U.S. equities were soaring Thursday as several tech companies reported strong quarterly earnings results. The S&P 500 Index gained more than 0.9%, the Dow Jones Industrial Average was up more than 0.8% and the Nasdaq Composite increased by about 0.9%.
Here’s what you should know ahead of today’s action:
Top High Tech Stocks To Buy For 2019: Facebook, Inc.(FB)
Perhaps surprisingly, the first stock on this list is none other than Facebook. Yes, that’s right FB. But when you think about it, it’s not surprising at all. Following the Cambridge Analytica scandal, we now have a “truly attractive entry point” into one of tech’s best growth stories.
For RBC Capital’s Mark Mahaney, FB is still his No. 1 Long in large-cap internet stocks. This five-star analyst has just reiterated his bullish take on FB with a $250 price target. With shares down 7% year-to-date, this translates into massive upside potential of over 50%.
According to Mahaney, FB has a key advantage because of its current low market shares — less than 20% of Global Online Advertising and a mid-single-digit percent of Global Total Advertising. This will help it to maintain premium growth for a long time. On top of this, FB still has several new large revenue growth drivers up its sleeve. We are looking at Instagram monetization, Messaging Platform monetization, camera/AR, AI, and video to name but a few.
He adds, “Yes, Regulatory Risk is real … But we believe this is now more than fairly reflected in FB shares and reiterate our Outperform rating.” And the Street as a whole clearly feels the same. Overall, FB has received 31 recent buy ratings vs just two hold ratings and one sell rating. Meanwhile their $219 average price target translates into 33% upside potential from current levels.
Top High Tech Stocks To Buy For 2019: International Business Machines Corporation(IBM)
Perhaps a bit less surprising is the lack of love tech stalwart IBM (NYSE:IBM) continues to be shown by the investment community. According to data from WhaleWisdom, institutional money managers dumped more than 20 million shares of IBM in the latest quarter. Sellers of "Big Blue" included Warren Buffett’s Berkshire Hathaway, which dumped all of its remaining 2.05 million shares, as well as Point72 Asset Management’s Steven Cohen, who sold his entire 548,666 share stake in IBM.
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The issue for IBM continues to be a lack of catalysts. Even though the company has seen its cloud revenue grow steadily on an organic basis and as a percentage of total sales, its late push into cloud computing left it far too reliant on legacy products, which have gone nowhere for years. IBM did recently break a streak that saw its sales decline for 22 consecutive quarters over the prior-year period, but that’s not saying a lot.
As noted, the positive here is that organic cloud revenue is up 20% (on a constant-currency basis), to $17.7 billion over the past 12 months, which provides some momentum moving forward. What IBM really needs, though, is for blockchain technology to take off.
IBM has been investing heavily in currency- and non-currency-based blockchain applications, which have the potential to put it on the leading edge of this technological game changer. IBM Is already testing cross-border payments at a dozen banks in the South Pacific using Stellar’s Lumens coin as an intermediary currency, and it formed a joint venture with shipping giant Maerskearlier this year to develop blockchain-based shipping solutions.
Of course, investors also should understand that blockchain still is a nascent technology that has some growing up to do. Translation: IBM’s blockchain division is unlikely to be a major contributor anytime soon.
Personally, I appreciate IBM’s relative value at roughly 10 times next year’s EPS, as well as its 4.4% yield. However, without any top-line growth at the company, I’d suggest adding IBM to your watchlist or waiting for an even more attractive entry point (i.e., a lower share price).
Top High Tech Stocks To Buy For 2019: Alaska Air Group, Inc.(ALK)
Similar to Hawaiian, the last year has been rough for Alaska Air, with its stock price down nearly 25%. Alaska Air stock has tried to recover over the last month and its stock price popped 1.5% on Wednesday. Furthermore, the struggling airline company is projected to see its Q1 revenues climb by 4.5% to hit $1.83 billion.
Investors might be less pleased to note that Alaska Air’s earnings are expected to plummet 95% from the year-ago period to $0.05 per share. With that said, Alaska Air is currently a Zacks Rank #3 (Hold) and rocks an Earnings ESP of 51.53%, with its Most Accurate Estimate coming in 3 cents above our current consensus estimate. This means that Alaska Air, despite its projected earnings decline, is a stock that could top earnings estimates when it reports.
Top High Tech Stocks To Buy For 2019: Merck & Company, Inc.(MRK)
Our second money-making stock, Merck & Co., Inc. (NYSE:MRK), is one of the world’s largest pharma companies. MRK delivered revenue in 2017 of over $40 billion. The pharma giant is seeing the dollars roll in from its best-selling cancer drug Keytruda. This isn’t surprising given that the drug currently costs a whopping $150,000 per patient per year.
The company has just announced positive Q1 earning results, revealing an unexpectedly robust performance of key franchises outside the U.S.
“Keytruda’s beat reflects Merck’s strong commercial execution. Januvia and Gardasil’s strong demand in ex-US (e.g., China) should also drive growth in the near term” comments top BMO Capital analyst Alex Arfaei. He calls the execution and R&D on Keytruda ‘excellent.’
Investors should keep a close eye on data presented at the upcoming ASCO annual meeting in June advises Arfaei. This will be ‘the next catalyst’ which “should further strengthen the drug’s lead in lung cancer, raise expectations in other tumors, and provide insights on the next set of Keytruda combo data (e.g., with Lenvima).” He has a $70 price target on “Strong Buy” rated MRK (22% upside potential). Indeed, in the last three months, MRK has received four consecutive buy ratings from top-ranked analysts.
Note that Merck is also a top dividend stock. The company pays an impressively high dividend yield of 3.36%. With six straight years of dividend growth under its belt, Merck’s latest quarterly payout came to $0.48 in April.