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3 Technology Stocks That Crushed Apple in 2014


Apple has something of a cult following among tech investors, but these 3 stocks outperformed the pride of Cupertino in 2014.

This article reprinted with permission from Zacks.com.

As we bid adieu to 2014 and step into 2015, the stock market and the key sectors warrant introspection. Amid macroeconomic uncertainties and global market upheavals, the sector that stood out in 2014 was Technology. This is evident by a substantially better performance by NASDAQ-100 Technology Sector (NDXT) index which rallied 25.1% year-to-date, exceeding Dow Jones (8.8%), Nasdaq (14.1%), and the S&P 500 (12%).

In addition, the global MSCI World Information Technology Index rose around 17% year-to-date and many of the companies listed under it outperformed the index. One such company that has been calling the shots in the Tech sector is Apple Inc. (AAPL - Analyst Report). The company has grown to become a cult technology stock to own in the recent times and a bullish market has led the stock to gain around 40.4% year-to-date, superseding market returns so far generated by any of the indices this year.

The launch of iPhone 6 and 6 Plus this year not only brought the company on par with the major phablet makers like Samsung, HTC, and LG but also set a record of selling over 10 million units in the first weekend. As a result, Apple’s market capitalization reached a record $700 billion mark in November, representing a major milestone in its history.

While Apple is still basking in the glory of iPhone 6 and looking forward to the mega launch of iWatch in 2015, it is yet to be a major gainer in terms of market performance in 2014.

3 Better-than-Apple tech performers

It appears that several companies have gained significant momentum and caught investors’ attention with returns considerably higher than that of Apple. We picked 3 such stocks that stood out in terms of market returns and performance in 2014. Also, the fundamentals and favorable Zacks Rank of these stocks signal their outperformance in 2015 as well.

Facebook, Inc. (FB - Analyst Report): One of the revolutionary changes that took place in the recent times in the technology space was the emergence of social networking sites. The rapid growth in online social hubs aka networking website transformed the trend in social media and Facebook remains the front-runner in this genre. It is, therefore, no surprise that Facebook surpassed its biggest competitors Twitter, Inc. (TWTR - Analyst Report) and LinkedIn Corporation and also outshone giants like Apple, International Business Machines Corporation (IBM -Analyst Report), Microsoft Corporation (MSFT - Analyst Report), and Oracle (ORCL -Analyst Report) in terms of market share gain.

Facebook gained 45% year-to-date, far exceeding the industry majors. Over the past 4 quarters, the company delivered an average earnings surprise of 12.4% and the Zacks Consensus Estimate for 2014 earnings reflects year-over-year growth of a whopping 118%. Currently, the stock has a Zacks Rank #3 (Hold). From a messy IPO release in 2012, Facebook grew to become a company with annual revenues of over $7 billion in 2013. With more than 1 billion active users, key acquisitions like WhatsApp and its rapidly growing popularity as an online marketing platform, Facebook is definitely a stock to watch out for in 2015.

Take-Two Interactive Software Inc. (TTWO - Snapshot Report): Apart from social networking, another sector that benefitted the most from the rise in Internet usage was video game. According to reports, the global gaming market is expected to be worth $117.9 billion in 2015. One of the most promising players gaining from this growth trend is video game developer, publisher, and distributor—Take-Two Interactive Software.

The emerging gaming company soared 63.4% year-to-date and delivered a positive earnings surprise of 25.3% in the last-reported quarter. In the coming days, with the surge in handheld, PC software, and digital gaming including mobile gaming platforms, we expect the Zacks Rank #3 stock to gain more focus. As a result, Take-Two finds a spot in our list of tech stocks worth a watch in 2015.

Micron Technology (MU - Analyst Report): Idaho-based Micron Technology is one of the fastest growing advanced semiconductor solution providers. As a manufacturer of Dynamic Random Access Memory (DRAM), NAND flash memory, CMOS image sensors, other semiconductor components, the company competes with some of the industry leaders like Samsung, Electronics Co., Ltd., SanDisk Corporation, and Toshiba Corporation. In the last reported quarter, the company’s gross margin surged 790 basis points to 32.8% backed by solid revenues.

Micron Technology’s market value in 2014 grew manifolds with round 62.8% gain year-to-date. The company delivered average earnings surprise of 32.42% in the trailing 4 quarters. The Zacks Consensus Estimate reflects year-over-year increase of 15.8% for earnings in fiscal 2015. Currently, the stock sports a Zacks Rank #1 (Strong Buy).

Outlook for 2015

In 2015, we see a lot happening in the tech sector. Both established and new players stand to gain from the growing trends like Big Data, Internet of Things and Bring Your Own Device, changing scene of social media, rapid growth in the video game market due to the demand for interactive entertainment, as well as technological developments in computer components and networks.

However, investors should carefully consider what each company has to offer and decide if they are a good fit for the high-risk portion of their portfolio. All these stocks could be volatile, but given the rebounding economy, improving technology fundamentals and recent earnings estimate revisions, these could be potential outperformers in the year to come.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. Neither Zacks Investment Research, Inc., Physician’s Money Digest nor the information providers have any liability, contingent or otherwise for the accuracy, completeness, timeliness or correct sequencing of the information or for any decision made or action taken by you in reliance upon the information or “Zacks.com” or “PhysiciansMoneyDigest.com” or for interruption of any data, information or any other aspect of “Zacks.com” or “PhysciansMoneyDigest.com.” The past performance of a mutual fund, stock or investment strategy cannot guarantee its future performance.

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