It would not be an exaggeration to state that tech stocks have been through a rough patch in 2018. Trade war fears, data privacy concerns, GDPR implementation in Europe and rising interest rates have put tech stocks on a roller-coaster ride this year.
The NASDAQ Composite, the S&P 500, the Dow Jones Industrial Average (DJI) and the technology Select Sector SPDR ETF (XLK) have lost 9.5%, 5.4%, 4.2% and 0.97%, respectively, so far in 2018 (till Dec 14).
Factors That Hit Tech Sector Hard in 2018
One of the major reasons behind the roller-coaster ride of this sector has been growing fears of trade war. The escalating trade tensions between the United States and China have time and again made tech stocks bleed.
Moreover, the implementation of General Data Protection Regulation (GDPR) impeded growth in Europe. Further, NAND price crash and the tariffs on semiconductors owing to trade tensions brought no respite.
The troubles in the tech sector do not stop here. User data privacy has been an increasing concern for quite some time now. Tech companies have lately been under scrutiny on growing concerns of privacy breach. This has also been taking a toll on shares of companies like Alphabet and Facebook.
Tech Has Scope to Woo Investors Anytime Soon
Whatever be the situation, technology will always be a dominant element in our lives and this sector has immense prospects to make investors happy.
From digitizing retail outlets with automated check-out technology, modernizing payment systems with rigid cyber security measures to revolutionizing health care mechanisms and education with credible data-driven insights, we can safely say that the age of technology is here to stay.
Moreover, escalating demand for sensors and software for autonomous vehicles, advanced driver assisted systems (ADAS), Augmented/Virtual reality devices (AR/VR) and Internet of Things (IoT) are noticeable growth catalysts.
In addition, high demand for power-efficient as well as high performance chips, essential for running cloud-data centers and processing massive data by using Big Data analytics, machine learning and deep-learning tools has been a key driver of technology stocks.
Further, the lighting pace at which the 5G platform and technology are evolving is worthy of mention.
Key Picks
Using our easy-to-use Zacks screener, we have zeroed in on five technology stocks that were badly hit by market turmoil during the year but might reverse the trend, given solid Zacks Rank #1 (Strong Buy) or 2 (Buy) and a solid VGM Score of B or better.
inTEST Corporation INTT -The stock has lost 26.5% year to date (YTD) against 26.2% rally of the industry it belongs to.
inTest makes ATE interface solutions as well as temperature management products, which are used by semiconductor manufacturers to perform important testing of certain circuits and wafers. The big thing to like here for 2019 is the magnitude of EPS estimate revisions.
The stock carries a Zacks Rank #1 and a VGM Score of A. It has an expected growth rate of 10%.Over the past 60 days, the Zacks Consensus Estimate for its 2019 earnings hasbeen upwardly revised by 28% to 96 cents.
LogMeIn, Inc. LOGM -The stock has lost 25.7% YTD, underperforming the industry’s decline of 6.5%.
LogMeIn, headquartered near Boston in Woburn, MA, is a leading provider of on-demand, remote-connectivity and support solutions to small businesses, IT service providers as well as consumers.
The stock carries a Zacks Rank #2 and a VGM Score of B. It has an expected growth rate of 17.5%.
Over the past 60 days, the Zacks Consensus Estimate for its 2019 earnings has moved up 0.9% to $5.82. The consensus mark for sales is $1.26 billion, reflecting year-over-year growth 4.42%.
PC-Tel, Inc. PCTI -The stock has lost 46.5% YTD against the industry’s rally of 8.9%.
PC-Tel designs, develops and delivers wireless solutions. The company is expected to benefit from the growing adoption of 5G, antennas and industrial Internet of Things (IoT). Moreover, stabilizing cell revenues, driven by customer wins in China, North America and Europe, is another positive.
The stock carries a Zacks Rank #1 and a VGM Score of B.
In the past 60 days, the Zacks Consensus Estimate for 2019 has remained steady at 8 cents. The consensus mark for sales is $1.26 billion, reflecting year-over-year growth 4.42%.
CSG Systems International, Inc. CSGS - The stock has lost 23.7% YTD, underperforming the industry’s decline of 6.4%.
CSG Systems is a leading provider of outsourced billing, customer care, along with print and mail solutions and services supporting the North American cable and direct broadcast satellite markets.
The stock carries a Zacks Rank #1 and a VGM Score of B. Over the past 60 days, the Zacks Consensus Estimate for its 2019 earnings has been revised 2.3% upward to $3.16. The consensus mark for sales is $953 million, reflecting year-over-year growth 9.92%.
Vipshop Holdings Limited VIPS - The stock has lost 54.7% YTD, underperforming the industry’s decline of 10.1%.
It is an online discount retailer for various brands in the People's Republic of China. The company offers apparels and accessories for men and women, as well as shoes for casual and formal occasions.
The stock carries a Zacks Rank #2 and a VGM Score of B. Over the past 60 days, the Zacks Consensus Estimate for its 2019 earnings has moved 4.6% upward to 68 cents. The consensus mark for sales is $13.39 billion, reflecting year-over-year growth 8.43%.
Vipshop Holdings Limited (VIPS): Free Stock Analysis Report
PC-Tel, Inc. (PCTI): Free Stock Analysis Report
CSG Systems International, Inc. (CSGS): Free Stock Analysis Report
LogMein, Inc. (LOGM): Free Stock Analysis Report
