The following are the top rated Information Technology stocks according to Validea's P/E/Growth Investor model based on the published strategy of Peter Lynch. This strategy looks for stocks trading at a reasonable price relative to earnings growth that also possess strong balance
The recent rise in big
tech stocks is awe-inspiring. Last year, higher rates sent the broader tech sector rolling off a cliff. The more speculative or less profitable the stock, the greater the damage was. Now, the broader markets and tech scene are in recovery mode, but the magnitude of relief gains has not been even.
The bigger the market cap, the larger the gains have been in the tech scene. This makes sense, given the stronger balance sheets, profitability, growth prospects, and potential efficiency gains to be had as the broader economy begins to slump.
Therefore, in this piece, we'll check in with
TipRanks' Comparison Tool to observe three impressive tech plays -- AAPL, GOOGL, and NVDA -- in the mega-cap universe that may be worth consideration.
Wall Street has each name at a Strong Buy, even after their sharp ricochets off their respective lows. These three stocks also have 'Perfect 10'
Smart Scores, implying that they can outperform the market from here, according to TipRanks. Coincidentally, each tech behemoth has impressive hardware capabilities and upside potential from the AI boom.
Apple (
NASDAQ:AAPL)
Apple is a tech juggernaut that's found a way higher after clocking in some very reasonable
earnings results. Going into the report, Apple's shares looked pretty "peaky" after surging more than 32% off their January lows. Still, Apple rose over 4% on the earnings beat, likely causing many profit-takers to kick themselves.
Though there has been a valuation multiple expansion in recent months, I remain bullish. The firm looks to be on the cusp of a new product, and its expansion into India could pave the way for greater growth over the next five years.
Warren Buffett gave Apple some pretty high praise over the weekend, going as far as to call it the best business in Berkshire's portfolio. I'm in agreement. Apple has a lot going for it, with one of the best managers in the business and a product that's become more of a staple than a nice-to-have.
It's hard to tell what comes next after the iPhone. Regardless, Apple seems likely to take its fanbase to new waters. Whether we're talking about the next hardware release or new services (think fintech), Apple always seems to find a pathway higher.
Even at 29.1 times trailing price-to-earnings (P/E), I’m enthused by what could lie ahead. The growing services business and a potential mixed-reality headset may be on the radar of some analysts. However, it's what's not yet on any of our radars that may help Apple continue its upward march.
The hardware business, in particular, could have disruptive potential. As AI plays a more prominent role in our everyday lives, I'd look for Apple's Silicon neural engine (which helps Apple devices handle certain tasks faster and more efficiently) to be more of a difference maker.
What is the Price Target for AAPL Stock?
Apple stock comes in at a Strong Buy, with 23 Buys, four Holds, and just one Sell. The
average AAPL stock price target of $182.56 entails a mere 5.4% gain from here.
Alphabet (
NASDAQ:GOOGL) (
NASDAQ:GOOG)
Alphabet used to be the go-to play for AI. These days, the software behemoth seems to be in a rush to get a product out of the gate to match the likes of OpenAI's
ChatGPT. Google has a lot of innovative
AI talent behind the scenes. Still, it's up to Google to use AI to defend its turf in the search space.
It's not hard to imagine how AI will change the search market over the next few years. Fortunately for Google, it's ready to defend its search dominance, all while its other businesses (such as its Cloud business) look to gain ground over peers with some help from AI. Therefore, I’m bullish on GOOGL, even if the company is forced to play a bit of defense.
For now, it's ChatGPT that's sparking excitement, but it may or may not be ChatGPT that's the number-one consumer-facing chatbot a year or so from now. The near future still seems uncertain. Arguably, a top-competing product could come out of Google's pipeline.
Google's Bard "experiment" may be off to a mixed start. However, I do think Google is wise to be cautious, given the potential for regulatory backlash in the near future. By ensuring a smooth launch, Google can avoid further scrutiny from regulators, many of whom may already be setting their sights on the firm for its market dominance.
We're going to learn a lot about Google's AI plans today, with the big I/O event nearly underway. I'd look for new developments to boost the stock over the near and medium term.
What is the Price Target for GOOGL Stock?
Alphabet is also a Strong Buy, with 29 unanimous Buy ratings on the name — quite impressive! The
average GOOGL stock price target of $129.50 implies a 18.7% gain from current levels.
Nvidia (
NASDAQ:NVDA)
Finally, we have hardware play Nvidia, which has been on the hottest run of the tech stocks in this piece. The stock is
up a scorching 100% year-to-date. Indeed, new highs seem inevitable, given recent momentum. A big chunk of the rally is courtesy of AI hype.
Though AI opens new doors for Nvidia, a pullback could be lying around the corner. It's not easy to bet against Nvidia, given its impressive position. However, I have to be bearish at these valuations as they make me uncomfortable. That said, I'm more than willing to reconsider at lower prices.
The stock trades at over 160 times trailing earnings, well above the semiconductor industry average. While AI enthusiasm could propel NVDA stock much higher from here, I'd avoid chasing it.
Letting it come back to you may be the best course of action, especially if a recession causes more rumbles in the market.
What is the Price Target for NVDA Stock?
Nvidia stock boasts a Strong Buy consensus rating, with 30 Buys, seven Holds, and one Sell rating assigned in the past three months. Nonetheless, the
average NVDA stock price target of $286.94 implies 1.2% downside potential.
Conclusion
Big tech has been delivering big gains. Still, of the three stocks mentioned, Alphabet has the most upside potential, according to analysts. Further, it's the only stock to have all analysts recommending it as a Buy.
Disclosure
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