With the third-quarter numbers still coming in and quite a few companies left to report, one thing appears to be for sure. The recent volatility derived from a combination of election jitters, the ongoing civil unrest in major U.S. cities, a spike in COVIID-19 cases and, of course, the “sell the news” aspect that always accompanies earnings releases, have put some top technology leaders at levels that look very attractive.
We screened the BofA Securities research coverage universe looking for technology leaders that, for whatever reason, are in a price zone where aggressive growth investors have to be looking to buy some shares. We found four mega-cap technology giants that will not remain on sale forever. While all four are rated Buy at BofA Securities and are outstanding ideas for aggressive growth investors, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
AMD
This top semiconductor stock has been on fire but was blasted after earnings. Advanced Micro Devices Inc. (NYSE: AMD) operates in two segments: 1) Computing and Graphics, and 2) Enterprise, Embedded and Semi-Custom. Its products include x86 microprocessors as an accelerated processing unit, chipsets, discrete and integrated graphics processing units (GPUs), and professional GPUs, as well as server and embedded processors, and semi-custom system-on-chip products and technology for game consoles.
AMD announced last week that it had reached an agreement to acquire semiconductor maker Xilinx for $35 billion, which would benefit the company’s margins, per-share earnings and free cash flow generation. The company said it expects to achieve operational efficiencies of $300 million within 18 months of the deal closing.
Between the massive purchase and earnings, the shares have been rocked, but the BofA team remains positive:
Idiosyncratic share gainer in highest valued semi markets, solid pipeline, raising our estimates and price target. CPU value share against Intel now at 13% in the third quarter (vs 10% in Q2), we see expansion to 15%/18% in calendar 2012 and 2022. Xilinx M&A is accretive, adds scale, expands total addressable market, though adds regulatory/execution risks.
The BofA Securities price target was raised to $110, which compares with the lower $86.66 Wall Street consensus target. Advanced Micro Devices stock traded at $76.05 Monday morning.
Alphabet
The search giant continues to expand and is even working on a driverless car now. Alphabet Inc. (NASDAQ: GOOGL) is a global technology company focused on key areas such as search, advertising, operating systems and platforms, and enterprise and hardware products. The company generates revenue primarily by delivering online advertising and by selling apps and content on Google Play, as well as hardware products. Alphabet provides its products and services in more than 100 languages and in 190 countries, regions and territories.
The company offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal internet products, such as search, ads, commerce, Maps, YouTube, Apps, Cloud, Android, Chrome and Google Play, as well as technical infrastructure and newer efforts, such as virtual reality.
The analysts point to Google Cloud, which is the largest cloud infrastructure play and engages in more technology, infrastructure research and development in headcount and dollars than any other company. That gives it the strength and wherewithal to compete with and differentiate itself from Amazon’s AWS and Microsoft’s Azure.
Alphabet reported blowout earnings, but some on Wall Street feel that blowout advertising revenues sure won’t help the company in its fight against antitrust allegations. The BofA analysts said this:
Clean beat; Third quarter revenue above Street with search rebounding to +6% vs -10% in the second quarter, and operating expenses below our estimates. Raising estimates; Search should improve with the economy, slower cost growth and buybacks could aid earnings recovery.
The $1,850 BofA Securities price target was lifted to a stunning $2,000. The consensus target is $1,762.90, and Alphabet stock was trading at $1,648.00.
Amazon
This is the absolute leader in online shopping and remains a technology anchor on the US 1 list of top stock picks. Amazon.com Inc. (NASDAQ: AMZN) serves consumers through retail websites that primarily include merchandise and content purchased for resale from vendors and those offered by third-party sellers. It has one of the most valuable brands in the world.
The company serves developers and enterprises through Amazon Web Services, which provides computing, storage, database, analytics, applications and deployment services that enable virtually various businesses. AWS is also the undisputed leader in the cloud now, and many top analysts see the company expanding and moving up the enterprise information value chain and targeting a larger total addressable market.
Like every year, online sales should continue to grow, especially during the busy Christmas shopping period, as Amazon remains the go-to portal for shoppers looking for holiday bargains and a way to stay out of brick-and-mortar stores this year if they choose to.
The company crushed Wall Street expectations and sold off big-time. The analysts noted this:
Amazon reported revenue/GAAP EPS of $96.1 billion/$12.37, well above Street at $92.7 billion/$7.55 as their quarter results beat across the board. Fourth quarter profit guide at $1 billion-$4.5 billion was the main blemish for the quarter, driven by $4 billion in COVID costs and fulfilment center openings. Results underscore strong profitability potential of the retail business and continued AWS strength.
BofA Securities had a $3,560 price objective but boosted it to $3,650. The consensus figure is even higher at $3,755.30, and Amazon.com stock was trading at $3,061.95.
Nvidia
This sector leader made a huge purchase last year that is proving to be a solid tailwind for the company. Nvidia Corp. (NASDAQ: NVDA), a company that rarely has grown through acquisitions, bought Mellanox and paid a whopping $6.9 billion in cash in a deal that closed back in April. In what actually was somewhat of a duel, Nvidia knocked out Intel in its bid to buy the chipmaker, and the deal has helped Nvidia boost its business of making data center chips that help power cloud computing.
Mellanox’s BlueField intelligent network adapters are another version of data center co-processing acceleration. Top Wall Street analysts see the combination of Nvidia and Mellanox as a definite threat to Intel’s data center CPU dominance of workloads.
Nvidia recently outlined a $100 billion total addressable market for its data center business by 2024, or twice the $50 billion outlined at its last investor day. The upside includes $20 billion from core Mellanox networking, $10 billion from new class of data processing units and another $10 billion from the emerging edge AI EGX computing platform.
Together, Nvidia’s computing platform and Mellanox’s interconnects power over 250 of the world’s Top 500 supercomputers and have as customers every major cloud service provider and computer maker. The company will not be reporting the quarter until November 18.
BofA Securities has a huge $650 price objective. The consensus estimate is $571.37, and Nvidia stock traded at $508.95 on Monday, which is down over 11% from the high posted in September.
We purposely avoided both Facebook Inc. (NASDAQ: FB) and Twitter Inc. (NYSE: TWTR), which both posted very solid results but are embroiled in arguments with the government over potential censorship and other issues. It may make sense to watch these closely for settlements or changes and add shares accordingly.
Again, while the volatility has a good chance to remain even after the elections, buying these top technology companies at a discount to previously posted highs makes sense for aggressive growth investors who are looking to increase positions or initiating new ones. As we often recommended, scale buying shares now until the end of the year may be a good strategy.
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