Without a doubt, the first quarter will turn out to be one of the biggest on record. While the kind of double-digit growth we saw likely is unsustainable, many top Wall Street strategists feel that the overall economic strength could last well into 2023. The combination of massive stimulus, continued low interest rates still buoyed by the ongoing quantitative easing, and the reopening tailwind that is driving consumption and spending will keep the momentum in place for the foreseeable future.
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This week, four mega-cap technology companies reported incredible results. While two stocks jumped higher, two others were greeted with selling despite the stellar results. For long-term aggressive growth investors, all four are still offering outstanding entry points. While it may make sense to scale buy the shares of the two that shot higher, all can be bought by those with a time frame of 12 to 18 months in mind.

BofA Securities has Buy ratings on all four, but 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 company has been on fire and crushed expectations. Advanced Micro Devices Inc. (NYSE: AMD) operates as a semiconductor company worldwide. Its products include x86 microprocessors as an accelerated processing unit, chipsets, discrete and integrated graphics processing units (GPUs), data center and professional GPUs, and development services. They also include server and embedded processors, and semi-custom system-on-chip products, development services and technology for game consoles.

AMD provides x86 microprocessors for personal computers under the AMD Ryzen, AMD Ryzen PRO, Ryzen, Threadripper, AMD A-Series, AMD FX, AMD Athlon, AMD Athlon PRO and AMD Pro A-Series processors brands. It provides microprocessors for notebook and 2-in-1s under the AMD Ryzen, AMD A-Series, AMD Athlon, AMD Ryzen PRO, AMD Athlon PRO and AMD Pro A-Series processors brands, as well as microprocessors for servers under the AMD EPYC and AMD Opteron brands. Its chipsets are sold under the AMD trademark.

The company reported outstanding results, with data center revenue doubling. The BofA Securities analyst said this:

Solid beat and raise with calendar 2021 sales growth now 50% year-over-year (vs. 37% prior); We reiterate our buy rating and raise the price objective with a path to long-term earnings-per-share of $4+. Like: improving supply; product cycles (Milan, Ryzen 5000, consoles, Radeon 6000); 1.3% to 4% of market share gains in first quarter 2021 estimated. Risks: tough PC compares post double-digit growth in 2020/21 estimated; growing competition from Intel (new CEO) and Arm based CPUs.

The BofA Securities price target on the shares was raised to $110 from $100. The Wall Street consensus target is $102.50. The final Advanced Micro Devices stock trade for Wednesday came in at $84.02 a share.

The search giant continues to expand and absolutely crushed analyst expectations. 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.
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Alphabet 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.

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 does. That gives it the strength and wherewithal to compete with and differentiate itself from Amazon’s AWS and Microsoft’s Azure.

BofA Securities noted this after the stellar results:

Clean beat; first quarter revenue and margins above Wall Street with search growth at 30% versus 22% expected, and constrained, 4% year-over-year operating expense growth. Raising 2022 EPS 15%; Still see room for more optimism on a Search recovery as travel and local rebound. Raising our price target; Top FANG stock given preference for easier search comps versus DR focused peers, cyclical exposure, and valuation.

The $2,440 BofA Securities price target was raised to $2,755, which compares with the consensus target of $2,426.55. On Wednesday, Alphabet stock rose almost 3% to close at $2,359.04 per share.

Microsoft

This is a more conservative way for investors to participate in the massive cloud growth, and the company also posted stellar results. Microsoft Inc. (NASDAQ: MSFT) manufactures, licenses, and supports a wide range of software products. The company has transformed its business model from a component-driven model (personal computer, server) to one driven by the need for cloud capacity.

Many Wall Street analysts agree that Microsoft has become a clear number two in the public or hyper-scale cloud infrastructure market with Azure, which is the company’s cloud computing platform offerings, and which continues growing at triple-digit levels. Some have flagged Azure as the biggest rival to Amazon’s AWS service.

Some analysts maintain that Microsoft is discounting Azure for large enterprises, such that Azure may be cheaper than AWS for larger users. The cloud was big in the first-quarter earnings report, and it will remain a growing part of the software giant’s earnings profile.
The BofA Securities analysts noted this about the software behemoth’s results and the subsequent selling:

Microsoft reported solid third quarter results with revenue upside driven by Azure momentum (+50% year-over-year versus our initial 41%) and Windows (+10% year-over-year versus our 6%) fourth quarter guidance for sustained high teens PBP growth and low 20s IC growth highlights continued momentum. Reiterate Buy rating and raising price objective for revenue/free-cash-flow upside.

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Investors in Microsoft stock currently receive a 0.88% dividend. BofA Securities raised its $300 price target to $310, well above the $276.77 consensus price objective. The shares closed at $254.56 per share, after retreating almost 3% on Wednesday.

Texas Instruments

This old-school semiconductor maker also trounced estimates, but disappointing guidance brought in the sellers. Texas Instruments Inc. (NASDAQ: TXN) is a broad-based supplier of semiconductor components, ranging from digital signal processors to high-performance analog components, to digital light-processing technology and calculators.

Some 65% of the company’s sales are exposed to the well-diversified, business-to-business industrial, automotive, communications infrastructure and enterprise markets. The company is a big Apple supplier, so the long-term outlook for this venerable leader makes it a safer bet for investors with less risk tolerance.

The stock was crushed after the solid first-quarter results, as guidance surprised Wall Street. The pullback in the share price is offering long-term investors the best entry point in some time.

The analysts said after reviewing the earnings:

Texas Instruments reported a solid first quarter 2021 sales of $4.29 billion, beating guidance by $300 million or 9%. Price objective is raised. Likes: Strength in Industrials, internal fab capacity promotes lead time stability, stable prices bodes well for share gains. Risks: Supply shortages unlikely to be resolved anytime soon, flat lining auto growth in the first quarter, inventories hit 4 year lows.

Investors receive a solid 2.25% dividend. BofA Securities lifted the price target from $200 to $210. That compares with the posted consensus target of $190.36. Texas Instruments stock was last seen Wednesday trading at $181.82, after pulling back almost 5%.

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Two stocks traded higher on good news, and two sold off on good news. The bottom line for those with a long investment timeline is that these are all premier growth stocks and the companies are incredible leaders in their technology silos. They have long and proven track records and will be around long after 2021.

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