Despite recent turmoil in the IT quarter for 2008, I contend that this is now where you want to be. The reasoning here follows that the monetary area is suffering to preserve its awful news buried, the housing market in shambles or even shops are struggling to preserve growth. A move toward tech appears absolutely logical due to generally sturdy international publicity, confident stability sheets, and the truth that IT stocks preserve a traditionally low correlation to the wider markets. Let’s pick a few technology bulls.
Consumer Electronics – The Net Fool picks Apple (NYSE: AAPL) Hey Mr. Market, why so down on Apple? The iPod business is completely matured. The iPhone is dropping stock to comparable gadgets. MacWorld became missing its traditional superstar prospect. I let you know what, take this news and recognize that Apple has historically carried out its best when sentiment is low. Steve Jobs & Co. Is my preferred IT pick for 2008. The disadvantage has unfolded price in the stock, and I sense they have bottomed!
Looking in addition to the concerning troubles. The iPhone turned into promoting much less due to Apple’s push into the new iPod Touch, the analysts at Needham referred to that “Apple might have bought close to 4 million iPhones in its absence.” Add this to the reality that an anticipated 25%-30% of iPhones have been “unlocked” from AT&T, quite a number that actually advantages AAPL via the carrier’s headache. While iPod sales had been slowed, I experience that the mp3 tool is merely in a transitioning phase, and interesting opportunities at the moment are raised in cellular technology.
I feel that AAPL can be a recession resistor. Mac commercial enterprise is healthier than ever, and single-handily offset losses in iPods. Investors are punishing high-end companies like Apple for any disappointments. The stock is 35% off its highs, buying and selling at a premium 24-times-profits as compared to its peer’s 32x and has a PEG of 0.7x. They’ve got the unfastened coins to waft we love ($6.Seventy eight/share est. 2008) and its commercial enterprise segments have by no means appeared more healthy. People are hating on this agency for no cause. As Warren Buffet puts it: “Be fearful whilst others are greedy, and grasping handiest whilst others are nervous.”
Comm. Equipment – The Net Fool choices Corning (NYSE: GLW) Corning is the corporation you want for LCD glass panels. This market is thriving with larger and worse television sets popping out at each day. Fourth zone effects confirmed that management feels the equal due to persisted investment in facilities and stable relationships with marketplace leaders. 2008 outlook changed into VERY high quality and new sales streams should be discovered in an anticipated 60%+ growth in LCD capital spending. GLW anticipates releasing a brand new bendy fiberglass cloth and ought to see appreciation from the coming adoption of mandated diesel filtration. No important catalyst is driving growth, that’s sincerely extraordinary, but an attractive valuation recovers a maximum of the hazard.
Outside of LCD glass, Corning is still strolling the table. A new “Gorilla Glass” product that enabled touch-display access has come to be readily bought to handset manufacturers. Corning appears to recognize the shift to cell generation and is simply at the ball. With this in thoughts, Standard and Poors delivered: “income acceleration to 17% boom in 2008, up from thirteen% in 2007, aided by means of foreign money blessings and extra important because of higher demand for liquid crystal display (LCD) glass substrates from TV and pc manufacturers.” Everything is coming together for Corning, even Verizon is on board, a brand new purchaser of GLW’s “ClearCurve” cable answers. ClearCurve is the sector’s maximum bendable fiber, 100x more bendable than normal fiber… Which is seemingly very important. This new technology could unlock huge capacity with the support of an industry leader in FiOS.
Corning needs to be a middle era conserving for every investor. They remain inexpensive with a PEG at 0.83x and a forward PE at 13x versus a predicted trading fee in the direction of 20x. There are a few dangers offered via overcapacity in the LCD glass enterprise and potentially slowed IT spending. However, I sense as though stores will maintain to purchase the glass for bigger displays, and the fiber for the quicker net. If they are overstocking and cannot promote, that is their trouble… Now not Corning. These men beat earnings by means of a penny, and their outlook handiest progressed. They are bulls across the board and deserve to exchange at a top rate in my view.
