The stock market's tech benchmark set a new record for all-time highs in a calendar year. While Apple Inc. AAPL helped Nasdaq reach a record close, other Silicon Valley tech stocks continue to hover near the mark. The Cupertino-based iPhone maker reported blowout earnings results, while such an encouraging trend is noticeable for the entire tech sector.
Some market pundits believe that tech stocks are riding the years-long economic expansion, while most of them attribute a part of this uptick to Trump administration's pro-business policies including tax cuts, deregulation and outlays on infrastructure.
Needless to say, tech stocks are preferred by astute investors due to their proprietary technological expertise and heavy cash balances. These companies also relish high barriers to entry, which position them for faster growth in the market.
Given such bullish trends, investing in some rock-solid Silicon Valley stocks for better gains seems judicious.
Nasdaq Scales Record High on Apple's Success
The tech-laden Nasdaq Composite trumped all records on Nov 3. The index registered its 63rd record-closing high of this year that beat the previous record of 62 highs in a calendar year. The index has also outpaced the other major indices so far this year.
While the Nasdaq has rallied almost 26% on a year-to-date basis, the S&P 500 and the Dow Jones gained nearly 16% and 19%, respectively, over the same period. In fact, the tech-stacked indexes' year-to-date gains are the best since the dot-com boom of the late 1990s.
Stellar quarterly results from tech-bigwig Apple helped the Nasdaq scale a record high. The iPhone maker gained 2.6% and flirted with a valuation at $900 billion. The world's most valuable company has soared 48.9% so far this year.
Apple's fiscal fourth-quarter sales of $52 billion topped analysts' expectations. Almost half of the sales came from iPhone. Chief Executive Tim Cook declared that iPhone 8 and iPhone 8 Plus sales were the best ever in the company's history. Its service units that comprise iTunes, Apple Music, Apple Pay and Apple Care, to name a few, also raked in record-high revenues.
Profits also rose to $10.71 billion, while the executives showed more optimism over the current quarter. They raised the fiscal first-quarter sales guidance from $84 billion to $87 billion. This has ward off fears related to the company's flagship iPhone X production, priced at $1000. This is, incidentally, the most exorbitant iPhone model in the company's history (read more: Apple Stock Pops on Q4 Earnings Beat, Strong Guidance ).
Blowout Tech Earnings
Apple isn't the only Silicon Valley tech stock moving north this season. Better-than-expected quarterly results from other tech giants like Google-parent Alphabet Inc. GOOGL and Microsoft Corporation MSFT also helped drive the Nasdaq to a record high.
Alphabet's third-quarter earnings of $9.57 increased 91% sequentially and 32% year over year. Net revenues of $22.27 billion increased 6.5% sequentially and 21.9% year over year. While Google Cloud generated substantial revenue growth, it continues to enjoy strength in the mobile platform (read more: Alphabet Beats Earnings, Revenue Estimates in Q3 ).
Microsoft reported first-quarter fiscal 2018 earnings of 84 cents per share, up 16.7% on a year-over-year basis. Revenues of $24.54 billion increased almost 12% from the year-ago quarter. The company was also successful in achieving its goal of attaining $20 billion in annualized revenues from its commercial cloud business (read more: Microsoft Q1 Earnings Beat on Strong Azure Growth ).
Shares of Alphabet and Microsoft climbed more than 30% so far this year. To top it, Netflix, Inc. NFLX , Cisco Systems, Inc. CSCO , eBay Inc EBAY and NVIDIA Corporation NVDA continue to hover near record highs as the tech sector displays strength in the third-quarter earnings season.
Total earnings for the tech companies' third-quarter earnings so far are up 22.4% from the same period last year on 9.3% higher revenues, with 81.8% beating EPS estimates and 86.4% surpassing revenue estimates (read more: The Tech Sector's Impressive Earnings Power on Display ).
Tax Cuts - A Major Boost to Software & Semiconductor Stocks
Hopes of pro-business legislation promised by Trump have, mostly, supported the gains among both the manufacturers of the internal technologies - the semiconductor makers and the software industry.
