Even though investors rotated out of expensive tech stocks last month and earlier this month, the tech-heavy Nasdaq gained yesterday driven by stellar third-quarter earnings reports. According to a Factset report, more S&P 500 companies are…
exceeding EPS estimates for the third quarter than on average and beating EPS estimates by a wider margin than on average.
Furthermore, the tech industry is expected to grow in the near future due to the increasing applications of smart technology solutions across several industries. Wedbush analyst Dan Ives said, “We continue to believe this pressure on the tech sector is short-lived with our belief that tech stocks will be up 10% into year-end as the tech growth stories are being massively underestimated by the Street with 3Q earnings a major positive catalyst for the tech sector.”
Against this backdrop, we think the shares of quality tech companies Analog Devices, Inc. (ADI – Get Rating), VMware Inc. (VMW – Get Rating), and Synopsys Inc. (SNPS – Get Rating) could be solid additions to one’s portfolio.
Semiconductor company ADI designs, manufactures, tests and markets integrated circuits, software, and subsystems that leverage analog, mixed-signal, and digital signal processing technologies. The Norwood, Mass.-based company’s IC product portfolio includes general-purpose products and application-specific products designed for specific target markets.
On August 26, 2021, ADI acquired Maxim Integrated Products Inc. (MXIM). The acquisition is expected to bolster ADI’s position as a high-performance analog semiconductor maker. Also, the synergy derived from the acquisition is expected to strengthen ADI’s efforts in developing even more cutting-edge solutions for its customers.
For the third quarter, ended July 31, 2021, ADI’s revenues came in at $1.76 billion, up 21% year-over-year. The company’s adjusted operating income grew 24% year-over-year to $766 million. Also, its adjusted EPS increased 26% year-over-year to $1.72.
Analysts expect ADI’s revenue and EPS to increase 30% and 30.8%, respectively, year-over-year to $7.28 billion and $6.42 in its fiscal year 2021. It surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has gained 45.3% in price over the past year to close yesterday’s trading session at $180.52.
ADI’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
ADI has a B grade for Quality. Within the Semiconductor & Wireless Chip industry, it is ranked #40 of 98 stocks. Click here to see the additional POWR ratings for ADI (Growth, Value, Momentum, Stability, and Sentiment).
VMW is a Palo Alto, Calif.-based software provider in hybrid and multi-cloud, modern applications, networking, security, and digital workspaces. It has strategic alliances with Amazon Web Services to build and deliver an integrated hybrid solution. In addition, it sells its products through distributors, resellers, system vendors, and systems integrators.
On September 21, 2021, VMW announced that VMware Cloud on AWS GovCloud (US) had achieved FedRAMP Agency Authority to Operate (ATO) at the High Impact Level. Lynn Martin, vice president of government, education, and healthcare at VMW, said, “Achieving this certification for VMware Cloud on…
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