4 Must-Own Technology Leaders to Buy When the Massive Selling Stops
The huge social media leader has been on a roll, and the analysts remain very positive. Facebook Inc. (NASDAQ: FB) is the largest social network, with over 2.3 billion monthly active users and over 1.6 billion daily active users. The company generates revenue from advertising and from payments, with over 95% of revenue from advertising. It generates close to 50% of revenues in the United States and Canada and is expanding rapidly in international markets.
The company’s solutions also include Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends. Messenger, a messaging application for mobile and web on various platforms and devices, enables people to reach others instantly, as well as enable businesses to engage with customers. WhatsApp Messenger is a mobile messaging application.
Facebook reported solid fourth-quarter results that beat expectations. Going forward, management expects revenue growth deceleration in the first quarter, and it said in the earnings call that the majority of the ad targeting headwinds are ahead of the company. That said, many analysts are buyers on any stock weakness, citing commerce advertising, Facebook messenger and Instagram.
The $250 Merrill Lynch price target is in line with the $248.09 consensus price target. Facebook stock closed most recently at $196.77.
This legacy technology leader has a massive $133.8 billion sitting on the balance sheet. Microsoft Inc. (NASDAQ: MSFT) manufactures, licenses and supports a wide range of software products. The company has transformed its business model from a component-driven model (PC, server) to one driven by the need for cloud capacity. It is also considered one of the best companies to work for.
Many Wall Street analysts agree that Microsoft has become a clear number two in the public or hyper-scale cloud infrastructure market with Azure, which is the company’s cloud computing platform offerings, and which continues growing at triple-digit levels. Some have flagged Azure as the biggest rival to Amazon’s AWS service.
Microsoft reported strong fiscal second-quarter results across the board, with Azure accelerating to an impressive 64% year-over-year growth rate from 63% last quarter. Total revenue growth was 15%, and management guided double-digit revenue growth and 2% of operating margin expansion in fiscal 2020. The analysts see strong visibility into double-digit percentage revenue growth, supported by multiple drivers (Intelligent Cloud, Productivity & Business Processes) and secular trends for the foreseeable future.
Shareholders receive a 1.5% dividend. The Merrill Lynch price target is $200. The consensus price objective is $194.19, and Microsoft stock closed Tuesday at $168.07.
Given the performance of these stocks into the withering selling over the past two trading days, it is pretty obvious portfolio managers are using the dip, and literally any dip, to add to positions. These companies are dominating their respective technology silos and should continue to long after the coronavirus worries have left the center-stage position.