December 1, 2016
I won't sugarcoat it: The technology sector clearly woke up on the wrong side of the bed today. Household names like Alphabet (GOOGL), Apple Inc. (AAPL), Facebook (FB), Oracle (ORCL) and Microsoft (MSFT) are all in the red. As I write this, the tech-heavy NASDAQ is down over 1.3%, while the Dow is up nearly 0.3% today. What is causing the selloff? Are there buying opportunities here? Let's take a look.
On the consumer electronics front, rumors about Apple are making investors nervous. A report from a Taiwain technology news site alleges that Apple is cutting orders for the iPhone 7. According to this report, iPhone 7 demand is starting to slow, so suppliers are looking ahead to the next generation of iPhones.
These rumors put pressure on AAPL shares, as well as suppliers Broadcom (AVGO), Micron Technology (MU), Qualcomm (QCOM) and Skyworks Solutions (SWKS). Of these six stocks, only two rate highly in my Portfolio Grader system: Broadcom and Qualcomm. I personally recommend AVGO in a few of my newsletters, and it still has stunning sales and earnings prospects. So, I consider it a great buy on the dip. As for the rest, you can plug them into Portfolio Grader to see how they stack up.
Meanwhile, shares of Facebook are under pressure after Canaccord Genuity cut its target price to $160 for FB. Keep in mind, though, that this price target still represents nearly a 39% premium over the stock's current price.
And, given that analysts have been aggressively revising their earnings projections higher, I think that Facebook will blow right past that target. This quarter, analysts expect Facebook to post 45% annual sales growth and 65.8% earnings growth. This is while the industry as a whole is expected to see earnings decline 1%. I consider this to be another buying opportunity.
My point is that you can't judge a book by its cover, and you can't judge an entire sector by a knee-jerk selloff. Despite some near-term volatility, there are still a handful of excellent technology stocks that should be bought on the dip.