Large to mid-cap tech stocks have helped the Nasdaq ratchet up its December gains further. In fact, the tech-laden index reached a new psychologically significant level on Dec 26, as several tech stocks head to close the year with best gains in years.
The Nasdaq closed above the coveted 9,000 mark for the first time ever, ending above 9,022. The index also registered its 11th straight positive run, marking its longest winning streak since 2009. What’s more, Nasdaq’s winning run had helped notch its longest stretch of all-time closing highs since 1997.
The Nasdaq had climbed to 8,000 at the close on Aug 27, 2018. Since then, two major tech bigwigs, in particular, have helped the index generate a return of 27.5% so far this year. These tech stocks are none other than Microsoft Corporation MSFT and Apple Inc. AAPL.
Microsoft’s new subscription model, Azure, and promising new products generated sizeable cash flows this year. To top it, its gaming segment, including Xbox Live, Game Pass subscriptions and Mixer, also helped the trillion-dollar plus company gain traction. Also, acquisitions like PlayFab and GitHub helped Microsoft expand its total addressable market.
Other segments of commercial cloud, including Office 365 and Dynamics 365, are also expected to have driven the software giant’s earnings. Lastly, the 10-year, $10 billion Joint Enterprise Defense Infrastructure project from the Department of Defense that Microsoft secured, bodes well.
The stock has soared 56.2% on a year-to-date basis, more than the Computer – Software industry’s growth of 43.9%. The Zacks Rank #2 (Buy) company’s expected earnings growth rate for the next quarter and next year is 8.8% and 12.3%, respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
.jpg)
And when it comes to Apple, the iPhone maker benefited from momentum in its non-iPhone businesses, particularly Services and Wearables, strong adoption of Apple Pay and growing Apple Music subscriber base.
In the wearable space, Apple Watch continues to dominate the global smartwatch market. After all, Apple Watch’s market share surged to 48% in the third quarter of 2019, up from 45% in the second quarter. During the quarter, Apple’s wireless AirPods also accounted for nearly 45% of all earbuds sold. Needless to say, that the company has done so good this year that its goal of $51 billion in services revenues is now very much within reach. Apple’s service revenues had already grown to $46.29 billion, as of the third quarter.
Shares of Apple have climbed 83.7% so far this year, more than the Computer – Mini computers industry’s growth of 76.7%. The Zacks Rank #3 (Hold) company’s expected earnings growth rate for the next quarter and next year is 14.6% and 15.8%, respectively.
.jpg)
But not all tech stocks have performed encouragingly since the Nasdaq last gained 1,000 points. Notable among them are Amazon.com, Inc. AMZN and Netflix, Inc. NFLX. Both of their shares have declined more than 4% since late August 2018.
Notably, there are a few non-tech players that helped the index climb north during the said period. Such non-tech names include Lululemon Athletica Inc. LULU and Starbucks Corporation SBUX. While shares of designer of athletic apparel and accessories Lululemon surged more than 67.3% since August 2018, shares of coffee retailer Starbucks skyrocketed 66.3%.
Lululemon has been posting positive earnings and revenue figures for quite some time, thanks to the merchandising policies it adopted in the recent times. The company’s Power of Three strategic plan not only aided its recent quarterly results but is expected to double sales in the men’s and digital categories in the near term. The plan’s primary focus lies on product innovation, augmenting omni-guest experiences and market expansion.
Shares of Lululemon have jumped 90.1% on a year-to-date basis, more than the Textile – Apparel industry’s growth of 32.2%. The Zacks Rank #2 company’s expected earnings growth rate for the next quarter and next year is 17.6% and 16.7%, respectively.
.jpg)
Similarly, Starbucks’ business is rapidly growing in China, courtesy of innovative store designs and the success of the MSR program. China has been home to nearly 500 million middle-class families. And that’s the reason why Starbucks’ management believes that the country is the company’s biggest market. At the same time, China is untapped as a coffee market.
Starbucks’ comparable-store sales despite the effects of changes in foreign currencies have been rising at a steady pace. The company has also seen remarkable growth in U.S.-based Starbucks rewards members. CFO Pat Grismer acknowledged that the Rewards loyalty program has boosted Starbucks' comps growth in the recent times. He added that the program will continue to aid Starbucks’ results in the long run as well.
Also, Starbucks’ Mobile Order & Pay app, which allows non-Rewards members to place orders, is also boosting its revenues. Further, Starbucks had created a venture capital fund — Valor Siren Ventures 1 — in partnership with Valor Equity Partners to invest in food/retail related start-ups. This enhanced Starbucks’ bottom line.
Shares of Starbucks have advanced 36.7% so far this year, more than the Retail – Restaurants industry’s growth of 20.3%. The Zacks Rank #3 company’s expected earnings growth rate for the next quarter and next year is 10% and 11.5%, respectively.
.jpg)
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020?
These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold.
Start Your Access to the New Zacks Top 10 Stocks >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment