Best Tech Stocks To Buy Or Watch Now: 5 Growth Stocks Holding Up Well Amid Tech Sell-Off
The best tech stocks to buy or watch aren’t hard to find, as long as you’re fishing in the right pond. Whether it’s a widely held name like Twitter stock or a lesser-known name like Dynatrace stock, the best tech stocks share many common traits.
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The best tech stocks boast strong fundamentals along with leading price performance in their industry groups. Many also show favorable fund ownership trends.
Fishing in the right pond means targeting top stocks showing resilience and holding near highs. Use IBD Stock Checkup to quickly identify industry group leaders with the potential to be stock market leaders.
Stock Market Health
The 2020 stock market rally started with a follow-through day for the S&P 500 on April 2. It soared 2.3% in higher volume, confirming a new uptrend on the eighth day of its rally attempt. The Nasdaq composite confirmed a new uptrend on April 6 when it soared 7.3% in higher volume.
The stock market went into a correction on Sept.23 after the S&P 500 flashed its eighth distribution day, falling 2.3% in higher volume. But it didn’t take the stock market to recover. The Dow Jones Industrial Average flashed a follow-through day on Sept. 30, rising 1.2% in higher volume.
After a sharp pullback for the stock market in October, the S&P 500 followed through again on Nov. 4, rising 2.2% in higher volume.
The stock market uptrend came under pressure, hurt by six distribution days for the S&P 500 between Feb. 18 and Mar. 4. The Nasdaq composite is the laggard index at this point, but the Dow Jones, S&P 500 and Russell 2000 small-cap index are back near highs.
You can monitor the distribution day count every day in The Big Picture column. Read it every day for exclusive stock market analysis.
To be sure, the coronavirus stock market crash last year resulted in a lot of broken stock charts. But new leaders emerged, and there’s still a fair supply of bullish stock charts out there.
Five Top Tech Stocks
The best tech stocks to buy or watch now include Twitter (TWTR), Dynatrace (DT), PayPal (PYPL), Axonics Modulation (AXNX) and Skyworks (SWKS).
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The technology sector is loaded with stocks with outstanding fundamentals. Many sell at a hefty premium, but a high valuation is warranted due to strong growth prospects.
While several growth stocks have corrected 40% or more off their recent highs, the pullbacks for Skyworks, Twitter and PayPal have been contained so far. PayPal is a Leaderboard stock.
Finding The Best Tech Stocks To Buy Or Watch
Screening for the best tech stocks to buy or watch is as easy as looking at the MarketSmith Growth 250, a daily screen of high-quality stocks. Click on any column header to sort the screen as you wish, either by those closest to their highs, stocks with the highest Composite Rating, or stocks trading up in price with the heaviest volume.
The best tech stocks to buy or watch aren’t guaranteed to be huge stock market winners. But they do have qualities seen in past stock market winners before big price gains.
Twitter Stock
Amid a recent sell-off in technology stocks, Twitter continues to hold above its 10-week moving average.
Twitter stock gapped on Feb. 10 on bullish Q4 results. Adjust profit of 38 cents a share topped expectations and was up 52% year over year. Revenue was also better than expected at $1.29 billion, up 28%. Ad revenue rose 31% to $1.15 billion.
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The company’s mobile daily active users increased by 5 million from the third quarter to 192 million in Q4, a bit below analysts’ expectations of 193.5 million. The user base was up 26.3% compared to a year ago.
Buyers were in the stock again on Feb. 25 when the company said in an SEC filing that it plans to double its annual revenue by the end of 2023 with 315 million with 315 million mobile daily active users. Twitter recorded just over $3.7 billion in revenue in 2020.
Composite Rating: 91 (scale of 1-99 with 99 being the best)
Latest-quarter EPS % change: +52%
Latest-quarter sales % change: +28%
Three-year annualized EPS growth rate: n/a
Annual return on equity: n/a
Annual pretax margin: 15.1%
Dynatrace Stock
One of the few stocks left standing in the enterprise software group, Dynatrace recently found support at the 10-week line after a powerful breakout during the week ended Feb. 5, fueled by a strong earnings report.
