Q2 Earnings Preview: 3 Hot Tech Stocks to Buy

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As earnings season prepares to kick off for the second quarter of 2018, we’re putting three tech stocks in the spotlight. Tech players have been booming this year in the market. Naturally, investors want to buy into the rally, especially ahead of the next quarterly earnings reports.

Here, we turned to TipRanks’ powerful data to pick 1) tech stocks with a ‘Buy’ consensus rating; and source 2) bullish recommendations from the best performing analysts on Wall Street.

Worthy of note: every analyst we’ve selected earns profits when betting on the tech stocks below. Financial accountability is crucial when choosing a worthwhile investment ahead of earnings season. Let’s explore.

1. Facebook (FB)

Social media titan Facebook unleashes second quarter earnings on July 25 after market close. CEO Mark Zuckerberg’s brainchild got hit in the first quarter of 2018 with a stream of bad press. After all, the ghost of the Cambridge Analytica data scandal put this tech leader’s brand in hot water. Yet, the Strong Buy name set loose a stellar first quarter print, which left many on the Street encouraged. In the last three months, the company has scored 26 buy ratings around the Street. See FB Target Price and Analyst Ratings Detail.

Expect the company to put on another robust earnings show; even one of Wall Street’s top 100 analysts just boosted his price target on Facebook. Brent Thill of Jefferies is a five-star analyst who reaps 109.7% in average profits when rating Facebook. (See Brent Thill’s other stock recommendations) Even more upbeat on the tech giant approaching its second quarter print, Thill just lifted his price target from $215 to $240 (16% upside potential). One of his top large-cap picks into the next round of earnings, this stock shines as the strongest return on investment for advertisers.

Look no further than Instagram’s killer performance, Thill points out, also noting to look for further ad prospects to be brought to the table. Facebook could soon have over $10 in EPS power “on the horizon.”

2. Akamai (AKAM)

Cloud delivery platform Akamai Technology is raring to post its second quarter earnings come July 31. Feeling the heat of foreign exchange pressures – specifically the strength of the dollar – Akamai dialed the tail-end of its guide on adjusted profit as well as revenue for the quarter. The AKAM team braces for a headwind to the tune of $3 million in second quarter revenue and $0.01 in EPS. Still, one of Wall Street’s best performing analysts bats for the bulls on this tech stock.

Oppenheimer’s Timothy Horan, a top five-star analyst ranked #20 out of over 4,800 analysts anticipates 16% upside potential in store for Akamai. When it comes to bets on the tech stock, Horan has an impressive track record: an 87% success rate and an average of earnings 23.4% in profits on the stock.

Ahead of the print, Horan reiterates a Buy rating on Akamai, especially on the back of growth that has risen in “each business unit” for the company. Horan pays note to media traffic that has “accelerated” in three consecutive quarters with momentum primed to get stronger as the year unfolds. Even “beyond” 2018, Horan believes “video and gaming move OTT” will play out in AKAM’s favor.  (See Timothy Horan’s other stock recommendations)

Don’t worry about the reduced revenue guide, said Horan; after all, “normalized revenue is coming in at the high end of guidance.” Not only did the company stand by its margin expectations, but Akamai has also targeted areas to scale down expenses. Horan contends, “Web security is the fastest growing and is on track to be the largest segment in a few years. Management suggested that it can win share in a $16B TAM (between CDN, performance, security) because of its unique, globally distributed platform.”

This ‘Moderate Buy’ tech stock is one to watch, having amassed 8 buy ratings in the last three months. When eyeing consensus expectations, the bulls win out here, as the stock points to almost 10% in return potential. See AKAM Target Price and Analyst Ratings Detail.

3. Silicon Motion (SIMO)

Taiwanese chipmaker Silicon Motion (SIMO) produces controller chips for NAND flash-based storage products and is a Strong Buy stock to watch. The company releases its second quarter earnings July 31 and just last month had a top analyst singing SIMO’s praises.

Analytics reveal that the 12-month consensus average price target lands at $57.50, marking close to 9% in upside potential. The budding bullish camp on the Street clearly likes what it sees with Silicon Motion’s market opportunity. See SIMO Target Price and Analyst Ratings Detail.

Top analyst Rajvindra Gill of Needham is one of Wall Street’s leading analysts and notably yields 20.1% in average profits when recommending SIMO stock. A long-time bull, Gill exhibits a 79% success rate with this tech stock; therefore, he continues to be confident on his odds here. In fact, the analyst, who maintains his Buy rating on Silicon Motion recently hiked his 12-month price target to $60 (13% upside potential). (See Rajvindra Gill’s other stock recommendations)

Last year was a different story for Silicon Motion: the company confronted sluggish adoption of solid-state drives by clients in the back half of 2017, a result from steeper NAND prices. However, this time around, attach rates could shoot past 50% for 2018 on the heels of 3D NAND pricing that has “declined substantially.” The semiconductor stock is on pace to deliver not one, but two flash makers on Quad-Level Cell shipments. Gill commends Silicon Motion for delivering the first client SSD QLC NAND flash controller to the market. Looking ahead, these shipments will kickstart in the back half of 2018 and fire up next year.

Silicon Motion has even drawn a new top analyst over to the bulls, recently earning a bullish bet from Mike Burton of Benchmark. Another top 100 analysts on the Street, Burton showcases a solid 85% success rate when recommending SIMO and garners an average of 30.9% in profits on the stock. With two top analysts in its corner, Silicon Motion is not one to miss come second quarter tech earnings.

Our database spans more than 5,000 stocks. Find your own top stock picks that flash killer upside potential, in any sector you choose. Go to the Nasdaq Smart Portfolio stock screener now.

This article was written by Julie Lamb

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Investing Ideas , Earnings , Stocks , Technology
Referenced Symbols: FB , AKAM , SIMO

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