2013 has been an excellent year for most technology stocks. The Nasdaq Composite has witnessed a rise of 27% so far and may gain further as we move into the final quarter of the year. Particularly, four tech stocks are showing great potential and it is highly likely that they will outperform the market going forward as well.
Let's analyze them one by one.
The 3-D perspective
3-D printing is expected to develop into the next-generation technology for manufacturing. Direct digital manufacturing has numerous benefits that have led to an increase in demand in various industries. This has, in turn, led to new opportunities for companies like 3D Systems (DDD). The stock of 3D Systems has appreciated 130% year-to-date and the company looks set to sustain this growth.
Credit Suisse initiated the coverage of 3D Systems with an overwhelming review. 3D Systems got an Outperform rating and a price target of $62, while it currently trades around $54. With a broad range of products and technology, 3D Systems' growth rate is anticipated to be way more than the industry average. Analysts expect earnings to grow at a CAGR of 21% for the next five years and this is an impressive growth rate.
Also, the recent acquisitions of 3D Systems will allow the company to improve its offerings and will enable it to perform better than peers in the future. Bearing in mind that 3D Systems enjoys amazing profits and yet trades at a lower valuation than its peers, it is highly probable that it will yield good returns in the future.
According to a Wohlers Associates report, the global 3-D printing market is expected to grow to $6 billion before the end of 2017. Hence, I expect 3D Systems to leverage the wide consumer base and technology of its acquisitions into the prototyping market. 3D Systems reported a 45% y-o-y growth in its top line recently and given its initiatives, it can sustain its growth going forward.
The future looks bright for this LED maker
Shares of the LED lighting specialist Cree (CREE) have soared roughly 80% year-to-date. The LED lighting market is anticipated to grow to $94 billion in revenue by 2020, and Cree looks well set to make the most of this growth.
The cheaper and energy efficient LED bulbs appeal to consumers. Cree's 40-watt and 60-watt replacement LED light bulb cost $9.97 and $12.97, respectively. These bulbs last 25 times longer than any ordinary light bulb and consume roughly 85% less power. The company claims that consumers can save up to $61 per year if they use its LED bulbs. Cree also has its eyes set on the commercial lighting market. The company claims that its XSPR Series Street Light is 65% more efficient than the regular sodium streetlights.
The performance of Cree in the first quarter was impressive as it reported an increment of 22% in revenue and a gigantic 182% growth in earnings. Even though the trailing P/E of the company is 81.34, its forward P/E is 25.5. This indicates that the analysts are expecting substantial growth in the future. In addition to that, Cree is debt-free and has $1 billion of cash on the balance sheet. Therefore, there's no reason to believe that the company won't be able to sustain its current success.
A dominant chipmaker
The impressive quarterly performance of Qualcomm (QCOM) shows that the company has improved significantly. It reported top-line growth of 35% in the previous quarter, while its operating income grew 18% year over year, beating consensus estimates on both fronts.
The company's Snapdragon 800 processors support 3G/4G LTE modem with ultra high-definition graphics. In addition to that, these chipsets offer better battery life and are faster with clock speeds of up to 2.2 GHz per core. The high efficiency of these processors makes it an obvious choice for premium smartphones.
Also, according to the Global Mobile Supplier Association (GSA), carriers across the globe have added 113 LTE networks in about 80 countries. The deployment of LTE networks will certainly increase as 406 carriers are looking to bring LTE to 125 countries. GSA also expects LTE handset sales to grow at a CAGR of 44% in two years. The high compatibility of Qualcomm's chipset with most new LTE networks makes it a clear pick for smartphone makers. Qualcomm is also trying to diversify and this might lead to further revenue growth in the future and hedge it against any possible weakness in mobile.
With a trailing P/E of 18.34 and a high dividend yield of 2.1%, the stock isn't too expensive. Also, bearing in mind that analysts are expecting 17% annual bottom-line growth for the next five years makes Qualcomm a stock worth adding to your portfolio.
A Chinese media company to watch
Sina (SINA) is an online media company in China. The company has witnessed significant growth and its stock has appreciated 60% in 2013. Sina's performance was impressive in the second quarter as it reported a 20% jump in its top line, while its earnings almost quadrupled to $14 million. Much of this can be attributed to Weibo, the Chinese Twitter. Revenue from Weibo grew 205% and with more people shifting to mobile devices, it is expected to grow further.
With the increase in the number of mobile devices, the time spent on the social networking segment, or SNS, has significantly increased this year. Sina is intensifying its initiatives to capitalize on this paradigm shift. The company recently released an upgraded version of Weibo, which offered better user interface along with adding many new features to it. With the help of increased acceptance of advertising, Sina is targeting the massive fan-base of Weibo to benefit from the mobile advertising segment.
Also, a few months after the Chinese e-commerce giant Alibaba acquired 18% of Weibo's share with a $586 million investment; the two have collaborated to launch Weibo-Taobao. This new platform will enable the users of Weibo to shop on the e-commerce site Taobao. Also, Alibaba confirmed that it has suspended the use of WeChat marketing applications on the website, citing misuse by sellers. This is good news for Sina as it means that sellers will only be able to come to Weibo for marketing purposes.
These four technology companies have been on a solid run this year and can be considered to be leaders in their fields. Their focus on innovation and delivering a great product to customers is what sets them apart and that's why they can be expected to outperform going forward as well.