Tech Stock Outlook – What Can Investors Expect in 2019?
Tech stocks had a hard time in 2018. The technology-heavy Nasdaq index fell 3.9% in the previous year – the worst performance in nearly a decade.
Above all, the popular FANG stocks (Facebook, Amazon, Netflix, Google aka Alphabet) came under heavy weight at the end of the year. Tech stocks had a significant impact on the stock market boom over the last 9 years. So, of course, many investors are wondering if consolidation will continue in 2019, or if current prices are a good starting point?
Tech Stocks 2019 – an outlook
High-growth tech stocks have generally outperformed the overall market in recent years. Investors must note, however, in these investments, that even tech stocks in a stock market consolidation usually fall more than the rest of the market.
One of the reasons for this is that tech stocks are often valued higher and usually pay no or only a small dividend. Technology companies need capital to continue investing in innovation to stay competitive in the future.
Netflix – ready for a recovery?
The best example here is Netflix , which has nearly tripled since the beginning of 2016 until today. However, the Netflix share has corrected by nearly 40% from its record high in the summer of 2018 to the end of the year.
In addition to the ambitious assessment, the corporate environment also plays a major role in this correction. Netflix continues to invest heavily in its content to keep competing streaming services at bay. Cash flow will remain negative until further notice. Nevertheless, many analysts see good chances that the Netflix share will recover in 2019. The price targets of the analysts here range from 400 to 500 US $.
Workday – the favorite cloud stock of many analysts
Even with the Workday , many analysts still see room for improvement – the price targets range from $ 160 to over $ 200. In the current fiscal year of 2019, the cloud specialist should be able to increase its sales by more than 30%, and next year Wall Street analysts expect a 25% increase in sales.
Earnings per share are expected to climb to $ 1.27 per share on Workday this year and over $ 1.60 per share next year. Workday is active in the area of human resources management and sells its software exclusively via the cloud via a subscription model. This means regularly recurring revenue. On the other hand, customers love the financial flexibility associated with the workday business model. The backlog at Workday last added $ 5.9 billion.
Microsoft is returning to its old strength
With the new company boss Satya Nadella the success returned to Microsoft. Microsoft is growing disproportionately thanks to its cloud business. With Windows Azure, the software vendor is now the second largest cloud infrastructure vendor behind Amazon Web Services (AWS).
Analysts believe that Microsoft in the cloud business (Office 365, Azure, etc.) so far only scratch the surface. Industry observers refer in particular to the broad customer base of Microsoft in the enterprise sector, whereby the Windows manufacturer can open up quite new sales potentials with further cloud offers. In addition, investors can look forward to a dividend yield of 1.8%.
Splunk – Big Data as growth driver
For years, companies have been looking for ways to easily, quickly and efficiently analyze large amounts of data. Software that helps make large amounts of data usable is booming. This allows companies to derive action strategies and further optimize business processes.
A big beneficiary in this area is Splunk . Analysts expect Splunk to grow its sales by an average of 25% over the next two years, with earnings per share likely to rise more than 50%. The price targets of the analysts range from 100 to 170 US $.
Keysight Technologies benefits from the 5G boom
Mobile phone companies are currently working diligently on the successor to the LTE technology. We are talking about 5G, the fifth mobile generation. 5G enables data transfer rates of up to 10 gigabits per second.
In order to realize such 5G networks, mobile and network operators need test and measurement equipment. A leader in this field is the former Agilent Keysight Technologies division.
Both Qualcomm and Samsung, for example, rely on Keysight technology to build 5G networks. Despite the sluggish stock market, the Keysight share price has recently climbed to a new record high – an end to growth is currently not in sight. Analysts see a price target of $ 80 to $ 90 for the value.
Conclusion: Tech stocks could be among the big winners in 2019
While tech stocks tend to be more volatile than more conservative stocks such as Coca-Cola, investors should consider technology stocks in the custody account.
Whether big data, 5G networks or cloud computing, technological development continues to advance. Companies worldwide must continue to invest in new technologies in order to remain competitive – and this will not change in the next few years.
Tech stocks such as Amazon , Alphabet, and lesser-known names such as Adobe Systems and Salesforce have benefited from this development in recent years and have already yielded rich returns to investors.
Also the new generation of tech stocks like Splunk, Workday, Keysight, Palo Alto Networks or Twilio promise high growth in the next years. But investors should not put everything on a card in the tech sector, but spread the risk over several stocks.