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3 Technology Stocks That Investors Should Definitely Look At

May 30, 2014 | About:
rusticnomad

Rustic Nomad

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There are three technology stocks that have become very impressive of late and have caught the attention of investors. All three are from different industries in the tech sector, therefore investors can look to profit from these companies as they operate in different aspects of the technology.

Giant Growth

Giant Interactive (GA) is a Chinese online gaming company backed by vast multiplayer online games that were successful among Chinese subscribers. And as per IDC, Giant Interactive has found the formula to succeed in the industry that is expected to grow at the compounded average growth rate of 15.57% for the next five years.

ZT online game franchise of Giant Interactive is the large source of revenue for the company. ZT online has earned quite a lot traction in the market by revamping and expanding its pack that has enhanced gamers experience, which is a healthy strategy. Also the company is engaged in bringing in World of Xianxia, which is believed to be the great source of revenue for the company next.

ZT online is done with beta testing for the game, which has already began benefitting the company though it has not been opened to the entire subscriber base. Besides, Giant Interactive simultaneously concentrating on various other formants such as web games to differentiate itself from its peers. Also it is leveraging the popularity of its existing MMO games, which should help its web games to get a better start.

Giant Interactive currently trades at the trailing P/E of 11.78, which further comes down to just 8.57 on a forward P/E basis. Also, the analysts have estimated CAGR of 18.37% over the next five years; reflect tremendous growth opportunity for the company. Moreover, the company does have cheap valuation and yields healthy dividend as it pays hefty dividend of 5.70%. It could be the best buy at the current price.

Lighting Up the Portfolio

The other tech company that has been very impressive is LED Lighting specialist, Cree (CREE). LED lighting has become popular in recent times, which is biggest advantage for Cree as it looks quite strong to take away a great share in the industry. In addition to this, its 40-watt replacement LED light bulb costs $9.97 while the 60-watt replacement goes for $12.97. What’s more striking is that these bulbs will last 25 times longer than an incandescent light bulb and consume 84% less power. Hence Cree believes that consumers can save $61 a year if they use Cree’s LED bulbs in a home’s five most frequently used light fixtures.

Apart from this, Cree is also focused to tap commercial lighting market through its XSPR Series Street Light that costs $99.00. This XSPR series street light is 65% more efficient than sodium street lights which is currently deployed for commercial purposes in the region, and is expected to replace it in the near future. But at a trailing P/E of almost 80, Cree is not a stock for the faint-hearted. But on a forward basis, the P/E multiple comes down to just 25.5, which means that analysts are expecting solid growth.

But considering that Cree’s year over year quarterly revenue growth stands at an impressive 22% and earnings growth is a whopping 182%, investors should give Cree a thought. Also, the company is debt-free, has $1 billion of cash on the balance sheet, and earnings are expected to grow at a terrific pace of 33% for both the current and the next fiscal year.

The Memory Play

Higher prices of DRAM and NAND has led chipmaker, Micron Technology’s (MU) earnings to grow approximately 173% during the year. Micron registered a solid profit of $43 million that was a great improvement from vast loss of $320 million in the same quarter a year earlier.

The average selling prices of DRAM grew to 16% and NAND flash prices increased 8% in the previous quarter, surprisingly the increase in prices resulted in increase demand for these memories which is really a good sign for the chip maker. Also the growth in shipments of mobile devices has led to strong demand for Micron’s mobile DRAM and the company has further consolidated its position in the industry by acquiring Japanese memory company Elpida.

Micron is in a solid position and is expected to benefit from different trends in the market such as growth of data centers, growing demand for solid state drives and higher shipments of mobile devices. Furthermore the prices for DRAM are expected to jump further according to Micron as memory makers keep capacity additions under control. Also, the Elpida acquisition has also probably helped Micron buy its way into Apple as Elpida was a supplier of DRAM for the iPhone 5.

Moreover, Micron is expected to report earnings later this month and the next earnings call will give investors greater insight of where it is going. But considering the trends in the industry such as rising prices and demand, I expect Micron’s growth to continue going forward.

Conclusion

These three companies belong to different areas in the tech sector and all have performed well. All are a part of growing industries and all three look to be in a good position to benefit from the positive developments in their end markets, which means that further upside can be expected.


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