3 Tech Stocks With Bullish Momentum to Buy
Shweta is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Significant outperformance or underperformance with respect to the broader markets is often a sign that something interesting is happening in a company. Analyzing fundamentals of such a company is often the first step in identifying potential investment targets. I discussed two tech stocks which have become attractive buys after recent underperformance in a previous article. In addition it is also interesting to look at tech stocks which are seeing significant bullish momentum in the last one month. The following is a list of three stocks which have significantly outperformed the broader markets in the last one month.
Here’s a look at these stocks in detail.
ARM Holdings Plc.
ARM holds~ 6% of the server market majorly benefitting from wide use of its low power CPU architecture. It recently launched two new processors A57 and A53 collectively labeled as A50 series based on Av8 architecture. Seeing the surge in demand for smartphones and tablets in recent years, A50 series which supports both 32/64 bit softwares will help in its topline growth. Also newly launched Samsung Arndale (community development board) incorporates ARM's dual-core A15 with a quad-core ARM Mali T604 GPU. This rich mix of ARM processors should fuel further revenue growth.
Coming over to the strategic alliance, a new partnership between AMD and ARM to develop 64 bit chips for server computers will strengthen ARM’s position as AMD is specialized to address both x86 and ARM markets. AMD knows the server market quite well and this expertise is critical as some ARM’s SoC players are struggling with relatively modest requirements of an O/S, such as Win RT for consumer markets. ARM led >100M unit shipments in 2012 through 25 partners, the bulk of which were for Samsung, ST-Ericsson, Mediatek (TVs), Rockchip and AllWinners. Additionally, a large proportion of apps from key vendors (Qualcomm, Broadcom, Marvell, etc.) which prefer in house GPU IP, look towards ARM as their supplier.
With the majority PC makers shifting ~15% of their products to chips based on ARM’s designs instead of Intel in coming years, I see ARM well positioned to monetize this opportunity. This trend could be strong in emerging markets where PC sales are on the rise.
LG display is trading at its 52 week high level of 14.84 (31 Oct12) after it acquired panel orders for iPad mini. Seeing limited alternatives for Apple which is involved in a patent lawsuit with Samsung, LGD will generate incremental revenues. Additionally LG Display is set to launch the world’s first 84-inch Ultra Definition (UD) LCD displays for interactive whiteboards. Its interactive whiteboard provides superior brightness and clarity even during the daytime without turning off lights or closing window blinds. As the whiteboard industry is expected to grow ~50% over the next 3 years (830,000 units in 2011 to 1,210,000 in 2014) LG will get the early start benefit.
Taking a long term view, the company is expected to outperform in the LCD panel industry with its strategic shift towards premium applications such as in cell TSP smartphone panels, 3D FRP TV panels and high-resolution tablet/NB panels. LG Display is considered as reliable supplier, and will surely benefit from Sharp’s decline in market share.
LGD’s solid R&D and technological advancements and continuous improvement in product mix keeps it ahead in competition and earnings. I anticipate an upside in this stock as global demand for panels rise and new products, 3D TVs and OLED TVs, further contribute to earnings.
Lam Research Corporation
Lam’s stock is down ~12% in last 6 months and is currently trading at $35.40. I am not much bothered with this dip bearing in mind that its long term growth trends are still intact. Lam has an upper hand against its closest peer Applied Materials, gaining market share. Applied Materials revenues slid 16% from a year ago with net income dropping down to 54%, whereas Lam saw a revenue upside of 33%.
The new technological advancements in Lam’s portfolio with the introduction of FinFET and 3D NAND keeps it well positioned to gain further market share. Moreover, Lam will benefit from an increasing number of patenting steps in next generation Foundry and Memory devices. As a leader in back-end-of-line applications, the company is now focused on improving productivity and differentiated process results to carve out its niche.
As demand for tablets, smartphones and SSDs grow, it will proportionally increase demand for NAND capacity and Logic/ Foundry investments. This will also be a driving force for mobile DRAM. I see all these as dominant positive topline drivers for Lam.
On the other hand, the Novellus acquisition in 2011 has put the company in a more competitive position and further growth should be accredited in 2013 with more investments in product development. Additionally, I see an upside potential in the stock with an on-going share buyback program of $1.6 billion (paid $29 million in first two quarters of 2012) and projected cost saving $100 million.
ShwetaDubey has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend ARM Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.If you have questions about this post or the Fool’s blog network, click here for information.