4 Tech Stocks Driving Profits
Jan 29th 2012 4:11PM
Updated Jan 29th 2012 4:12PM
The tech industry is off to a fast start in 2012. Despite a challenging economy, some tech stocks are lifting the sector higher. Here's a look at recent earnings for four leading technology companies and whether they can keep the momentum going.
The obvious leader here is Apple (NAS: AAPL) . The company set a new industry high with quarterly sales of $46.3 billion. Apple's earnings blew past analyst estimates and boosted shareholder returns. The Mac-maker's record quarter even managed to beef up overall profit-growth for the S&P 500. According to The Wall Street Journal, earnings growth for the S&P climbed to 11.6%, up from just 2.7% before Apple's report. Similarly, the tech sector can thank Apple for its overnight growth spurt from 8% to 15.8%.
If you have the cash, I think Apple's still a buy today. The stock is currently trading at 11 times next year's estimated earnings. It's hard to imagine that Apple will slow down, with upcoming product releases rolling out later this year including the iPhone 5 and the next-generation iPad.
Riding Apple's coattails
My next pick within the tech industry is one that closely ties into Apple: Broadcom (NAS: BRCM) , a supplier for Apple products. Nearly half of Broadcom's revenue comes from its wireless connectivity products. In 2010, sales to Apple accounted for 11.1% of the company's net revenue.
With industry-leading technologies for mobile devices, the chipmaker should benefit greatly from increased growth in mobility. For an in-depth look at the company's 2011 performance, we'll have to wait until Broadcom reports its fourth-quarter and full-year review on Jan. 31.
PC does it
The world's largest chipmaker, Intel (NAS: INTL) , makes my playbook for other reasons. Despite hard-drive shortages and other setbacks for PC makers, Intel beat analyst expectations for its fourth quarter. Although Intel faces a tough challenge in rival ARM Holdings, I'm confident in the company's new multi-device partnerships with Motorola (NYS: MMI) and Lenovo. Motorola will deliver its first Intel-equipped device in the second half of the year. If Intel's new Atom chips work out the way Motorola envisions, it could rock the smartphone market -- just the type of disruption I like from a tech stock.
Another player I like in the tech-sphere is online marketplace eBay (NAS: EBAY) . Fourth-quarter results came in strong, with revenue growing 35% to $3.38 billion for the period. eBay sold its remaining stake in Skype, which boosted earnings. But the real root of the stock's success is its PayPal payment portion of the business.
In 2011, Paypal added a million new members each month -- driving incredible growth for the company. I see this progress continuing as PayPal adds more ways for people to pay for products using its service. For example, last year the company processed nearly $4 billion in mobile payments, up from just $25 million in 2008. The growth potential here is huge. eBay's PayPal division could also be a big player on the point-of-sale playing field. The company is testing an in-store payments system with Home Depot. Ultimately, PayPal hopes to partner with other brick-and-mortar retailers, allowing customers to make purchases with their PayPal accounts using a mobile phone.
Those are my picks for the best plays within technology. If you, too, want to ride Apple's phenomenal success, look no further than The Motley Fool's free report: "3 Hidden Winners of the iPhone, iPad, and Android Revolution." Find out how you can cash in on the booming smartphone and tablet market today. Get your free report.
At the time this article was published Fool contributor Tamara Rutter owns shares of Apple. Follow her on Twitter, where she uses the handle @TamaraRutter. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple and eBay, writing puts in eBay, and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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