April 13

Best Tech Stocks To Buy Or Watch Now: Twitter, Roblox, 3 Other Top Stocks Follow Nasdaq Higher

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The best tech stocks to buy or watch aren’t hard to find, as long as you’re fishing in the right pond. Whether it’s a widely held name like Twitter stock or a lesser-known name like Roblox stock, the best tech stocks share many common traits.




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The best tech stocks boast strong fundamentals along with leading price performance in their industry groups. Many also show favorable fund ownership trends.

Fishing in the right pond means targeting top stocks showing resilience and holding near highs. Use IBD Stock Checkup to quickly identify industry group leaders with the potential to be stock market leaders.

Stock Market Health

The 2020 stock market rally started with a follow-through day for the S&P 500 on April 2. It soared 2.3% in higher volume, confirming a new uptrend on the eighth day of its rally attempt. The Nasdaq composite confirmed a new uptrend on April 6 when it soared 7.3% in higher volume.

The stock market went into a correction on Sept. 23 after the S&P 500 flashed its eighth distribution day, falling 2.3% in higher volume. But it didn’t take the stock market long to recover. The Dow Jones Industrial Average flashed a follow-through day on Sept. 30, rising 1.2% in higher volume.

After a sharp pullback for the stock market in October, the S&P 500 followed through again on Nov. 4, rising 2.2% in higher volume.

The stock market uptrend came under pressure, hurt by six distribution days for the S&P 500 between Feb. 18 and March 4. But the stock market went back to a confirmed uptrend on March 16.

You can monitor the distribution day count every day in The Big Picture column. Read it for exclusive stock market analysis.

Five Top Tech Stocks

The best tech stocks to buy or watch now include Twitter (TWTR), Facebook (FB), Microsoft (MSFT), Roblox (RBLX) and ASML (ASML).


Why This IBD Tool Simplifies The Search For Top Stocks


The technology sector is loaded with stocks with outstanding fundamentals. Many sell at a hefty premium, but a high valuation is warranted due to strong growth prospects.

Finding The Best Tech Stocks To Buy Or Watch

Screening for the best tech stocks to buy or watch is as easy as looking at the MarketSmith Growth 250, a daily screen of high-quality stocks. Click on any column header to sort the screen as you wish, either by those closest to their highs, stocks with the highest Composite Rating, or stocks trading up in price with the heaviest volume.

The best tech stocks to buy or watch aren’t guaranteed to be huge stock market winners. But they do have qualities seen in past stock market winners before big price gains.

Twitter Stock

After a 27% pullback, Twitter is back above its 50-day moving average and near a 71.96 buy point.

Twitter stock gapped up on Feb. 10 on bullish Q4 results. Adjusted profit of 38 cents a share topped expectations and was up 52% year over year. Revenue was also better than expected at $1.29 billion, up 28%. Ad revenue rose 31% to $1.15 billion.


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The company’s mobile daily active users increased by 5 million from the third quarter to 192 million in Q4, a bit below analysts’ expectations of 193.5 million. The user base was up 26.3% compared to a year earlier.

Buyers were in the stock again on Feb. 25 when the company said in an SEC filing that it plans to double its annual revenue by the end of 2023, with 315 million mobile daily active users. Twitter recorded just over $3.7 billion in revenue in 2020.

Composite Rating: 92 (scale of 1-99 with 99 being the best)

Latest-quarter EPS % change: 52%

Latest-quarter sales % change: 28%

Three-year annualized EPS growth rate: n/a

Annual return on equity: n/a

Annual pretax margin: 15.1%

Facebook Stock

When Facebook reported Q4 results in late January, the company warned that the looming changes in Apple’s iOS 14 operating system along with a reversal in pandemic trends could hurt its advertising business. Apple’s change will affect Facebook’s ability to target ads, but CEO Mark Zuckerberg recently downplayed the change.

Q4 profit and sales came in nicely ahead of expectations, but Facebook’s user base in the U.S. and Canada fell to 195 million daily active users from 196 million a quarter earlier. It was the second straight quarter where the company lost users in the U.S. and Canada.

At the end of Q4, Facebook counted 3.3 billion monthly users across its family of apps, compared to 3.21 billion in the previous quarter. Besides Facebook, other apps include Instagram, Messenger and WhatsApp.