As per Statista, corporate taxation rate in the United States is among the worlds' highest. This explains why most of the tech majors stash cash overseas. The proposed tax plan will lower taxes from 35% to 20%. As a result, tech companies' after-tax earnings will improve and will lead to repatriation of trillions of dollars held abroad by such companies. Tech companies can use this extra cash for R&D and M&As.
Tech players including Apple, Microsoft, Alphabet, Facebook Inc FB and Amazon.com, Inc. AMZN have billions of dollars in cash reserves parked abroad. In fact, a Nikkei Asian Review showed that combined overseas cash reserves for such companies exceeded the Japanese government's overall tax revenues in fiscal 2016.
5 Top Silicon Valley Stocks to Buy Now
Investors, thus, should double down on the hottest Silicon Valley tech stocks after they cross one record after another on earnings strength, primarily, backed by favorable government policy. We have selected five such stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Adobe Systems IncorporatedADBE operates as a diversified software company worldwide. The company is headquartered in San Jose, CA. The company has a Zacks Rank #1. Adobe reported adjusted third-quarter fiscal 2017 earnings of $1.10 per share, surpassing the Zacks Consensus Estimate of $1.0 (read more: Adobe Beats Earnings and Revenue Estimates in Q3 ).
The Zacks Consensus Estimate for its current-year earnings increased 3.9% over the last 60 days. Adobe's expected growth rate for the current year is a solid 39.4%.
Intel CorporationINTC - a Zacks Rank #1 company - manufactures and sells computer, networking, and communications platforms worldwide. The company is based in Santa Clara, CA. Intel reported third-quarter 2017 non-GAAP earnings of $1.01 per share, which beat the Zacks Consensus Estimate by 21 cents (read more: Intel Q3 Earnings Top on Robust Data-Centric Growth ).
The Zacks Consensus Estimate for its current-year earnings rose 6.6% in the last 60 days. Intel's anticipated growth rate for the current year is a solid 17.9%.
Lam Research CorporationLRCX manufactures, markets, refurbishes, and services semiconductor processing equipment used in the fabrication of integrated circuits worldwide. The company is headquartered in Fremont, CA. The stock has a Zacks Rank #1. Lam Research reported first-quarter fiscal 2018 non-GAAP earnings of $3.46 per share, surpassing the Zacks Consensus Estimate of $3.27 (read more: Lam Research Tops Q1 Earnings & Revenue Estimates ).
The Zacks Consensus Estimate for its current-year earnings jumped 13.4% over the last 60 days. Lam Research's projected growth rate for the current year is a promising 44.8%. You can see the complete list of today's Zacks #1 Rank stocks here.
KLA-Tencor CorporationKLAC manufactures, and markets process control and yield management solutions for the semiconductor and related nano-electronics industries worldwide. The company is headquartered in Milpitas, CA. The stock has a Zacks Rank #1. The company reported first-quarter fiscal 2018 earnings of $1.80 per share, beating the Zacks Consensus Estimate by 17 cents (read more: KLA-Tencor Beats Earnings and Revenue Estimates in Q1 ).
The Zacks Consensus Estimate for its current-year earnings climbed 6.1% in the last 60 days. The company's expected growth rate for the current year is an encouraging 20.5%.
Maxim Integrated Products, Inc.MXIM develops, manufactures, and markets a range of linear and mixed-signal integrated circuits in the United States and internationally. The company is headquartered in San Jose, CA. The stock has a Zacks Rank #2. Maxim reported first-quarter fiscal 2018 adjusted earnings of 60 cents per share, surpassing the Zacks Consensus Estimate by 5 cents (read more: Maxim Beats Q1 Earnings Estimates, Outlook Strong ).
The Zacks Consensus Estimate for its current-year earnings climbed 6.4% over the last 60 days. The company's expected growth rate for the current year is a solid 16.9%.
Wall Street's Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It's a once-in-a-generation opportunity to invest in pure genius.
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