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Power Your Portfolio with These 4 S&P 500 Large-Cap Tech Picks

Radhika Pujara
·5 min read

The coronavirus pandemic has brought about a tectonic shift in the way products and services are availed and consumed. With people starting to accept and adapt to the fact that cohabiting with the virus is the only way for the time being, social distancing and work-from-home trends are becoming integral part of the new normal.

Nevertheless, the S&P 500 index has gained 4.6% in the past month courtesy of momentum in technology stocks that have shown greater resiliency amid the coronavirus pandemic. Markedly, five S&P 500 companies – Microsoft MSFT, Apple AAPL, Amazon AMZN, Facebook and Alphabet – now account for nearly 20% of the index’s total market capitalization.

Despite the challenging scenario, the tech sector is thriving and holds potential to defy the recessionary woes and minimize the anticipated contraction of the world economy owing to coronavirus-induced crisis.

In fact, technology companies, particularly cloud computing, Internet services and cybersecurity providers, are expected to benefit from the ongoing work-from-home, online learning and telemedicine, remote health diagnosis trends. Further, rising demand for web-based services like e-commerce, contactless payment and delivery, favor the sector’s prospects.

The momentum is anticipated to continue primarily owing to the fear of a second wave of COVID-19 with no vaccine yet in sight.

Moreover, economic data, including retail sales growth in May reflecting improved consumer spending, bodes well. Additionally, stimulus to fuel the economy hold promise.

Further, rapid adoption of cloud computing, the ongoing integration of AI and machine learning and the accelerated deployment of 5G technology, blockchain, IoT, autonomous vehicles, AR/VR and wearables are major positives.

Winning Criteria

Here we zero in on four S&P 500-listed large cap tech stocks that are well-poised to grow in the current volatile market situation. Large caps have strong fundamentals that help them stay afloat in a turbulent economic and business environment. Each of the four stocks has a market cap of more than $20 billion.

Moreover, they a favorable combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Per the Zacks proprietary methodology, stocks with such a perfect mix of elements offer solid investment opportunities.

Notably, each of these stocks has outperformed the S&P 500 composite on a year-to-date basis, as the chart below shows. The momentum is anticipated to continue on the back of robust growth prospects.

Year-to-Date Performance


 
Let us take a look on the best bets:

Fortinet FTNT is well positioned to capitalize on the rising demand for security and networking products amid coronavirus crisis which has compelled a massive workforce to work remotely globally. It is also benefiting from robust adoption of Fortinet Security Fabric, cloud and SD-WAN offerings.

Moreover, new deal wins, especially those of high value, are key catalysts. Higher IT spending on cybersecurity is expected to aid Fortinet in outgrowing the broader security market.

The Zacks Consensus Estimate for 2020 earnings has been revised upward by 8.1% to $2.81 per share in the past 60 days. Fortinet has a market cap of $21.71 billion. Further, the company currently flaunts a Zacks Rank #1 and has a Growth Score of B.

ServiceNow NOW is riding on robust adoption of its workflows by companies undergoing digital transformation. Further, strategic alliances with the likes of Microsoft remain tailwinds. Solid pipeline and improvement in bookings also hold promise.

As businesses, government agencies and others continue to ‘cloudify’ their infrastructure, the company’s digital workflow solutions are well poised to gain adoption. Moreover, it continues to witness traction among Fortune 500 companies.

The Zacks Consensus Estimate for current-year earnings has been revised upward by 7.3% to $4.24 per share in the past 60 days. ServiceNow has a market cap of $74.93 billion. The company currently has a Zacks Rank #2 and a Growth Score of A.

VeriSign VRSN is benefiting from growth in .com and .net domain name registrations. Also, the renewal of the .com contract and price hikes for the .com and .net domain names favor growth prospects.

The Zacks Consensus Estimate for 2020 earnings is pegged at $6.62 per share, indicating growth of 24.7% on a year-over-year basis. VeriSign has a market cap of $23.42 billion.

This Zacks #2 Ranked stock with a Growth Score of A is expected to cash in on the pervasive Internet consumption globally.

T-Mobile US’ TMUS 600 MHz 5G now serves more than 215 million people, including citizens of Detroit and Columbus, while 50 million new T-Mobile devices have access to the 600 MHz LTE network. The company has deployed 5G sites in Philadelphia and New York City using Sprint’s 2.5 GHz mid-band spectrum on its 5G network.

The merger with Sprint enables T-Mobile to deploy nationwide 5G at a much faster rate. Within six years, the company is expected to provide 5G to 99% of the U.S. population and average 5G speeds above 100 Mbps to 90% of the population. T-Mobile has a market cap of $134.15 billion.

The Zacks Consensus Estimate for T-Mobile’s 2020 sales suggests an improvement of 51.8% on a year-over-year basis.

This Zacks #2 Ranked stock with a Growth Score of B is expected to capitalize on the rapid deployment of 5G triggered by coronavirus crisis induced Internet demand.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>


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
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
VeriSign, Inc. (VRSN) : Free Stock Analysis Report
 
ServiceNow, Inc. (NOW) : Free Stock Analysis Report
 
Fortinet, Inc. (FTNT) : Free Stock Analysis Report
 
TMobile US, Inc. (TMUS) : Free Stock Analysis Report
 
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Zacks Investment Research