Seeking Alpha
Profile| Send Message| ()  

The technology sector is broad, and investors can find a number of ways to make money, whether it is through growth or dividends. Accenture Plc (ACN), Akamai Technologies Inc (AKAM), Baidu Inc (BIDU), Electronic Arts (EA) and International Game Technology (IGT) all contribute to the sector, and each offers intriguing potential as investments. For that reason, we'll take a look at these tech stocks and see if you should incorporate them into your portfolio.

Accenture Plc

A leading information technology services company, Accenture is known for its skill in management consulting, technology services, and outsourcing, while specializing in communications, electronics, entertainment and other industries. Currently trading around $57 per share, the stock has a 52-week range of $47.40 - $63.66 and a one-year target of $62, while paying a dividend of $1.35, for a yield of 2.3%. Last year, the company enjoyed growth in quarterly revenue (a 17.1% increase) and earnings (up 20.1%), while it more than doubled its trailing annual yield of 1.1%.

Prospects for Accenture look very good going forward. The company was recently awarded a contract with the Internal Revenue Service to redesign, develop and manage three of its Internet portals. Although there is a concern that the stock is overvalued (price to book ratio of 9.77), big contracts like the new IRS deal could keep prices climbing. I see Accenture as a short-term buy, although I would continue to monitor it going forward to make sure its share price gain doesn't lose momentum over the next three months.

Akamai Technologies Inc

Massachusetts-based Akamai Technologies Inc is a company that specializes in delivering applications and content from its clients to users on the Internet. Trading near $34 per share in the first week of February, the stock price exploded on news that the company had crushed analysts' expectations for its earnings (earnings per share of $0.45 versus the projected $0.40). Currently trading close to $37.50, the company has a 52-week range of $18.25 - $43.58, and although its one-year target is only $32, its price to earnings ratio of 37.27 suggests that it will continue to track upward.

Akamai stock is subject to very low volatility (as seen by its 0.17 beta) and its guided 1st quarter sales could be as high as $313 million, which is well above expectations once again. Akamai is very stable, and analysts view it as an excellent provider of Internet infrastructure. I think this is the early stage of a nice run for the company, and I consider it to be a strong buy at this time.

Baidu Inc

The "Chinese Google" is a lofty nickname to have, but this is exactly what some people are calling Baidu Inc. This Internet search company has benefited from China's reluctance to allow similar American companies access to the country. This has allowed Baidu to surge, as you can see from its $135 share price. It has a one-year range of $100.95 - $165.96, a target estimate of $188 and a staggering price to earnings ratio of 51.82.

Although Baidu has a mind-blowing price to book ratio of nearly 22, investors and analysts remain optimistic, encouraged by its 85% quarterly revenue growth and its 79% increase in year-to-year earnings. It is impossible for investors to ignore a potential 40% gain in share price this year, but I would recommend either purchasing options on the stock or keeping a very close watch to make sure share prices don't decay. That said, investors should consider taking some kind of position in Baidu as quickly as possible.

Electronic Arts

While toys might be child's play, computer games are serious business. Electronic Arts has been one of the strongest companies in this competitive field, and although it started 2012 slowly, investors should look at this as their chance to get in before it takes off again. Currently trading at almost $18 per share, EA has a 52-week range of $16.85 - $26.13 and a one-year target estimate of over $24, projecting a potential 33% increase in share price in the next twelve months. It is trading nearly 20% below its 200-day moving average, and its forward price to earnings ratio of 15.41 indicates the potential to make a nice run.

Electronic Arts has shown signs of snapping out of its 2012 slump. The company announced 3rd quarter earnings that exceeded expectations. The company's digital revenue is its main driver right now, climbing 79% overall as its full downloads soared 440% and its handheld revenue jumped 25%. This company won't be down for long, and investors should look to get in while the price is so reasonable.

International Game Technology

Another aspect of the digital gaming industry revolves around gambling. Las Vegas-based International Game Technology is a key player, lending its experience to the designing, manufacturing and distribution of electronic gaming equipment and systems throughout the world. As gambling increases, this company has been involved. Trading at $15.50 per share, the stock is below the midpoint of its 52-week range of $13.38 - $19.15, while looking up at a one-year target of nearly $19.50 per share. In addition to its climbing share price, the company is also a dividend payer, with an annual dividend of $0.24 and a yield of 1.5%.

In spite of a slow 2011 in terms of quarterly revenue (down 4.2%) and earnings (off 33%), the company still has a very good price to earnings ratio of 18, a decent return on equity of 19% and a debt to equity of 111%. This suggests the company can generate returns without taking on too much debt. Its price to book ratio of 3.15 is a bit of a concern, but a potential 25% increase in share price and steady dividends have me rating International Game Technology as a buy.

Making a Profit in the Tech Sector

Tech companies can be great investments, and these companies do not disappoint. While I like the current strong positions of Baidu Inc and Akamai Technologies Inc the best, Accenture Plc, Electronic Arts and International Game Technology all have some to offer investors, either in projected growth, low prices or dividends.

Source: 5 Tech Stocks With Significant Upside