Solar Semiconductor – The Net Fool choices First Solar (NYSE: FSLR) After doubting the intense-boom at the back of solar era in January 2008, it seems excessive time we apologized to powerhouse gainers like First Solar. ThinkEquity Partners gave this top-notch stock a one-phrase classification, “debottlenecking.” After smashing income estimates of fifty-three cents a percentage with a brilliant 77 cent advantage, they liked 30% on the day after growing 2008 guidance. Don’t let this purchase-than scare you away. We idea the sun enterprise run-up changed into completed and have been really verified incorrect. The 12 months-over-12 months revenue increase of 280% and electricity in EPS shows stronger future earnings electricity.
Operating efficiency is one of the number one advantages I see from operation in 2008. Costs according to watt ($1.12) averages have been down 6% on the year, and a negative foreign money effect from the Euro become nearly completely overshadowed through low-cost operations in First Solar’s Malaysia plant. Spots for development have been diagnosed, and most analysts feel they are able to deliver home the gold. Most considerably, the first and 2d zone 2008 need to prove to expose persevered increase on target with 2007 appreciation. Solar corporations are all trading at appealing premiums whilst considering an increase. With oil on the pass upward, plainly momentum for inexperienced energy will remain strong. Investors must return to the sun area with sturdy profits and call for in thoughts.
The Malaysian plant’s revamped may additionally have a bad impact on First Solar’s first region earnings in 2008. On the opposite facet of the coin, we count on an growth in production and see operating margins assisting at 30%+ degrees. I wouldn’t be amazed in any respect to look more accurate information in steering. We count on their PE and PEG ratios to return extra in step with the enterprise, as the cutting-edge premium they seem like trading at is a result of the explosive boom over the past yr. Execution turned into ideal in 2007, and with not anything but green lighting fixtures so far… First Solar makes for an excellent lengthy-time period growth play.
Infrastructure Tech. – The Net Fool choices Akamai (NYSE: AKAM) Akamai is alive and properly in 2008. After considering them in advance in 2007, they have got endured to show strength in their enterprise. In a recession-trending marketplace, there is a chunk of safety surrounding a web-primarily based firm. There is VERY strong amusement and media call for throughout the net, and Akamai is just the organization to supply the products. AKAM posted a large soar in profits at some point of the fourth zone profits call, which handily beat analyst estimates. After increasing steerage into 2008 with persisted streaming media call for on the internet, it’s far becoming hard to spin this organization negatively.
Akamai Technologies has had a remarkable run up through the years. Frustrating the bears once again on their ultimate earnings conference, AKAM was given a boost off in their fifty two-week lows. They’ve now prolonged their streak of sequential revenue and earnings increase to 20 consecutive quarters! What’s extra, their balance sheet is as healthy as ever; they have all over again improved free coins float to $634m from $566m. With the main function in a thriving content-transport marketplace, analysts consisting of Canaccord Adams endorse the ability revenue and earnings boom “in extra of 30% for the next numerous years.”
The valuation of Akamai is contested often through analysts over whether they’re cheap or in-line. I consider they may be to the reasonably-priced aspect seeing as how they are off approximately 45% from their 52-week high and are buying and selling with a PEG of 0.7x. I am probably tempted to check the waters if they fall underneath $32. They are buying and selling at a slight top rate in price-to-earnings phrases, however, I sense this is greater than merited as they appear to be a confident recession conserving in statistics era. With rate sensitivity anticipated to vanish alongside decreasing bandwidth expenses, it might appear like Akamai’s market to influence over the following couple of years.
That’s it for facts technology. There are without a doubt some high-quality stocks to be found in the quarter, regardless of the belief that tech is always greater unstable and perilous than financials, conglomerates and the like. While February is a traditionally bad season for IT, I wouldn’t thoughts getting my march shopping completed a piece early with lots of terrible sentiment unfairly dragging down perfectly healthful businesses.