Some older technology companies like Microsoft Corporation (NASDAQ:MSFT) may be better bets compared to new technology names like Netflix, Inc. (NASDAQ:NFLX) and Facebook Inc (NASDAQ:FB), CNBC’s Seema Mody considers, taking into account the three-months percentage changes of 10 stocks technology stocks and analysts’ recommendations.
However, while older technology companies are “winning the race,” some analysts warn that these may be crowded trades. On the other hand, some experts are optimistic about old technology companies.
“There’s no question that so far this year, the older value-oriented dividend-paying names are winning the race, but S&P Capital IQ is calling this a crowded trade. Scott Kesler, the analyst there, says most of the growth for these old-school names is coming from acquisitions. That might not be seen as risky, but this increases the likelihood of earnings variability and inconsistency. Pacific Crest disagrees, citing the cyclical rebound in the PC market being a catalyst for legacy tech names going forward.”
Mody also compared the three-month returns for “old” tech companies:
– Cisco Systems, Inc. (NASDAQ:CSCO): +14%
– Hewlett-Packard Company (NYSE:HPQ): +11%
– Intel Corporation (NASDAQ:INTC): +8%
– Oracle Corporation (NYSE:ORCL): +7%
– Microsoft Corporation (NASDAQ:MSFT): +4%
In comparison, the stock of newer companies have not performed very well:
– Twitter Inc (NYSE:TWTR): -41%
– Pandora Media Inc (NYSE:P): -33%
– Groupon Inc (NASDAQ:GRPN): -26%
– Netflix, Inc. (NASDAQ:NFLX): -10%
– Facebook Inc (NASDAQ:FB): -7%
According to Mody, the new technology stocks named are have been floundering because of pressure due to valuation concerns. Nonetheless, she cited some analysts saying that the steep decrease in stock prices valuations and forward price-to-earnings ratios have made these stocks more attractive than they were earlier this year.
“In fact, just today, Nomura upgraded Twitter to buy saying this year’s drop in the stock price has resulted in a much more favorable risk/reward ratio. But other market participants say if you’re trying to get back into the new tech trade, be cautious. Many of the names are still trading at a premium to the market and may have further room to fall before they are seen as a good buying opportunity,” Mody said.
Mody then goes on to reveal that Facebook Inc (NASDAQ:FB) has the highest percentage of ‘Buy’ ratings out of all of these stocks, saying that out of all the analysts that cover it, 80% have a ‘Buy’ rating on Facebook Inc (NASDAQ:FB).
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