Think Netflix (NASDAQ:NFLX), Amazon.com (NASDAQ:AMZN) and other FANG stocks are the best way to garner exposure to the technology sector?
Think again. Not only are the world’s most recognizable ‘tech’ companies not actually tech stocks (they’re more along the lines of consumer services stocks), FANG stocks are all a bit overextended despite recent lulls. Never even mind the ever-increasing possibility that stricter regulation of them could translate into an earnings headwind.
Investors looking for serious, long-term capital appreciation opportunities be wise to look elsewhere.
To that end, here’s a rundown of three other tech stocks to buy that won’t necessarily suffer all the public-spotlight trappings of being a FANG stock. In no particular order …
Nvidia (NVDA)
Advanced Micro Devices (NASDAQ:AMD) has been all the rage of late within the hardware arena. Its turnaround, built on a complete overhaul of its product base, is the real deal. The company’s second-quarter profit was its best in seven years, withthe uptake of its processors and graphics cards brisk. Intel (NASDAQ:INTC) just never saw it coming, and now some analysts say Intel is years behind its rival.
The AMD story is a relative one though; not many people expected this much, this soon, from Advanced Micro Devices. Meanwhile, Nvidia (NASDAQ:NVDA) was and still is an absolute story. It has been and remains the king of the graphics processor market, and it’s setting the pace in the artificial intelligence (AI) hardware market.
Long story made short, whereas central processing units (CPUs) were designed for brute computing strength, graphics processing units (GPUs) were built to quickly handle a massive amount of simple data. It’s this latter design that’s proven more useful for artificial intelligence developers, so Nvidia has developed new products specifically for the AI market. It’s not had to sacrifice the high-end video-gaming market to do so, however.
It matters. Some believe the AI hardware market alone could be worth more than $100 billion per year by the year 2025.
ServiceNow (NOW)
Though most investors have certainly heard of Nvidia, it’s not likely many investors are familiar with ServiceNow (NYSE:NOW). Don’t let the lack of notoriety fool you … it’s a $36 behemoth, and growing its top and bottom lines faster — much faster — than most of its peers.
ServiceNow provides cloud-based software for businesses, allowing its clients to become more efficient. It’s more than just a collaboration platform. It’s a way of co-developing apps, automating workflows and empowering employees. The average consumer wouldn’t need it at home, but it’s increasingly a must-have tool for many modern workplaces.
The numbers validate the claim. Last quarter’s overall revenue was up 41% year-over-year.
It’s still booking GAAP losses, to be clear … one of the drawbacks. On an operating non-GAAP basis, adjusted earnings of 49 cents per share last quarter were a 121% improvement on its Q2-2017 bottom line. The pros are modeling a total operating profit of $2.33 this year, up from last year’s $1.19, and calling for non-GAAP income of $3.13 per share next year.
That’s the kind of growth owners of most other tech stocks have to envy.
Qorvo (QRVO)
Last but not least, add Qorvo (NASDAQ:QRVO) to your list of possible tech stocks to buy sooner than later.
When most investors think of a semiconductor stock, Qorvo isn’t a name that comes to mind. That’s because it doesn’t make the game-changing component found in your smartphone or your employer’s network. If the company wasn’t around, the way in which all of our devices talk to one another might look at least a little different.
Qorvo, in short, makes the chips, semiconductors, controllers and transistors you don’t think about. It has a hand in everything from connected cars to the Internet of Things to defense applications, and more.
It’s a product mix that may not be capable of producing explosive growth. The pros are only calling for revenue growth of a little more than 9% this year, and expecting it to slow to a little more than 8% next year. It’s respectable, but not necessarily the kind of strength most investors expect from tech stocks. This year’s projected per-share profit growth of 20% and next year’s modeled 15% bottom-line growth is more in line with the technology sector’s norm.
Regardless, what Qorvo may lack in pizzazz it makes up for in consistency — there’s a lot to be said for diversity. The modest forward-looking P/E of only 10.5 isn’t too shabby either.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.
