3 Tech Stock Darlings to Scoop Up After Q2 earnings

Stocks to buy

Over the past year, advancements in artificial intelligence (AI), cloud computing and cybersecurity propelled the tech sector to new Wall Street heights. As a result, the tech-heavy Nasdaq 100 index has returned over 35% in the past 12 months. Now that we are well into the second-quarter earnings season, investors are looking for tech stocks to buy after earnings.

Despite the decline in the tech sector in April, many positive earnings surprises across sectors have led to renewed optimism on Wall Street. And, the “Magnificent Seven” stocks, namely Apple (NASDAQ:AAPL), Meta Platforms (NASDAQ:META), Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA), Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG), and Tesla (NASDAQ:TSLA), are once again on investors’ radars.

Analysts have also been endorsing a number of tech darlings, especially citing AI’s role in the sector’s growth. For instance, Morgan Stanley (NYSE:MS) recently raised Apple’s target price post-earnings, noting the quarterly performance, stock buyback and hints at AI updates to come. With that in mind, let’s explore three tech stocks to to buy after earnings.

Amazon (AMZN)

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The first company is Amazon, which reported impressive Q1 2024 financials on April 30. Revenues surged 13% year-over-year (YOY) to $143 billion, driven by strong e-commerce and Amazon Web Services (AWS) performance. Net income tripled to $10.4 billion, or 98 cents per diluted share, compared to the same period last year. Additionally, the company’s free cash flow surged to $50 billion. This is a notable improvement from the $3.3 billion outflow in the previous year.

Apart from a strong retail business fueled by robust consumer demand, Amazon’s strategic emphasis on AI infrastructure positions it for further growth. Innovations such as the Trainium and Inferentia chips optimize machine learning tasks, ensuring efficiency. Furthermore, the AI services platform, Bedrock, streamlines deployment and customization. And, third-party applications utilizing Amazon’s infrastructure expand its market presence and reach.

As a result, AMZN stock has gained 22% year-to-date (YTD). Meanwhile, the shares are changing hands at 41 times forward earnings and three times trailing sales. Despite the relatively high valuation, analysts foresee further upside. They set a 12-month price target of $220, suggesting an 18% potential increase from current levels. Interested investors may consider the $180 level as a better entry point into Amazon shares.

iShares U.S. Technology ETF (IYW)

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Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, noted that the information technology and communication services sectors, which comprise the majority of the tech industry, drove over 70% of the S&P 500’s total return of 26.3% in 2023. The “Magnificent Seven” played a significant role in this rally, contributing around 60% of the index’s total return.

Therefore, the iShares U.S. Technology ETF (NYSEARCA:IYW) stands out as a compelling choice. This ETF provides a gateway to a diverse group of U.S. tech companies, reflecting a blend of established players and innovative disruptors.

Since its inception in May 2000, IYW has demonstrated remarkable growth, now boasting net assets totaling $16 billion. The fund offers a comprehensive portfolio comprising 131 holdings, with the top ten commanding approximately 65% of the allocation.

Among its leading holdings are tech giants Microsoft, Apple, Nvidia, Meta Platforms and Alphabet. The fund maintains a diversified spread across sectors, including Software & Services (40%), Semiconductors & Semiconductor Equipment (30%), Tech Hardware & Equipment (18%) and Media & Entertainment (10%).

IYW is up nearly 8% YTD and has gained almost 44% over the past 12 months, outperforming the broad S&P 500 index as well as the Nasdaq 100 index. Its trailing price-to-earnings (P/E) and price-to-book (P/B) ratios stand at around 36.5x and 9.5x, respectively. Finally, investors should note IYW’s expense ratio of 0.4%.

Qualcomm (QCOM)

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Our final pick among top tech stocks to buy earnings is Qualcomm (NASDAQ:QCOM). The leading global provider of semiconductor solutions and wireless technology operates through Qualcomm CDMA Technologies (QCT) and Qualcomm Technology Licensing (QTL). QCT generates revenue from chipsets for the telecommunications industry, while QTL manages patent licensing.

Recently, QCOM stock hit an all-time high after releasing impressive second-quarter fiscal 2024 earnings. The company reported $9.4 billion in non-GAAP revenues, a 1% increase from the previous year’s quarter, and $2.44 in diluted earnings per share, a 13% rise YOY that exceeded guidance. Notably, QCT Automotive saw exceptional growth, with a 35% surge in revenues due to expanded content in new vehicle launches featuring Snapdragon Digital Chassis products.

Investors have been following the anticipated demand for AI-equipped premium smartphones. Going forward, the company’s strategic diversification into emerging sectors like automotive, IoT and networking underscores Qualcomm’s commitment to long-term sustainability and revenue diversification.

So far in 2024, QCOM shares have returned 24%, and currently trade at around 19 times forward earnings and six times trailing sales, indicating a relatively premium valuation. Nonetheless, analysts’ price targets of $185 still imply an average upside potential of 3% from current levels. Finally, the stock also offers a 1.9% dividend yield.

On the date of publication, Tezcan Gecgil had both long and short positions in META stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Tezcan Gecgil, PhD, began contributing to InvestorPlace in 2018. She brings over 20 years of experience in the U.S. and U.K. and has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Publicly, she has contributed to investing.com and the U.K. website of The Motley Fool.

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