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It's been a rocky, uneven earnings season for the tech sector. But if you know where to look amid all the noise and numbers, there are clues that can help you find the best tech stocks to buy now.
"The tech sector's relative performance versus the S&P 500 has been dismal for a long time and signaling that we're going to have a tough earnings season," Hugh Johnson, chairman and CIO of Hugh Johnson Advisors, told Breakout.
But investors need to avoid the knee-jerk reaction of interpreting a few earnings stumbles by some big names as a flashing red exit sign for tech.
While some big tech companies are indeed facing serious challenges, several are on the verge of major turnarounds.
"I see this as a transitional quarter," said Money Morning Defense & Technology Specialist Michael Robinson.
What's more, some positive data buried in several of these reports point very strongly to the next big growth areas for the sector, and by extension to the best tech stocks to buy now.
Which Titans Are Among the Best Stocks to Buy Now?
Earnings in any given quarter usually don't give a complete picture of what's going on with a given company and which direction it's headed. This quarter's batch of earnings was a prime example of that:
- Microsoft: Like Intel, Microsoft got slammed this quarter for its inability to transition its business to the "mobile wave" of smartphones and tablets. Revenue was up, but missed estimates by almost 4%. And profits, at $0.59 a share, were woefully below the estimates of $0.75 a share.
But the key news was the $900 million charge for its unsold pile of Surface tablets – evidence that CEO Steve Ballmer's latest mobile strategy has failed. "As long as Ballmer is the CEO, Microsoft will be a laggard," Robinson said.
Bottom line: MSFT is not a tech stock to buy now — at least until Ballmer gets his long overdue pink slip.