Taylor Woodruff Kyle Temple Austin Frazier Brady Parsons Thomas Laskowski Current State of Sector Current State slightly bearish Some hesitation on fiscal cliff Consists of information ID: 739598
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Slide1
Technology Sector Review
Taylor Woodruff
Kyle Temple
Austin Frazier
Brady Parsons
Thomas
LaskowskiSlide2
Current State of Sector
Current State: slightly bearish
Some hesitation on fiscal cliff
Consists of:
information
technology consulting, semiconductor products, computers and computer peripherals, telecommunication services and wireless telecommunication
servicesSlide3
Performance vs
S&P 500Slide4
Impacts of recent headline news
Weak demand, cut IPhone 5 orders
RIM, Blackberry 10 this week
Google cofounder, Google glasses
Netflix- 37% price increase over growth expectationsSlide5
Macroeconomics
The technology sector is
volatile.
extremely sensitive to consumer estimates
Demand is shifting from hardware to software and high end services.
Not as heavily impacted during recession
In business cycle, XLK is in expansion near peak. Jan-March are consistently XLK strongest months.Slide6
November 1 – January 27
th
Slide7Slide8
Largest Holdings
Apple: 14.42%
Intl Business Machine Corp: 7.59%
Microsoft: 7.36%
Google: 6.99%
AT&T: 6.73%Slide9
Qualcomm Recommendation
No Changes
Snapdragon 800 ChipSlide10
Key Drivers
Product Innovation/ Research and Development
Billions of dollars spent each year
Must be cutting edge or could become obsolete
Government Regulation
Need protection of patents and trademarks to protect new ideasSlide11
Consumer Sentiment
For Tech firms to thrive there must be a substantial amount of consumer spending.
Economy
The performance of the sector tends to be very
volatile, dependent upon current state of the economy.
Key DriversSlide12
Valuation Matrices
PEG
P/E divided by the growth rate of a company’s
earnings.
Many companies in growth stage.
Lower = more undervalued.
P/E
Current
share price compared to
per share
earnings
.
Important to what each company is trading at in relation to their earnings.Slide13
Valuation Matrices
P/CF
compares the stock's market price to the amount of cash flow the company
generates.
Many smaller firms are acquired by corporate giants.
Strong indicator of having sufficient cash
for future endeavors.Slide14
Tech Recommendations 1
st
Semester
Apple
Intel
Dell
F5 Networks
Ebay
AT&T
Verizon
Oracle
Qualcomm
Texas Instruments
Microsoft
Crown Castle International
IBM
Centurylink
Salesforce.comSlide15
Qualcomm (QCOM)
Recommended buy on 12/6
CIF Decision: Bought @ $63.94
Review Performance: +.75%
Continued growth in 4G networks
Lagged by Apple
Announce on Jan. 30
th
Slide16
Texas Instrument (TXN)
Recommended no buy on 12/3
Review Performance: +13.20%
Announced Q4 “sneak peak”
Restructured wireless segment
New products demo at CESSlide17
Microsoft (MSFT)
Recommended buy on 11/15 CIF: NO BUY
Review Performance: +1.60%
Weak holiday computer sells
Surface tablet sales, Surface Pro
Windows 8 phone, cloud network
Intel BuyoutSlide18
Crown Castle Int.
Recommended buy on 12/7 CIF: NO BUY
Review Performance: +5.5%
Reached agreements with Sprint and Clearwire
Acquisition of shared wireless towersSlide19
IBM (IBM)
Recommended buy on 11/13 CIF: NO BUY
Review Performance: +3.7%
Recently beat wall street estimates
Revenue continues to slowly decline
Supercomputer and cloud computingSlide20
Century Link (CTL)
Recommended buy on 11/8 CIF: NO BUY
Review Performance: +1.9%
Combines network sales & operations
Announced $.725 dividend
Earnings Feb. 13thSlide21
Salesforce.com (CRM)
Recommended no buy on 10/16
Review Performance: +9.3%
Recently beat wall street estimates
Facing increased competition
4-1 split announced Slide22
Apple (AAPL)
Recommendation: YES
Dropped 20.97% since purchased on 10/18
Analysts wonder whether the tech giant has “lost its steam”
Missed earnings on January 24
th
Iphone
is no longer the best selling phone
What’s next to come?
will determine their futureSlide23
AppleSlide24
Intel (INTL)
Recommendation: NO
Lost 1.57% since recommended on 10/23
Told analysts that they would be spending $13 billion to build and develop manufacturing technology, up $2 billion from 2012
Wall Street
doesn
’
t see the value, they see PC’s becoming more obsolete by the yearSlide25
Ebay (EBAY)
Recommendation: NO
Has gained 12.14% since it was recommended on 10/25
Earnings beat estimates, unexpected
Holiday spending online was up
Outlook is somewhat mixed, as some analysts see Amazon bullying for market shareSlide26
AT&T (T)
Recommendation: YES
Lost 3.07% since it was recommended on October 25
th
Executives blamed Hurricane Sandy for lost revenue in the quarter
Added 80,000 subscribers above what analysts estimated, providing for some
optimisim
in 2013.Slide27
F5 Networks (FFIV)
Recommendation: YES
F5 networks has exploded since recommended on 10/30, up 17.31%
The stock dropped 20% the week prior to its recommendation due to lower revenues and several analyst downgrades.
Their new products have been entering the market and are receiving positive affirmation, pushing the stock towards their all-time highs.Slide28
Verizon (VZ)
Recommendation: NO
The stock has fallen 5.7% since recommended on 11/1
Talks about the outright buyout of
Vodaphone
have worried investors.
VZ already owns 55% of
Vodaphone
, yet analysts don
’
t the acquisition as the best source of cash for the shareholders.Slide29
Oracle (ORCL)
Recommendation: YES
Oracle was purchased on 10/18 and posted an 8% gain before it was sold in December.
Overall, it has gained 12.82%, sold a bit too early!
Their announcement to pay three early dividends in 2012 inclined investors to jump on board, as they were all scared about capital gains taxes going into 2013.Slide30
Dell (DELL)
Recommendation: NO
Dell has posted gains of 34.73% since it was recommended on 11/6.
Dell has been in talks about going private
Currently 4 major banks lined up to help with financing, as well as Microsoft
Microsoft could monopolize the PC market (possibly) by buying Dell outright, yet its unexpected
Dell has lost a lot of market share and has no competition in the tablet generationSlide31
Tech Sector Going Forward
With XLK’s 15% stake in Apple, we definitely see the value of an underweight ETF proportion
Bullish on IT computing, cloud computing, and telecommunication services
Bearish on semiconductors and computers sales