The fourth quarter of 2019 is off to a volatile start, with the Dow and S&P 500 plunging over the past two days. Technology shares haven’t been spared from the onslaught, with large-cap FAANG stocks among the hardest hit.
Barring a repeat performance of Q4 2018, the next three months should provide investors with new opportunities to cycle back into technology stocks – or pad their existing holdings. Below we’ve identified two technology stocks that could make welcomed additions to your portfolio this quarter.
Summary
- Micron Technologies (NASDAQ: MU)
- Vipshop Holdings (NYSE: VIPS)
Micron Technologies (NASDAQ: MU)
- Market Cap: $47.2 billion
- Revenue Growth: 49.6% (2018)
- Free Cash Flow: $8.52 million
Source: Yahoo Finance
Micron Technologies was among Q3’s top performers, as chipmakers made a roaring comeback despite the ongoing U.S.-China trade war. Ironically, MU shares tanked after the company reported better than expected financial results late last month.
Looking at the numbers, Micron saw revenues plunge 43% year-over-year. Operating income fell to 13% of revenue, down sharply from 52% a year earlier.
Even with the declines, the market for memory chips seems to be recovering. In the most recent earnings call, management said pricing for NAND flash chips have bottomed out, which means recovery is on the immediate horizon.
Despite underwhelming guidance for fiscal 2020, Micron’s stock price is dirt cheap relative to estimated earnings. As the tide turns, investors can expect MU to be an attractive play.
Vipshop Holdings (NYSE: VIPS)
- Market Cap: $6.1 billion
- Revenue Growth: 15.9% (2018)
- Free Cash Flow: $2.2 million
Source: Yahoo Finance
Vipshop is a Chinese e-commerce company specializing in online discount sales. The company’s earnings have surpassed estimates in two of the last four quarters, and currently has a ‘strong buy’ rating from Zacks Investment Research.
For its most recent quarter, the Guangzhou-based company reported a net revenue increase of 9.7% to $3.3 billion. Gross profits jumped 25.9% to $75.9 million.
The company has an attractive growth profile, operating in one of the world’s fastest-growing consumer markets. Nearly 148 million orders were placed on the ecommerce website in the second quarter, a gain of 33% compared with year-ago levels. Active customers jumped 11% to 33.1 million.
While much has been said about China’s factory slowdown, the country is making concerted attempts at transitioning its economy towards consumption and services. As CNBC recently reported, China’s “giant middle class is still growing.”
Conclusion
Technology stocks are highly volatile right now, but that shouldn’t preclude investors from snatching up long-term value plays. Micron and Vipshop certainly fit the bill.
Disclaimer: Author holds no investment position in Micron Technologies or Vipshop Holdings at the time of writing.
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