Technology has significantly underperformed the overall market over the last year. However, over the last month the sector has started to reverse this underperformance. Given the reasonable valuations available in the sector, I am starting to up my allocation to Technology. Here are three technology stocks that have been moving up recently on strong catalysts.
Himax Technologies (HIMX) designs and manufacturers semiconductors for flat panel displays. The stock has been en fuego since I profiled it in February at ~$3 a share. The main catalyst for this is the company's inclusion into Google Glass. Google (GOOG) has taken a better than 6% stake into one of the company's subsidiaries with an option to increase this stake to almost 15%.
The stock has continued its meteoric rise this week on a positive note from Craig Hallum. The shares are still reasonable selling for less than 12x next year's projected earnings. Revenue growth is expected to jump to over 25% in 2014 from high single digits this year and the stock sports a five year projected PEG of under 1 (.72). Finally, HIMX also yields over 4%.
Apple (AAPL) has continued its large run up from its late June lows of less than $400 a share. The stock gained almost 3% in the first two trading days of the week on multiple catalysts.
- Cantor Fitzgerald initiated the shares as a "Buy" with a whopping $777 a share price target, almost 60% above its current stock price.
- Apple sent out invites for a September 10th "town hall" which confirmed this is the date the next iPhone version will be revealed.
- The company will also present soon thereafter in China, which raised expectations that it will announced a long sought deal with China Mobile (CHL) and its 600mm subscribers.
- Finally, IDC just came out for its 2014 forecast stating it believes smartphone growth will clock in at 40% for the year with Apple gaining considerable market share.
The stock is still cheap at 8x times next year's projected earnings once one subtracts its huge cash hoard. The company is beginning a new product cycle and sentiment is turning on the stock. Still down some 30% from its September highs, the stock still has considerable upside.
Nokia (NOK) has had a huge week on the announcement that Microsoft (MSFT) will buy its handset business for over $7B which was significantly higher than most analysts believed the business was worth. Credit Suisse, Bernstein, and Oppenheimer immediately upgraded the shares following the announcement of the deal. Raymond James, Jefferies, BofA/Merrill, and BNP Paribas followed with upgrades the following day.
The sale of its handset business obviously provides Nokia with a large cash infusion and allows it to concentrate on its telecom equipment business while shedding a division that was losing money. I would wait to what the new leadership team will look like, what its earnings estimates are without the handset business and what the company will utilized its boosted cash holdings for before I decide to invest in the stock.