The technology industry keeps growing to satisfy the rising demand in an ever-changing world. Tech stocks, recognized for their steady upward trend, thrive due to the ongoing high demand for technology solutions. Thus, investors could consider keeping track of fundamentally sound tech stocks such as Microsoft Corporation (MSFT), Apple Inc. (AAPL), and Alphabet Inc. (GOOGL).
Businesses heavily depend on software solutions to optimize operations, enhance customer experiences, gain data-driven insights, and protect their systems as they strive to adapt and compete in the ever-evolving digital landscape. Therefore, the U.S. software market is estimated to grow at a CAGR of around 7.2% by 2030.
Additionally, the demand for business software and services is expected to be driven by the rapid increase in enterprise data volume and the automation of business processes across end-use industries such as retail, manufacturing, healthcare, and transportation.
Therefore, the global business software and services market is expected to expand at a CAGR of 11.9% till 2030.
Considering these conducive trends, let’s take a look at the fundamentals of the three tech stock picks.
Microsoft Corporation (MSFT)
MSFT develops and supports software, services, devices, and solutions worldwide. The company operates in Productivity and Business Processes; Intelligent Cloud; and More Personal Computing segments.
On May 1, MSFT, Brookfield Asset Management Ltd. (BAM), and Brookfield Renewable Partners L.P. (BEP) announced a global renewable energy framework agreement to help the company achieve its goal of matching 100% of its electricity consumption with zero-carbon energy purchases by 2030.
This agreement builds on their existing collaboration and aims to decarbonize global energy supplies. It provides MSFT access to new renewable energy capacity to support the growing demand for cloud services.
On April 29, MSFT and Axel Springer SE announced an expanded partnership in advertising, AI, content, and cloud computing. The strategic cooperation aims to leverage cutting-edge innovation to support independent journalism worldwide and accelerate growth in the AI era by combining their strengths in digital publishing and technology.
MSFT’s total revenues increased 17% year-over-year to $61.86 billion for the third quarter that ended March 31, 2024. Its operating income grew 23.4% from the year-ago value to $27.58 billion. The company’s net income and EPS came in at $21.94 billion and $2.94, reflecting increases of 19.9% and 20% from the prior year’s quarter, respectively.
In addition, the company’s total assets were $484.27 billion as of March 31, 2024, versus $411.98 billion as of June 30, 2023.
The consensus revenue estimate of $64.37 billion for the fiscal second quarter (ended June 2024) represents a 14.6% increase year-over-year. The consensus EPS estimate of $2.93 for the current quarter indicates a 9% improvement year-over-year. The company has an excellent surprise history, surpassing the consensus revenue and EPS estimates in each of the trailing four quarters.
Shares of MSFT have gained 11.4% over the past month to close the last trading session at $460.77.
MSFT’s POWR Ratings reflect its mixed outlook. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
MSFT has a B grade for Stability, Sentiment, and Quality. It is ranked #18 among 41 stocks in the Software - Business industry.
Click here to access the additional MSFT ratings (Momentum, Growth, and Value).
Apple Inc. (AAPL)
AAPL designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories globally. It offers the iPhone, a line of smartphones; Mac, a line of personal computers; iPad, a line of multi-purpose tablets; and wearables, home, and accessories comprising AirPods, Apple TV, Apple Watch, Beats products, and HomePod.
On June 10, AAPL unveiled Apple Intelligence, the personal intelligence system for iPhone, iPad, and Mac. This system combines the power of generative models with personal context to deliver intelligence that’s incredibly useful and relevant. It is deeply integrated into iOS 18, iPadOS 18, and macOS Sequoia.
Apple Intelligence harnesses the power of Apple silicon to understand and create language and images, take action across apps, and draw from personal context to simplify and accelerate everyday tasks. With its unique approach, AAPL combines generative AI with a user’s context to deliver helpful intelligence.
Also, on the same day, AAPL launched a suite of innovative new tools and resources to allow developers globally to design more powerful and efficient apps across all Apple platforms. With Xcode 16 beta, developers can save time in their development process and access features like Swift Assist and predictive code completion.
AAPL reported total net sales of $90.75 billion during the second quarter that ended March 30, 2024, of which services net sales increased 14.2% year-over-year to $23.87 billion. The company’s net income and EPS came in at $23.64 billion and $1.53 for the quarter, respectively.
Furthermore, the company’s cash and cash equivalents stood at $32.69 billion as of March 31, 2024, versus $29.96 billion as of September 30, 2023.
Analysts expect AAPL’s revenue for the third quarter (ended June 2024) to increase 2.4% year-over-year to $83.74 billion, and its EPS for the ongoing quarter is expected to grow 4.9% year-over-year to $1.32. Moreover, the company has topped the consensus EPS estimates in each of the trailing four quarters.
AAPL’s stock gained 27.5% over the past nine months to close the last trading session at $221.55.
AAPL’s fundamentals are reflected in its POWR Ratings. It has an overall rating of C, which equates to a Neutral in our proprietary rating system.
The stock has an A grade for Quality and a B for Sentiment. AAPL is ranked #22 in the B-rated Technology - Hardware industry.
Beyond what is stated above, we’ve also rated AAPL for Growth, Value, Stability, and Momentum. Get all AAPL ratings here.
Alphabet Inc. (GOOGL)
GOOGL is the powerhouse behind a spectrum of tech innovations and platforms worldwide. Its segments, spanning Google Services; Google Cloud; and Other Bets; cater to diverse digital needs and aspirations.
Like other Big Tech companies, GOOGL has been investing in artificial intelligence, a strategy that has helped drive demand for its cloud services. The company also offers internet services, subscription-based products, apps and in-app purchases, and licensing and research and development services.
On May 2, 2024, GOOGL and MongoDB, Inc. (MDB) collaborated to optimize Gemini Code Assist and provide enhanced suggestions for application development and modernization on MDB. MDB is the industry-leading developer data platform that millions of developers and tens of thousands of customers rely on every day for business-critical applications.
Through this collaboration, Gemini Code Assist can help developers get answers and information about MongoDB code, documentation, and best practices so they can more quickly prototype new features and accelerate application development.
During the first quarter, which ended March 31, 2024, GOOGL saw robust growth, with revenues rising 15.4% year-over-year to $80.54 billion. Income from operations surged by 46.2% from the year-ago quarter to $25.47 billion, while net income soared to $23.66 billion, marking a 57.2% increase from the prior year’s quarter. Earnings per share for Class A, B, and C stock reached $1.89, up by 61.5% year-over-year.
For the quarter ended June 2024, GOOGL’s revenue is expected to increase 12.7% year-over-year to $84.07 billion, and its EPS is expected to grow 27.6% year-over-year to $1.84. Moreover, the company surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Over the past year, the stock has gained 55%, closing the last trading session at $185.82.
GOOGL’s POWR Ratings reflect bright prospects. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
GOOGL has a B grade for Sentiment and Quality. It is ranked #12 in the B-rated Internet industry.
In addition to the POWR Ratings highlighted above, one can access GOOGL’s ratings for Growth, Value, Momentum, and Stability here.
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MSFT shares were trading at $460.77 per share on Wednesday afternoon, up $1.49 (+0.32%). Year-to-date, MSFT has gained 22.98%, versus a 16.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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