Facebook is still in buy range after a breakout from a long consolidation with a 304.77 entry. An Accumulation/Distribution Rating of A  indicates strong demand for shares in recent weeks.

Composite Rating: 97

Latest-quarter EPS % change: 52%

Latest-quarter sales % change: 33%

Three-year annualized EPS growth rate: 9%

Annual return on equity: 24.6%

Annual pretax margin: 38.6%

Microsoft Stock

The Nasdaq 100 firm and Dow Jones leader is near the top of the 5% buy zone after a breakout from a flat base with a 246.23 buy point.

The company recently announced plans to buy voice recognition and artificial intelligence firm Nuance Communications (NUAN) for $16 billion, excluding debt.

The software giant hit a new high in late January when the company reported strong Q4 results. Earnings, sales, and Azure cloud revenue all came in better than expected. Adjusted profit of $2.03 a share was well ahead of the Refinitiv consensus estimate of $1.64. Revenue growth accelerated sequentially, up 17% to $43.1 billion vs. the consensus of $40.18 billion.

Revenue from Microsoft’s Intelligent Cloud business unit totaled $14.6 billion, up 23% year over year. The unit includes the Azure public cloud, as well as server products like Windows Server and GitHug. Azure revenue was up 50%.

The More Personal Computing segment also did well. It houses Windows, gaming, search advertising and devices like Microsoft Surface and PC accessories. The unit did $15.12 billion in revenue, up 14%.

Composite Rating: 89

Latest-quarter EPS % change: 34%

Latest-quarter sales % change: 17%

Three-year annualized EPS growth rate: 22%

Annual return on equity: 40.1%

Annual pretax margin: 37.1%

ASML Stock

Netherlands-based ASML is one of several top performers in IBD’s chip-equipment group. The group is one of the few bright spots in the technology sector, with several group chip-equipment stocks like ASML reporting strong earnings and sales growth in recent quarters.

ASML stock has a consistent long-term record of growth, with a five-year annualized earnings growth rate of 23% and a sales growth rate of 20%.


Why This IBD Tool Simplifies The Search For Top Stocks


When ASML reported Q4 results in January, adjusted profit rose 31%, with sales up 15% to nearly $5.2 billion. For the current quarter, the Zacks consensus is for adjusted profit to soar 199% to $3.08 a share, with sales up 80% to $4.84 billion.

ASML is near the top of the 5% buy zone after a recent breakout from short consolidation with a 608.81 buy point.

Composite Rating: 99

Latest-quarter EPS % change: 31%

Latest-quarter sales % change: 15%

Three-year annualized EPS growth rate: 14%

Annual return on equity: 25.6%

Annual pretax margin: 30.2%

Roblox Stock

Roblox has been an outstanding performer since its March debut at 45. The stock opened at 64.50 and closed at 69.50 on its first day of trading.

It was added to the Leaderboard model portfolio on April 9 when it cleared an early entry of 72.96, 10 cents above its April 5 intraday high. The position was increased when the stock soared past its Mar. 17 high of 79.10. The 5% buy zone from the 79.20 buy point goes up to 83.16


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Roblox operates an online gaming platform popular with the Generation Z crowd. The company boasted 32.6 million daily active users at the end of 2020, up 85% from 2019.

What differentiates Roblox from other online game platforms is that it lets users create their own games on the platform.

Roblox shows three straight quarters of accelerating sales growth, from 68% to 92% to 110%. In 2020, it reported total sales of $924 million, up sharply from $508 million in 2019

Roblox lost 46 cents a share in 2020, but it’s expected to earn 44 cents this year and 56 cents in 2022.

 

Composite Rating: 30

Latest-quarter EPS % change: (-0.11 cents vs -0.6%)

Latest-quarter sales % change: 110%

Three-year annualized EPS growth rate: n/a

Annual return on equity: n/a

Annual pretax profit margin: n/a

Follow Ken Shreve on Twitter @IBD_KShreve for more stock market analysis and insight.

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The post Best Tech Stocks To Buy Or Watch Now: Twitter, Roblox, 3 Other Top Stocks Follow Nasdaq Higher appeared first on Investor’s Business Daily.


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