5 Tech Stocks to Buy on Market Recovery From COVID-19 Crisis

After bottoming out in late-March, the U.S. stock market indices rebounded strongly in the past two months from the pessimism surrounding the coronavirus crisis. Since April, the Dow Jones, the Nasdaq, and the S&P 500 indices have appreciated 23.7%, 27.5%, and 23.6%, respectively, so far.

Therefore, as of Jun 5, the year-to-date (YTD) losses of Dow Jones and S&P 500 had contracted to 5% and 1.1%, respectively, from 23.2% and 20% as of Mar 31. The Nasdaq Composite index’s YTD return has even turned positive to 9.4% as of Jun 5 from -14.2% as of Mar 31.

What’s Driving the Rally?

Optimism over a potential vaccine for COVID-19 and an uptick in economic activities, as lockdown measures are now starting to ease, are mainly driving the U.S. stock market. Notably, centers of economic activities had remained closed since March due to the lockdown.

However, all 50 states are gradually reopening their economies. Businesses, offices, shops, stores and movie theatres are now open again, attracting old customers. As consumer activity is gradually picking up, businesses such as airlines, hotels, restaurants, retailers of apparel, shoes and other discretionary products are also gaining momentum.

The stock market got a further boost last week from an unexpected drop in the U.S. unemployment rate. According to the latest data released by the U.S. Bureau of Labor Statistics, the unemployment rate fell to 13.3% in May from April’s 14.7%.

The labor department also added that employers added 2.5 million jobs last month, crushing economists’ predictions of further job losses. The overwhelming U.S. job data makes investors hopeful of a faster-than-expected recovery from the economic crisis.

Tech Sector Plays Crucial Role in Market Rebound

The technology sector played a crucial role in the quicker-than-expected recovery of the stock market. Since April, the Technology Select Sector SPDR XLK, which tracks an index of the S&P 500 technology stocks, has rallied 26.2% so far. Moreover, the ETF has a positive year-to-date return of 10.6%, outperforming the gains of all three major U.S. indices.

While the coronavirus outbreak has had a sector-wide impact economically, the U.S. tech sector has been more resilient compared with others. The pandemic has, surprisingly, opened up newer avenues of growth for tech companies. The coronavirus-led global lockdown is fueling demand for PCs, notebooks and peripheral accessories, as more and more workers and students are now working and learning from home.

The work-and-learn-from-home necessity is also stoking demand for cloud storage. Furthermore, the lockdown has bolstered the usage of online and e-commerce services globally. Therefore, data-center operators are enhancing their capacities to accommodate the demand spike for cloud services. (Read More: 6 Remote-Working Software Stocks to Ride on Virus-Led Lockdowns)

In addition, the long-term growth prospects of tech companies look promising owing to the continuous digital transformations. The rapid adoption of cloud computing, along with the ongoing integration of AI and machine learning, has been a major growth driver.

The accelerated deployment of 5G technology — the next-generation wireless revolution — is likely to spur further growth. Moreover, blockchain, IoT, autonomous vehicles, AR/VR and wearables offer significant growth opportunities.

Considering the healthy growth prospects of tech companies, it makes sense to invest in this space for long-term gains.

However, picking the right stock could be tedious.

Strategy to Pick Stocks

With the help of our Zacks Stock Screener, we’ve cherry picked five top-ranked technology stocks that have witnessed upward earnings estimate revisions in the last 30 days. Notably, Zacks empirical research shows that there is a strong correlation between trends in earnings estimate revisions and near-term stock-price movements. A positive trend is, of course, favorable here and vice-versa in a negative trend scenario.

Additionally, each of the five stocks currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

To narrow down the list, we have selected those with a VGM Score of A or B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.

Our Picks

Micron Technology MU is benefiting from strong demand for memory chips from personal computer manufacturers and data-center operators. The global quarantine situation is fueling demand for PCs and notebooks, as more and more workers and students are now working and learning from home.

Additionally, the work-and-learn-from-home necessity is stoking demand for cloud storage. Also, the lockdown has increased the usage of online and e-commerce services globally. Therefore, data-center operators are enhancing their capacities to accommodate the demand surge for cloud services.

This Zacks #2 Ranked stock has a VGM Score of B. The Zacks Consensus Estimate for its current-fiscal earnings moved up 12.8% over the past 30 days.

Micron Technology, Inc. Price

Micron Technology, Inc. Price

Micron Technology, Inc. price | Micron Technology, Inc. Quote

Fortinet FTNT seems to benefit from the widening threat landscape, thanks to its suite of efficient offerings. The FortiMail platform can be used to block specific file types containing certain keywords.

With the growing number of employees working from home due to the coronavirus crisis, the use of cloud and virtual meetings is also increasing. This is a solid opportunity for the new hacking method doing the rounds to extract information and launch an attack. Such rising cyber-attack risks are propelling demand for Fortinet’s products and services.

This Zacks Rank #2 stock has a Growth Score of B. The company’s earnings estimate for 2020 has been revised upward by 3 cents to $2.78 per share in the past 30 days.

Fortinet, Inc. Price

Fortinet, Inc. Price

Fortinet, Inc. price | Fortinet, Inc. Quote

Applied Materials AMAT is well poised to gain from the integration of advanced machine learning capabilities across its semiconductor fabs to enhance automated defect analysis.

This Zacks Rank #2 stock has developed an automated defect-classification technology that utilizes different imaging techniques to identify and eliminate defects in chip manufacturing. Also, the company's commitment toward the development of new AI and machine learning-powered computing materials and designs holds promise.

The stock has a VGM Score of A. The Zacks Consensus Estimate for fiscal 2020 earnings moved 1.9% north in the past 30 days.

Applied Materials, Inc. Price

Applied Materials, Inc. Price

Applied Materials, Inc. price | Applied Materials, Inc. Quote

ServiceNow NOW is advancing on the back of a rapid uptake of its diverse application-based products across all industries. This Zacks #2 Ranked company’s expanding global presence, strong partnerships and strategic buyouts are anticipated to aid its financial performance in the near term.

ServiceNow has a VGM Score Score of B. The consensus mark for the ongoing year’s earnings is pegged at $4.24 per share, having moved up 5.5% in the past 30 days.

ServiceNow, Inc. Price

ServiceNow, Inc. Price

ServiceNow, Inc. price | ServiceNow, Inc. Quote

CrowdStrike CRWD currently carries a Zacks Rank of 2 and has VGM Score of B. The Zacks Consensus Estimate for fiscal 2021 is pegged at a loss per share of 7 cents, narrower than the loss of 12 cents projected 30 days ago.

As more and more organizations begin to work remotely amid the coronavirus crisis, their cybersecurity needs are likely to spike. Remarkably, the rising number of work-from-home employees is aggravating security lapses, inducing risks of hacking and phishing scams using coronavirus as content of the subject. In addition, usage of own devices and equipment that are not properly configured or can be infected with malware during teleworking further escalates possible security breaches for enterprises.

CrowdStrike Holdings Inc. Price

CrowdStrike Holdings Inc. Price

CrowdStrike Holdings Inc. price | CrowdStrike Holdings Inc. Quote

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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Micron Technology, Inc. (MU) : Free Stock Analysis Report
 
Applied Materials, Inc. (AMAT) : Free Stock Analysis Report
 
Technology Select Sector SPDR ETF (XLK): ETF Research Reports
 
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Fortinet, Inc. (FTNT) : Free Stock Analysis Report
 
CrowdStrike Holdings Inc. (CRWD) : Free Stock Analysis Report
 
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