All three major U.S. indexes jumped Monday after Moderna announced it has seen positive results from early human tests of its coronavirus vaccine. On top of that, economies around the world are slowly starting to reopen, and Federal Reserve Chairman Jerome Powell’s 60 Minutes interview highlighted why Wall Street might remain in ‘don’t fight the Fed’ mode for a while.
Investors have been looking beyond the current coronavirus economic downturn for roughly two months now, and they have shaken off some rough earnings results and economic data. That said, we won’t see the full impact of the coronavirus economic shutdown until at least the second quarter.
Despite the rough overall earnings outlook for the S&P 500, big-tech has flexed its muscles so far, showcasing its ability to expand within tough economic conditions. With this in mind, let’s look at three high-yield stocks that are part of the broader technology space that investors might want to buy now amid continued coronavirus uncertainty.
Seagate Technology PLC STX
Seagate is a data storage firm, with offerings and solutions for both businesses and consumers. STX topped our Q3 fiscal 2020 earnings estimate on April 22 and its quarterly revenue jumped 18%. The firm performed well despite the coronavirus, and management remains confident in its long-term growth outlook. CEO Dave Mosley said in prepared remarks that STX is ready to capitalize on “secular demand for mass capacity storage” and the growing need for “cost effective data management solutions.”
Seagate stock has underperformed the market in 2020, but it’s up over 10% in the last year. Yet, STX still rests over 20% below its 52-week highs, which could give it more room to run. STX also trades at 9.2X forward 12-month Zacks earnings estimates. This marks a discount against its industry’s 11.3X average and its own one-year median of 10.3X.
Seagate, which is currently a Zacks Rank #3 (Hold), sports an “A” grade for Value and “Bs” for both Growth and Momentum in our Style Scores system. STX is expected to see both its revenue and adjusted earnings surge next quarter to help lift its full-year sales and EPS. On top of that, Seagate’s 5.27% dividend yield blows away the S&P 500’s 1.96% average. Investors should note that Seagate’s next dividend will be payable on July 8, to shareholders of record as of June 24.
Verizon, the largest U.S. wireless carrier by subscribers, topped our Q1 earnings estimate on April 24. The telecom powerhouse did see its revenue dip 1.6%, as the pandemic impacted its core wireless business. VZ also lowered its profit guidance and pulled its revenue outlook amid the uncertainty. And Verizon raised its bad-debt reserve to help account for customers who won’t be able to pay their bills.
Despite some near-term negativity, Verizon will play a major role in the 5G future. Plus, Verizon hasn’t taken on a ton of debt to fuel expansion into new industries like rival AT&T T and was already focused on various cost-cutting measures before the pandemic. Meanwhile, Verizon stock has outpaced its industry’s average over the past 12 months and is up 16% over the last two years, which tops the S&P 500’s 5% expansion.
Verizon is a Zacks Rank #3 (Hold) at the moment that rocks “B” grades for Value and Growth. VZ’s Wireless National industry also rests in the top 16% of our more than 250 Zacks industries. And Verizon presents solid value, trading at 1.7X trailing 12-month sales, against the S&P 500’s 3.1X and its own 12-month highs of 2.0X. Furthermore, VZ’s 4.41% dividend yield crushes the 10-year U.S. Treasury note’s 0.73%
IBM topped our Q1 fiscal 2020 earnings estimate on April 20, though its revenue dipped 3.4%. Despite its top-line decline, the historic tech giant once again proved that its efforts to expand its cloud computing business have started to pay off. IBM’s quarterly cloud revenue jumped 19%, with unit sales up 13% in the last 12 months. IBM will continue to try to dive deeper into the booming cloud industry, as it tries to find something remotely close to the success of industry leaders Amazon AMZN and Microsoft MSFT.
IBM is also investing in artificial intelligence. Despite its efforts to prepare for the next era of technology, IBM stock is down roughly 20% in the last three years. And the stock sits 23% below its 52-week highs, which could give it plenty of room to run. As one might assume, IBM trades at a significant discount to its industry right now and earns a “B” grade for Value.
IBM did withdraw its full-year 2020 guidance amid the coronavirus uncertainty. However, the company boosted Wall Street confidence when it announced at the end of April that it raised its quarterly dividend payment for the 25th straight year. IBM’s 5.36% dividend yield easily blows away Cisco’s CSCO 3.20% and Apple’s AAPL 1.04%. IBM is currently a Zacks Rank #3 (Hold).
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