Dynatrace has been a strong performer since its IPO in early August 2019. The company’s software helps customers modernize and automate information technology operations.
Composite Rating: 89
Latest-quarter EPS % change: 70%
Latest-quarter sales % change: +28%
Three-year annualized EPS growth rate: 117%
Annual return on equity: 29.3%
Annual pretax margin: 16.6%
PayPal Stock
PayPal recently introduced the ability to buy, hold and sell select cryptocurrencies like Bitcoin, Ethereum, Bitcoin Cash and Litecoin directly within the PayPal digital wallet.
The digital payments firm has been able to maintain strong earnings and sales even with a market capitalization of north of $250 billion. Full-year profit is expected to rise 18% in 2021 and 26% in 2022.
The company reported strong Q4 results on Feb. 3, with adjusted profit up 30% to $1.08 share. Revenue increased 23% to just over $6.1 billion. Total payment volume swelled to $277 billion, up 39%, as the coronavirus pandemic sparked more online transactions.
The company ended 2020 with 377 million active users and expects to add another 50 million in 2021.
PayPal gave a buy signal when it bounced off its 10-week line during the week ended Feb. 5. But like many other growth stocks, PayPal is back below its 10-week line and looks like it’s ready to form a new base.
Composite Rating: 81
Latest-quarter EPS % change: 30%
Latest-quarter sales % change: +23%
Three-year annualized EPS growth rate: +25%
Annual return on equity: 25%
Annual pretax margin: 25.6%
Skyworks Stock
Skyworks is a 5G chipmaker, along with Qualcomm (QCOM) and Qorvo (QRVO).
It’s been an orderly pullback so far for Skyworks, with the stock’s weekly chart already showing signs of strength and support. The stock fell 2.5% during the week ended March 5 but closed nicely off its weekly low. It did the same thing the following week, paring a 7% weekly loss to just 0.65%. Despite two straight weekly declines, buyers were in the stock both weeks lifting the stock off lows.
The chipmaker reported blowout earnings in late January. Quarterly profit surged 100% to $3.36 a share, with revenue up 69% to $1.51 billion.
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Skyworks generates most of its revenue from Apple (AAPL). But Skyworks’ broad market business, basically everything outside of mobile phones, did a record $326 million in the quarter, up 35%. The segment benefitted from applications that support remote work, gaming, automobiles, remote schooling and exercise.
Composite Rating: 90
Latest-quarter EPS % change: 100%
Latest-quarter sales % change: 69%
Three-year annualized EPS growth rate: -4%
Annual return on equity: 25.1%
Annual pretax margin: 33.7%
Axonics Modulation
Amid a sell-off in technology stocks, Axonics Modulation is holding its own with a relative strength line near new high ground. It’s still in the 5% buy zone after a breakout from an early-stage base with a 58.87 buy point.
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Axonics is a provider of sacral neuromodulation (SNM) solutions, used to treat patients with overactive bladder, fecal incontinence, and urinary retention. SNM delivers delivers mild electrical pulses to the sacral nerve to restore normal communication to and from the brain to reduce symptoms.
It’s a small-cap stock with a market capitalization of nearly $2.5 billion, but it’s fairly liquid with an averaged daily dollar volume of around $33 million.
Axonics isn’t profitable yet, but fund ownership has been rising in recent quarters. Increasing fund ownership was seen in several past stock market winners before big price moves.
Composite Rating: 71
Latest-quarter EPS % change: (-0.29) vs. (-0.75)
Latest-quarter sales % change: +250%
Three-year annualized EPS growth rate: n/a
Annual return on equity: n/a
Annual pretax profit margin: n/a
Follow Ken Shreve on Twitter @IBD_KShreve for more stock market analysis and insight.
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