While technology was a very strong sector in the first half of 2017, much of the excitement in the arena is expected in the second half of the year, not the least of which will be the release of the iPhone 8. The problem for many investors, especially those underweight the sector, is that share prices are extended, and with any earnings or guidance shortfalls, the penalties could be steep.
We screened the JPMorgan Analyst Focus List tech stocks for companies that the firm has an Overweight rating on, but classify the choice as a value play. We found five on the list that make good sense for investors wanting to maintain exposure to the ultra-high-growth possibilities in technology, but that offer potentially less volatility and downside.
This technology giant has pulled back recently and is offering a solid entry point. Apple Inc. (NASDAQ: AAPL) revolutionized personal technology with the introduction of the Macintosh in 1984, and it is among the leaders in the world in innovation with the iPhone, iPad, Mac, Apple Watch and Apple TV.
Apple’s four software platforms — iOS, OS X, watchOS and tvOS — provide seamless experiences across all Apple devices and empower people with breakthrough services, including the App Store, Apple Music, Apple Pay and iCloud.
JPMorgan thinks the iPhone 8 opportunities are solid, as the firm, like others, feels the product will have significant upgrades. Toss in the easier comparisons and the strong average selling prices, and the new phone is a distinct positive. While the firm does note higher commodity prices are a potential headwind from NAND and DRAM pricing, it sees service growth and acceleration as another distinct positive.
Apple investors receive a 1.75% dividend. The JPMorgan price target for the stock is $165, and the Wall Street consensus target is $158.95. The stock closed trading on Tuesday at $145.53, and the company is scheduled to report earnings on August 1.
This has been a top pick at JPMorgan for some time. KLA-Tencor Corp. (NASDAQ: KLAC) designs, manufactures and markets process control and yield management solutions worldwide.
It offers chip manufacturing products, such as front-end defect inspection tools, defect review systems, advanced packaging process control systems, metrology solutions, in-situ process monitoring products and lithography software; wafer manufacturing products comprising surface and defect inspection, wafer geometry and nanotopography metrology and data management; and reticle manufacturing products, such as defect inspection and pattern placement metrology products.
The company also provides light emitting diode (LED), power device and compound semiconductor manufacturing products consisting of patterned wafer inspection, defect inspection, surface metrology and data management products; thin-film head metrology and inspection, virtual lithography, in-situ process monitoring, transparent and metal substrate inspection and data management products for data storage media/head manufacturing; and stylus and optical profiling and optical inspection products for microelectromechanical systems manufacturing, as well as products for general purpose/lab applications.
JPMorgan cites the company’s strong execution, served available market (SAM) expansion and an industry leading financial model. The analyst also sees continued financial outperformance on strong market share and SAM expansion.
Shareholders receive a 2.22% dividend. JPMorgan has a $120 price objective, and the consensus target is much lower at $101.13. The shares closed Tuesday at $96.93.