated tech companies with solid earnings revisions and high overseas revenues.

Analog Devices

This stock spiked recently and has come back into a good buy range. Analog Devices Inc. (NASDAQ: ADI) is a leader in the design, manufacture and marketing of analog, mixed-signal and digital signal processing integrated circuits for use in industrial, automotive, consumer and communication markets worldwide. It offers signal processing products that convert, condition and process real-world phenomena, such as temperature, pressure, sound, light, speed and motion, into electrical signals.

Earlier this year the company introduced a highly integrated polyphase analog front end (AFE) with power quality analysis designed to help extend the health and life of industrial equipment while saving developers significant time and cost over custom solutions. Achieving extremely accurate, high-performance power quality monitoring typically requires customized development, which can be expensive and time-consuming.

The analysts believe that the Linear Technology acquisition, which closed earlier this year, is a huge positive. In addition, many on Wall Street expect feel that corporate management ultimately will exceed its $150 million of targeted synergies.

Analog Devices investors receive a 2.06% dividend. The Jefferies price target is for the shares is $105, and the Wall Street consensus target is $98.09. The stock traded early Tuesday at $86.60.

Facebook

The huge social media leader has continued to post gigantic numbers, and it is one of the top picks in internet media for 2017 across Wall Street. Facebook Inc. (NASDAQ: FB) operates as a mobile application and website that enables people to connect, share, discover and communicate each other on mobile devices and personal computers worldwide.

Its solutions also include Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends; Messenger, a messaging application for mobile and web on various platforms and devices, which enable people to reach others instantly, as well as enable businesses to engage with customers; and WhatsApp Messenger, a mobile messaging application.

Many feel that Facebook’s long-term forecasts are more easily attainable, especially as the company continues to grow and employ new platforms for online advertising. Facebook is growing at twice the rate of its large cap internet peers while delivering at least 50% operating margins.

Top analysts see further upside ahead from user growth, and the company sees upside potential to its $80 U.S. average revenue per user through better targeting, as well as improvements on Instagram.

The $225 Jefferies price target compares to the consensus target of $206.63. Shares traded at $183.70 Tuesday morning.

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NVIDIA

This top chip stock has reported very strong earnings, and it was the top performing stock in the S&P 500 last year. NVIDIA Corp. (NASDAQ: NVDA) is one of the leaders when it comes to supplying graphics processing technology for the 3D graphics market, including desktop graphics processors and gaming consoles.

NVIDIA is also moving into visual computing chips for cars, mobile devices and supercomputers. The company has been able to use its ability to leverage past investments, with a more controlled spending structure ahead on unified, which enables strong cash flow that is allowing a focus on capital return, which is currently estimated to be $1 billion next year.

Top Wall Street analysts feel the stock is maturing to a platform company from a pure chip company, and Jefferies sees the stock continuing to benefit from four secular trends: virtual reality, PC gaming, chips in the automobile industry and graphic processing units (GPUs) in the cloud.

The company posted gigantic third-quarter results that well exceeded Wall Street estimates, with much of the gains directly from the firm’s huge data center and AI business.

Investors receive just a 0.28% dividend. The Jefferies price target is $240. The consensus target is $211.43 but shares were last seen at $212.30.

Three very hot momentum companies that continue to post staggering revenues, some of which they generate from overseas sources. Given the massive runs in all three, it may make sense to buy small positions here and see if we don’t get a pullback next year. Typically December is a strong month for the markets, so any slight pullback now would be a good place to start.