Technology sector is having a topsy-turvy ride in 2018 courtesy data privacy concerns, GDPR implementation in Europe, NAND price crash and tariffs on semiconductors as a result of the U.S.-China trade war.
The volatility negatively impacted the tech sector stocks most. Nevertheless, the sector continued to benefit from the growing proliferation of cloud computing, predictive analysis, Artificial Intelligence (AI) and its tools and Internet of Things (IoT).
These factors helped the Technology Select Sector SPDR ETF (XLK) advance 2.2% on a year-to-date basis against the S&P 500 Composite’s decline of 1%.
AI & Semiconductors: Key Catalysts
The ever-evolving AI technology driven by continuous innovation holds a significant position in this data-driven world. The emergence of virtual assistants and increasing adoption of smart speakers that leverage the power of AI remains a key catalyst in the technology sector. Notably, voice assistant enabled devices makes a work smoother and easy.
Thanks to this, there has been a shift in consumer preferences and their willingness to adapt to new and innovative technologies remains a tailwind. Further, AI techniques aid in the real-time analysis of user data which is very crucial for businesses in today’s world.
Moreover, the ubiquitous nature of social media aided by the increasing number of Internet users and improvement in Internet penetration has kept it at the forefront of the digital age.
However, the social media and internet stocks such as Facebook FB and Alphabet’s GOOGL Google, to name a few, bore the brunt of data privacy issues in several countries this year. The major one being the implementation of GDPR in 2018 which remains an overhang on the sector.
Meanwhile, the semiconductors, witnessed sluggish growth owing to the trade tension between the United States and China, which saw tariff imposition on Chinese imports worth $250 billion ($50 billion in August & $200 billion in September).
Nevertheless, growing demand for memory chips and other semiconductor products due to the rapid adoption of IoT devices, autonomous cars, advanced driver assisted systems (ADAS), gaming, health monitoring wearables, drones are fueling growth in the space.
Cloud Computing Adoption Growing Rapidly
Adoption of cloud services and products are increasing rapidly. Moreover, the digital transformation projects are accelerating the adoption rate of multi-cloud and hybrid cloud which is a major positive.
In 2018, the cloud giants such as Amazon Web Services (AWS), Microsoft Azure and Google Cloud continued to experience growing clientele. This can be attributed to a large number of companies migrating their workloads to these cloud computing platforms.
Per a Gartner report, the global public cloud space is expected to reach $206.2 billion in 2019, reflecting year-over-year growth of 17.3%.
Due to the volatility, a few tech stocks have performed well to-date in 2018. Here we present four such stocks that have gained more than 100% this year. They have a Zacks Rank #1 (Strong Buy) or 2 (Buy). Our research shows that stocks with a Zacks Rank #1 or 2 offer good returns.
Moreover, these four stocks have a market capital of more than 1 billion.
Alteryx, Inc. AYX provides self-service data analytics software platform. The stock flaunts a Zacks Rank #1 and has a market cap of $3.82 billion. Shares have gained 117.6% year to date, substantially outperforming the 6% rally of the industry it belongs to.
Notably, over the last 60 days, the Zacks Consensus Estimate for its 2018 loss has narrowed down to 3 cents from 25 cents. Further, consensus mark for sales is $201.1 million, reflecting year-over-year growth of 52.8%.
Coupa Software COUP provides cloud-based spend management platform which connects organizations with suppliers. The stock carries a Zacks Rank #2 and a market cap of $3.87 billion.
Shares have gained 94.2% year to date, substantially outperforming the 6% rally of the industry it belongs to.
Notably, over the past 60 days, the Zacks Consensus Estimate for 2018 has improved from a loss of 7 cents to earnings of 10 cents. Further, consensus mark for sales is $252 million, reflecting year-over-year growth of 34.9%.
Etsy, Inc. ETSY offers online and offline marketplaces to buy and sell goods. The stock has a Zacks Rank #2 and a market cap of $6.92 billion. Notably, shares have returned 184.9% on a year-to-date basis against the industry’s decline of 21.6%.
Over the past 60 days, the Zacks Consensus Estimate for its 2018 earnings have surged 95.3% to 84 cents. Consensus mark for sales is $598.3 million, reflecting year-over-year growth 35.6%.
Twilio Inc. TWLO offers provides Cloud Communications Platform-as-a-Service. The company carries a Zacks Rank #2 and a market cap of $9.56 billion. Notably, shares of Twilio have returned 281.7% on a year-to-date basis, outperforming the industry’s rally of 6%.
Over the past 60 days, the Zacks Consensus Estimate for its 2018 earnings have surged 266.7% to 11 cents. Consensus mark for sales is $625.7 million, reflecting year-over-year growth 56.8%.