Tech stocks took a major hit on Wednesday amid growing skepticism about continued momentum and disappointing results reported by some of the dominant players. Nevertheless, Wall Street remains bullish about the long-term growth story of several tech players. We selected 3 Best Technology stocks to buy, according to analysts. We used the TipRanks Stock Comparison tool for Top Technology Stocks to scan companies that have earned analysts’ Strong Buy consensus rating and could offer reasonable share price appreciation in the next twelve months.
The June quarter’s earnings season is in full swing. Technology stocks have been in focus due to the AI (artificial intelligence) boom. It makes sense to see how these companies have performed in the latest quarter and how analysts are viewing their future growth potential. These companies need to constantly introduce the latest, technologically advanced products and services to survive amid intense competition. Let’s see how these 3 tech companies performed in the June quarter.
#1 Visa Inc. (V)
First on our list is payment network services giant Visa. The company is responsible for the vast amount of global commerce between financial institutions, corporates, individuals, and governments, which runs into trillions of dollars.
Visa reported mixed Q3 FY24 results. Revenues missed the Street’s estimates marginally while earnings came in line with expectations. Interestingly, key parameters remained elevated, with payments volume up 7%, cross-border volume increasing 14%, and processed transactions up 10% compared to Q3 FY23.
Importantly, for Q4, Visa forecasted high single-digit to low double-digit revenue growth. Management’s comment that the lower-income group had curbed spending caused some analysts to cut their price targets on V stock. Nonetheless, they remain bullish on Visa’s long-term growth trajectory.
Is Visa Stock Expected to Rise?
Despite the lowered price targets, the average Visa price target of $315.42 implies 24.1% upside potential from current levels. Visa stock has a Strong Buy consensus rating backed by 17 Buys and four Hold recommendations. Shares have declined 2% so far this year, mainly due to the post-earnings sell off.
#2 Alphabet Class A (GOOGL)
On July 23, search giant Alphabet reported better-than-expected Q2 FY24 results, beating both earnings and revenue. The quarter’s performance was driven by the solid performance of the Google Search and Google Cloud businesses, both of which are backed by powerful generative AI tools. Notably, Google’s advertising revenues jumped by 11.1% year-over-year and Cloud revenue crossed the $10 billion mark for the first time.
However, analysts were taken aback by Alphabet’s significant capital investments in AI, dragging down GOOGL stock by over 5%. In Q2, capex increased 91.4% year-over-year to $13.2 billion. The company expects to expend at least $12 billion in each quarter this year.
Meanwhile, Alphabet’s plan to buy Israeli cybersecurity company Wiz for a massive $23 billion fell apart, as the latter chose the IPO (initial public offering) route. In another surprise move, Google announced that it will retain third-party cookies in Chrome and give users the option to turn them off.
Is it a Good Time to Buy GOOGL Stock?
Analysts see great value in Google’s Cloud offerings and strong advertising business. Following the Q2 print, several analysts raised their price targets on GOOGL stock.
On TipRanks, GOOGL stock has a Strong Buy consensus rating based on 34 Buys and seven Hold ratings. The average Alphabet Class A price target of $204.50 implies 18.5% upside potential from current levels. Meanwhile, GOOGL shares have gained 23.7% so far this year.
See more GOOGL analyst ratings
#3 Taiwan Semiconductor Manufacturing (TSM)
The semiconductor giant is one of the largest beneficiaries of the AI revolution. On July 18, TSM’s earnings and revenues exceeded expectations for the second quarter, backed by solid demand from the likes of Nvidia (NVDA) and Apple (AAPL). TSM also boasts one of the finest margins in the industry, with gross margin, operating margin, and net margin coming in at 53.2%, 42.5%, and 36.8%, respectively in Q2 2024.
Furthermore, TSM guided for Q3 revenues that exceeded estimates. Management believes that strong demand for smartphones and AI will boost sales. The company is finding greater adoption of its 3-nanometer (nm) chips, which it started selling only in Q3 FY23. Meanwhile, its 5nm chips are the major contributor toward total revenues.
In June, Taiwan Semi made a deal with its customers to increase the prices of its 3nm chips by 5% next year, conditioned on timely supply and order fulfillment. The company has started developing the latest 2nm chips which are expected to hit the market by 2027. TSM expects to spend roughly $35 billion in capex in 2025 for these chips.
Despite robust demand, TSM’s geographic location on the world map remains a constant concern. Although the U.S. supports TSM’s chips, China’s growing intervention could hamper the company’s performance in the future.
What is the Future of TSM Stock?
Wall Street is highly optimistic about TSM’s future potential. Based on 11 unanimous Buys, TSM stock commands a Strong Buy consensus rating on TipRanks. The average Taiwan Semiconductor Manufacturing price target of $184.30 implies 15.3% upside potential from current levels. Year-to-date, TSM shares have zoomed 54.5%.
Ending Thoughts
The technology sector is primed for robust growth, fueled by AI tailwinds. The three companies discussed above are leaders in their respective fields. They have shown great earnings potential historically and are expected to deliver solid performance in the future. What’s more, all these stocks pay dividends and have won analysts’ bullish views, making them compelling investment opportunities. Investors seeking exposure to the tech world can consider these three companies from varying technological backgrounds.
