It is no secret that there is an ongoing, raging bull market taking place, and not just in 2017. The business climate is getting back to having the best pro-business feeling in years. Including dividends for total return calculations, the Dow Jones Industrial Average is up over 23% and the S&P 500 is up over 18% so far in 2017. The Nasdaq 100 is up even more with a gain of about 30.5%, and that is even after some of its top technology constituents have seen handy pullbacks. As 2017 is coming to a close, investors are wondering how they should be making their investment stance for 2018 and beyond.
Most Wall Street strategists are calling for continued but more muted gains in the S&P 500 in 2018. Some are even projecting a gain of 10% or more including dividends. With tech stocks outperforming the broad market, the two most beloved tech stocks are Apple Inc. (NASDAQ: AAPL) and Amazon.com Inc. (NASDAQ: AMZN). But what about the rest of the market? There are 29 other Dow stocks outside of Apple, and when you consider Apple and Amazon together there are 98 other Nasdaq 100 stocks and 498 other S&P 500 stocks that investors can consider. Surely some of those other companies, even in technology, could have a real shot of outperforming Apple and Amazon in 2018.
24/7 Wall St. has screened through the universe of large cap technology stocks to see if there are other stocks that are expected to outperform Apple and Amazon over the next 12 months. Survey says: There are some tech stocks that are candidates to outperform Apple and Amazon! We must warn that analysts on Wall Street tend to keep rolling a 12-month price target on a stock rather than a year-end price target, so the formal view of December 11 may look different from what is expected to be seen in January.
Many analysts and traders alike go into hibernation mode in the final 10 to 15 days of December. With 2017 having been so strong, they are unlikely to try to push the envelope and take big risks ahead of the end of the year. Analysts on Wall Street frequently “refresh” their price targets higher or lower after the first days of each new year. That means this list of potential large-cap tech outperformers could be marginally different or quite different if various scenarios come into play in the next 20 days to 30 days.
Looking at analyst targets from Thomson Reuters and using certain other valuation metrics, 24/7 Wall St. has identified 10 large cap technology stocks that could outperform Apple and Amazon in 2018. What makes 2018 so challenging for an outlook is that the technology sector performed incredibly well in 2017, with Apple up 46% and Amazon up 55% so far in 2017. Many of these companies that could outperform in 2018 also had strong gains in 2017.
Analysts have a consensus upside for Apple of about 12.3%, if you include its dividend, calling for its shares to rise to $187.75. And Apple has a market cap of $875 billion, meaning that if things get any better for Apple (and if it doesn’t buy back too much stock) it could become the first $1 trillion value. Amazon has a $560 billion market cap now, and the consensus analyst price target of about $1,258 would imply upside of about 8.3% ahead.
Some analysts of course have higher price targets and are calling for more upside on each, but the reality is that if you average these two out at about 10%, then the reality is that Apple and Amazon combined are expected to rise about 10% into late 2018 — just a tad more than the expected gain in the S&P 500. It is also important for investors to consider that analysts issuing new and reiterated Buy and Outperform ratings in Dow and S&P 500 stocks tend to shoot for upside of about 8% at this stage of the greatest bull market in a generation.
To qualify as a technology stock that should outperform in 2018, several characteristics had to be present. Obviously the consensus analyst ratings and price targets had to be positive. The market cap target was generally at or above $10 billion, and there had to be strong trading volume and interest by Wall Street. The companies also still had to be seeing earnings and revenue growth. Certain stocks have pulled back from their highs considerably, so we tried to screen out stocks that might see analysts significantly “right-size” their expectations to something that might be less upside than expected for Apple and Amazon.
Here are 10 large cap and active technology stocks that are currently expected to rise more than Apple and Amazon over the coming 12 months.
AMD: Back to Profits, and Maybe M&A
Advanced Micro Devices Inc. (NASDAQ: AMD) shares have gained exponentially over the past two years, but it has also pulled back by one-third as the stock got ahead of itself above analyst targets. The years of 2018 and 2019 are expected to return to real earnings, with double-digit revenue growth. The consensus target price of $14.30 implies upside of more than 40% from the recent $10 share price, but Jefferies has kept its price target up at $19.
AMD’s stock got ahead of itself when it went over $15 in 2017, so considering the pullback and considering that many analysts will probably “right-size” their expectations, AMD could still rise more than 25% in 2018, even if some price targets come down, and it remains a name that comes up in conversations around potential chip M&A targets. A spotty operating history and its market cap of almost $10 billion might limit some of the scope and interest for some investors. Still, AMD is winning in graphics and artificial intelligence, it has a new partnership with Intel and it can even be considered a cryptocurrency mining winner.
AMD has a 52-week trading range of $9.42 to $15.65 and a market capitalization of $9.7 billion. Its shares were down 12.4% so far in 2017, since its pullback has been so strong.