S&P 500 technology stocks are leading the market again — and recent earnings reports show why. And now analysts are racing to discover the sector’s next leg of growth.
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Analysts see more than 20% upside in the prices of five S&P 500 tech stocks — including Micron Technology (MU), Enphase Energy (ENPH) and Synopsys (SNPS) — in the next 12 months, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. That’s more expected stock price appreciation than from any of the so-called FAANGs.
Positioning in the right places in technology might be a make-or-break proposition for portfolios as the S&P 500 bull market rages on. Many millennials are loaded up most with stocks that aren’t working this year.
“We strongly believe the underlying $2 trillion of digital transformation spending on the horizon among enterprises and consumers is unmatched and growth prospects are unlike anything we have seen covering tech stocks on the Street the past few decades,” said Dan Ives, analyst at Wedbush Securities.
S&P 500 Technology Perks Up In April
Tech stocks in the S&P 500 are reasserting themselves in market leadership. They’ve been missing for months.
The Technology Select Sector SPDR ETF (XLK) is up 7.7% in April so far. That makes it the top performer among the 11 S&P 500 sectors as it handily beats the S&P 500’s 5.4% rise.
It’s quite a reversal, as S&P 500 tech stocks struggled during the first few months of the year. Even following a strong run in April, the Technology Select Sector SPDR is up 10% this year so far. That puts it behind the S&P 500’s 11.7% gain.
But the tide is changing fast.
Picking The Favorite S&P 500 Technology Stocks
Memory-chip maker Micron is the favorite technology stock among the 75 in the S&P 500. Analysts think the stock will hit 115 a share in 12 months. And if that’s right, it would mark upside of 28.5% from Tuesday’s 89.46 closing price. That’s more implied upside than with any other tech stock in the S&P 500.
Much of the massive upside for Micron is tied to huge expectations for this year. Thanks to off-the-hook demand for computer chips, Micron’s adjusted profit is seen jumping 131% in 2021 on 34% higher revenue of $29.6 billion. Micron also sports a sky-high 96 IBD Composite Rating.
Solar power is also a big winner in the eyes of analysts. Shares of Enphase, a maker of solar system components, are seen hitting 217.25 a share in 12 months. That’s up 27% from Tuesday’s close of 171.10. Stock gain expectations are backed up by an expected 72.6% jump in revenue and 50.4% rise in adjusted profit.
And top-notch management still matters. Driven by its world-class CEO, chip design company Synopsys is expected to trade 21.6% higher than it does now. Analysts think this stock, which closed Tuesday at 251.70, should be worth 306.14 a share in 12 months. Part of that is catch-up. Shares are down 2.9% this year so far. Earnings, though, are seen rising 5.9% this year on 7.6% higher profit.
S&P 500 Tech Stocks Analysts Like Most
| Ticker | Stock YTD change | Price target* | Upside to target | Composite Rating | |
|---|---|---|---|---|---|
| Micron Technology | (MU) | 19.0% | 115.00 | 28.5% | 96 |
| Enphase Energy | (ENPH) | -2.5% | 217.25 | 27.0% | 70 |
| IPG Photonics | (IPGP) | 2.8% | 284.60 | 23.8% | 50 |
| Qualcomm | (QCOM) | -9.4% | 169.72 | 23.0% | 74 |
| Synopsys | (SNPS) | -2.9% | 306.14 | 21.6% | 67 |
Sources: IBD, S&P Global Market Intelligence, * – 12-month estimate.
What About S&P 500 FAANGs?
Investors love to own the FAANG stocks: Facebook (FB), Amazon.com (AMZN), Apple (AAPL), Netflix (NFLX) and Google parent Alphabet (GOOGL). Not all are tech stocks, though. Amazon, for instance, is in the consumer discretionary sector.
But none is seen putting up the kinds of stock-price gains analysts predict in other S&P 500 tech stocks.
Price targets are highest for Amazon.com. Analysts think the company’s stock price still has 18.3% upside until hitting its 12-month target of 4,041. The online retailer reports earnings on April 29. This year, analysts see an Amazon revenue gain of 22.6% and a profit bump of 13.5%.
But investors know analysts are fallible.
Among FAANG stocks, analysts are least bullish on Leaderboard member Alphabet. Analysts are only calling for the stock to hit 2,499.71 a share in 12 months. That’s just 9.1% upside from Tuesday’s close of 2,290.98. But the search giant blew away first-quarter profit estimates late Tuesday, sending shares up 4% already. The stellar 96 IBD Composite Rating, though, is a sign that this is a stock you don’t want to ignore.
Analysts’ message, though, is clear. Expect big things from S&P 500 tech stocks, but perhaps not the biggest moves from the biggest companies.
Analysts Bite On FAANG
| Ticker | Stock YTD change | Price target* | Upside | Composite Rating | |
|---|---|---|---|---|---|
| (FB) | 11.1% | 339.94 | 12.0% | 94 | |
| Amazon | (AMZN) | 4.9% | 4041.37 | 18.3% | 86 |
| Apple | (AAPL) | 1.3% | 149.62 | 11.3% | 73 |
| Netflix | (NFLX) | -6.5% | 593.14 | 17.3% | 72 |
| Alphabet | (GOOGL) | 30.7% | 2499.71 | 9.1% | 96 |
Sources: IBD, S&P Global Market Intelligence, * – 12-month estimate.
Follow Matt Krantz on Twitter @mattkrantz
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