The technology sector is a large part of many business organizations and it also plays an integral part in the lives of consumers today. Investors may find it hard to resist such a large sector due to the returns generated by some technology companies. In this article, I will focus on five technology stocks which are likely to outperform expectations in the near future based on new deals and developments which I will detail below. They have also been chosen because they are relatively cheaper than their peers, thus offering great value. Here are my findings:
Sina (SINA) engages in the provision of online media and mobile value-added services for China. It has a market capitalization of $4.05 billion and its stock is currently trading at around $61 per share. It has shown a quarterly revenue growth of around 20%. Sina’s gross margin of 56.24% is the same as the industry average, indicating that the company is performing well. Its operating margin of 12.3% is significantly higher than the industry average of 1.3%. Cogent Communications Group (CCOI) is a competitor of Sina Corporation. Cogent has a five year expected PEG ratio of 4.13 times, versus the 2.97 times reported by Sina. This indicates that future shares of Sina can be purchased at a lower relative price. Despite forecasts of a smaller profit for Sina, analysts expect that the company is going to generate greater revenues from its online blog, Weibo. In recent times, the company has shown positive performance.
Netflix (NFLX) is a provider of internet services based on the subscription of television shows and movies. It has a market capitalization of $6.2 billion and its shares are currently trading at around $112 per share. Netflix has a profit margin of 7% and a return-on-equity of 48.5%. Its gross margin of around 36% is greater than that of its competitor Amazon (AMZN) at around 22%. Netflix has shown an operating margin of 12%, which is significantly higher than that of Amazon at 1.8%. Its price-to-sales ratio of 1.95 times is lower than the industry average of 2.11 times, indicating that its shares can be bought at a lower price than most of its peers. Netflix recently voted in favor of supporting Android and Apple but not BlackBerry; a wise decision due to the market share of the first two companies. It is also looking to strike a deal to provide a greater number of its customers with Spanish-language programming. It has already entered a deal with The Weinstein Company (TWC) to provide enhanced online content.
Baidu (BIDU) is a China-based internet search services provider. It has a market capitalization of $44.7 billion and shares of the company are currently trading at around $135 per share. Baidu has a profit margin of 45.8% and a return-on-equity of 53.5%. Baidu’s forward price-to-equity ratio of 20.9 times is lower than that of Internap Network Services (INAP) which has a price-to-equity ratio of 111 times. Baidu’s five year expected PEG ratio of 0.65 times is lower than that of United Online (UNTD) at 1.25 times, indicating that future shares of Baidu can be bought at a relatively cheaper price. Baidu has great plans for increasing its international presence. Currently, it already caters to the majority of the Chinese population by providing them with a vast amount of services. Baidu is a hot technology stock that I recommend buying today.
OpenTable (OPEN) engages in the provision of restaurant reservations. It has a market capitalization of $1.15 billion and shares of the company are currently trading at around $49 per share. OpenTable has a profit margin of 15.5% and a return-on-equity of 20.3%. PFSweb (PFSW) is a competitor of OpenTable. PFSweb has an operating margin of negative 1%, while OpenTable has an operating margin of around 23%. Online Resources (ORCC) is another competitor that has a five year expected PEG ratio of 1.9 times, versus the 1.12 times reported by OpenTable. Thus, we can see that future shares of OpenTable are relatively cheap. It is looking to see an increase in revenue and profits due to the recent industry trends. Its positive margins are also great news for the company. It was also selected to be a part of the Gordon Ramsay Holdings as a reservation provider and guest management solution. I recommend taking a position in OpenTable now.
Ancestry.com (ACOM) is an online family history resource that runs a subscription based service. It has a market capitalization of $1.05 billion and shares of the company are currently trading at around $24 per share. Also, it has a profit margin of 15.7% and a return-on-equity of 18.6%.Ancestry.com recently teamed up with celebrity customers to support non-profit organizations; a move that is supported by the general public. The company has outperformedanalyst expectations and I recommend the stock to investors.
— Guru Focus