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2 Stocks to Watch From the Challenging Computer Industry

The Zacks Computer-Mini Computers industry suffers from multiple supply chain and logistics issues, along with many pandemic-related and geopolitical challenges, including the ongoing Russia-Ukraine war. However, the coronavirus epidemic is beneficial for industry participants as well Apple AAPL and HP HPQ. Despite the many disruptions in the supply chain, the ongoing work-from-home and waves of online learning are beneficial for them. The strong demand for high-end laptops and smartphones, especially the availability of iPhones supported by 5G, is a major factor. In addition, the launch of foldable as well as AI and ML-infused smartphones, tablets, wearables and hearables is a major driver of growth for industry participants.

Industry Description

Zacks Computer – The Mini Computers industry consists of companies offering smartphones, desktops, laptops, printers, wearables and 3 -D printers. Such devices are based on iOS, MacOS, iPadOS, WatchOS, Microsoft Windows, or the Google Chrome and Android operating systems. They typically use processors from Apple, Intel, AMD, Qualcomm, NVIDIA and Samsung. Expanding screen size, better display and enhanced storage capabilities have become key catalysts driving the rapid growth of smartphones. It is well supported by faster mobile processors. Laptops, both consumer and commercial, benefit from faster processors, beautiful designs and expanded storage facilities. The addition of health care features is driving the demand for wearables.

3 Mini Computer Watch Industry Trends

Bring Your Own Device (BYOD) Aids Momentum: The industry has benefited from the rapid adoption of BYOD in workplaces. Businesses that practice BYOD allow employees to use their personal devices, including mobiles, laptops and tablets, for work purposes. BYOD helps bridge the communication gaps between remote workers and desk-bound employees, thus improving process management and workflow. In addition, BYOD has proven to be more productive because it lowers training time. In addition, the coronavirus-induced remote working and online learning model is good for industry participants as it is expected to increase demand for desktops and laptops.

The Attractive Formfactor Drives Demand: Expanding screen size, better display and enhanced storage capabilities have become key drivers of the rapid growth of smartphones and tablets. It is heavily supported by faster mobile processors from the likes of Qualcomm (Snapdragon-branded), NVIDIA (Tegra X1), Apple (A14 Bionic) and Samsung (Exynos 9609). In addition, improved Internet access and speed along with the evolution of mobile apps have made smartphones a must for consumers. In addition, the improved quality of the graphics makes the smartphones suitable for playing games such as PUBG and Fortnite. It is expected to increase demand for high-end smartphones and open up significant opportunities for device makers.

PCs Face Extinction Risk: Personal computers (desktop and laptop), whether Windows or MacOS-based by Apple, face the risk of extinction due to the rapid proliferation of smartphones and tablets. Tight competition from smartphones has forced global PC makers to not only constantly upgrade hardware but also add apps and cloud-based services to attract consumers. However, the advent of 5G, AI, machine learning and foldable computers is likely to be the key factor in the expansion of the total addressable market (TAM) of PCs.

Zacks Industry Rank Identifies Dim Prospects

The Zacks Computer industry – Mini Computers is located within the broader Zacks Computer and Technology sector. It carries Zacks Industry Rank #224, placing it in the bottom 10% of Zacks ’more than 250 industries.

The group’s Zacks Industry Rank, which is the average Zacks Rank across all member stocks, indicates bearish future prospects. Our research shows that the highest 50% of industries with Zacks rank outperform the lowest 50% by a factor of more than two to one.

The industry position in the bottom 50% of Zacks-ranked industries is a result of the negative earnings outlook for constituent aggregate companies. Looking at the aggregate earnings estimate revisions, it appears that analysts are negative on the revenue growth potential of this group. As of July 31, 2021, the Zacks Consensus Estimate for this industry in 2022 revenue is down 3.7%.

Before we present some stocks you can consider for your portfolio, let’s take a look at the latest stock-market performance and industry valuation picture.

Industry Over Sector and S&P 500

The Zacks Computer – Mini Computers industry outperformed the broader Zacks Computer And Technology sector as well as the S&P 500 index last year.

The industry returned 5.7% this period against the S&P 500 decline of 9.4% and the fall in the broader sector of 24.7%.

One Year Price Performance

The Current Price of the Industry

On the basis of the forward 12-month P/E, which is commonly used as a multiple for valuation of computer stocks, we can see that the industry is currently trading at 21.32X compared to the S&P 500’s 16.77X and the sector at 20.14X.

Over the past five years, the industry has sold as high as 28.99X, as low as 21.32X and a median of 24.98X, as shown in the chart below.

Pass the 12-Month Price-to-Earnings (P/E) Ratio

2 Computer Stocks Watch Today

Apple: This Zacks Rank #3 (Hold) company has benefited from continued momentum in the Services segment, driven by the App Store, Cloud Services, Music, advertising and AppleCare. You can find the complete list of Zacks #1 Rank (Strong Buy) stocks right now here.

Apple’s imminent prospects are driven by the availability of the new Mac Studio and iPad Air. Apple TV + has gained recognition for its award-winning movies. This is good for the Services part. Revenue growth in services is expected to be at a strong double figure for the June quarter.

Apple now has more than 825 million paid subscribers across the Services portfolio. The App Store continues to attract the attention of prominent developers around the world, helping the company offer and compelling new apps that drive App Store traffic. In addition, the growing number of AI-infused apps will attract more subscribers to the App Store.

The Zacks Consensus Estimate for fiscal 2022 revenue has been consistent at $ 6.11 per share over the past 30 days. The stock has lost 20.2% year to date.

Price and Consensus: AAPL

HP: This Zacks Rank #3 company has benefited from solid demand for PCs amid a pandemic led by remote-working and online-learning waves.

In addition, strict cost control measures are expected to drive the margin in the long run. The expectation of HP to return at least $ 4 billion to shareholders by fiscal 2022 is encouraging.

The Zacks Consensus Estimate for fiscal 2022 revenue rose 1.4% to $ 4.31 per share over the past 30 days. The stock has lost 6.4% year to date.

Price and Consensus: HPQ

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HP Inc. (HPQ): Free Stock Report Analysis

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