Technology

5 Tech Stocks Poised to Beat Estimates This Earnings Season

Lockdown restrictions across the world, in a bid to curb the spread of COVID-19, have been taking a toll on the economy. The pandemic has caused disruptions across major sectors and economic zones, resulting in a full-blown global crisis due to the slowdown in productions and operations, and sluggish spending patterns.

As a result, second-quarter corporate earnings are expected to have suffered significantly. According to the latest Zacks Earnings Preview article, total earnings for the S&P 500 members will likely be down 44.8% year over year on 10.7% lower revenues in the to-be-reported quarter.

Though the coronavirus outbreak has had a sector-wide impact, the U.S. tech sector seems more resilient compared with the other sectors. Per the Earnings Preview article, tech sector earnings are expected to decline 13.3% on 1.1% lower revenues.

Why Tech Sector Could Outperform?

The coronavirus outbreak has, surprisingly, opened up newer avenues of growth for several industries in the broader tech sector. Due to the global lockdown, the adoption rate of Internet-based services and apps has been increasing rapidly as people are compelled to stay indoors.

Moreover, the work-from-home wave is bolstering demand for advanced technology-based virtual meetings and conference tools. Additionally, the work-and-learn-from-home necessity has propelled demand for PCs, notebooks, peripheral accessories, and cloud storage.

All these, in turn, are aiding growth for high speed Internet services. Additionally, the rising demand for robust communication networks is another positive. Further, the growing proliferation of AI technology, and cloud computing products and services in managing this pandemic situation is a tailwind.

All these trends are stoking demand for semiconductor chips. Notably, Micron Technology MU reported better-than-expected third-quarter fiscal 2020 results last month. The company stated that the lockdown situation has spurred significant chip demand from data-center operators.

Apart from these, the adoption rate of streaming services for entertainment has surged in this ‘stay at home’ scenario.

All these positives will encourage investors to buy tech stocks.

As the second-quarter earnings season has already begun, we believe estimate-beating stocks will be the most important ones from an investment point of view. We consider investors should always hunt for such stocks before an earnings release. This strategy would place them ahead of time, and help bet on stocks that are rich in quality and have higher chances of beating earnings estimates.

How to Make the Right Pick?

With the presence of several industry participants, finding the right technology stocks with the potential to beat on earnings can be daunting. Our proprietary methodology, however, makes this task fairly simple.

You could narrow down your choices by looking at the stocks that have the perfect combination of the two key elements: a 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 the stocks that have the maximum chances of beating estimates at 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 apt mix of ingredients, the odds of a positive earnings surprise are as high as 70%.

Prominent Picks

Given below are five technology stocks that have favorable combinations to beat on earnings this reporting cycle:

Netflix NFLX is scheduled to report second-quarter 2020 results tomorrow. The company currently carries a Zacks Rank of 2 and has an Earnings ESP of +2.27%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has moved up a penny to $1.84 per share in the last seven days.
 

Netflix, Inc. Price and EPS Surprise

Netflix, Inc. Price and EPS Surprise

Netflix, Inc. price-eps-surprise | Netflix, Inc. Quote

Twitter TWTR is slated to announce quarterly numbers on Jul 23. The company currently carries a Zacks Rank of 3 and has an Earnings ESP of +170.97%. The Zacks Consensus Estimate has remained unrevised at a loss of 3 cents per share over the past month.
 

Twitter, Inc. Price and EPS Surprise

Twitter, Inc. Price and EPS Surprise

Twitter, Inc. price-eps-surprise | Twitter, Inc. Quote

Facebook FB is set to release June-end quarter figures on Jul 29. The company carries a Zacks Rank of 3 and has an Earnings ESP of +10.07%, at present. The consensus estimate for the quarter under review has been revised upward by a penny to $1.42 per share over the past week.
 

Facebook, Inc. Price and EPS Surprise

Facebook, Inc. Price and EPS Surprise

Facebook, Inc. price-eps-surprise | Facebook, Inc. Quote

Google’s parent Alphabet GOOGL has an Earnings ESP of +3.73% and carries a Zacks Rank of 3 at present. The company will report second-quarter results on Jul 30. The consensus estimate for quarterly earnings has been revised upward by five cents to $8.23 per share over the past week.
 

Alphabet Inc. Price and EPS Surprise

Alphabet Inc. Price and EPS Surprise

Alphabet Inc. price-eps-surprise | Alphabet Inc. Quote

Xilinx XLNX is set to report first-quarter fiscal 2021 numbers on Jul 30. The company has an Earnings ESP of +1.09% and carries a Zacks Rank of 3 currently. The consensus estimate for earnings has been raised by a penny to 62 cents per share in 30 days’ time.
 

Xilinx, Inc. Price and EPS Surprise

Xilinx, Inc. Price and EPS Surprise

Xilinx, Inc. price-eps-surprise | Xilinx, Inc. Quote

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>


Click to get this free report

Micron Technology, Inc. (MU): Free Stock Analysis Report

Netflix, Inc. (NFLX): Free Stock Analysis Report

Xilinx, Inc. (XLNX): Free Stock Analysis Report

Facebook, Inc. (FB): Free Stock Analysis Report

Alphabet Inc. (GOOGL): Free Stock Analysis Report

Twitter, Inc. (TWTR): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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

Latest Technology Videos

    Some of the Ways Video Is Changing How Business Is Being Done

    Brightcove Chief Marketing Officer Jennifer Smith discusses some of the ways video is changing how business is being done and key themes from Brightcove PLAY.

    Oct 6, 2021

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More