Goldman Sachs Reveals Top Tech Stocks to Buy Ahead of Earnings
Goldman Sachs has identified several tech stocks that it recommends investors buy before quarterly earnings are announced. The firm’s top picks include Apple, Fiverr, Microsoft, and Broadcom. Microsoft is expected to report strong results due to its artificial intelligence efforts, particularly in its Microsoft 365 portfolio and Azure cloud computing platform. Goldman Sachs also reinstated coverage of Broadcom with a buy rating, citing the company’s AI-related businesses and potential for operating margin expansion. Apple was named a top pick for 2024, with the firm highlighting its revenue growth potential in services and track record of product innovation.
Microsoft: Strong Growth and AI Potential
Analyst Kash Rangan expects Microsoft to deliver impressive results in its upcoming second-quarter report. Rangan points to the healthy growth profile of Commercial M365 (excluding Gen-AI), improving PC outlook, and diminishing impact of the optimization narrative as drivers of growth. Additionally, Microsoft’s Azure cloud computing platform has significant potential in the field of artificial intelligence and is projected to become a $200 billion business by 2029. Rangan believes that the overall positive market conditions will support Microsoft’s current valuation and views it as an attractive investment opportunity.
Broadcom: Positive Catalysts and Synergies
Following its acquisition of VMware, Broadcom is expected to experience double-digit revenue growth in its AI-related businesses. Analyst Toshiya Hari predicts that the deal will drive operating margin expansion and earnings growth above industry averages. Furthermore, Broadcom’s non-AI semiconductors are poised for a cyclical recovery. The company’s attractive capital return profile is also seen as a positive factor that could contribute to its relative performance. Despite an 8% increase in share price this year, Hari believes that Broadcom has further room for growth.
Apple: Revenue Growth and Product Innovation
Goldman Sachs analyst Michael Ng considers Apple a top pick for 2024 and recommends it heading into earnings season. Ng highlights the revenue growth potential of Apple Services, such as Apple TV+ and the App Store, even in a challenging consumer-facing macro environment. Additionally, Ng anticipates continued product innovation as the iPhone cycle begins again and new devices like the Apple Vision Pro are introduced. With its strong performance in 2023, outperforming the market by 48.2%, Apple is seen as a high-quality compounder and is included on Goldman’s conviction buy list.
Fiverr: Long-Term Operating Momentum
Fiverr, a two-sided marketplace business, is expected to build operating momentum in the long term. Goldman Sachs sees ample growth opportunities for Fiverr due to management’s execution against a large and growing total addressable market (TAM) as the future of work evolves. The company is also focused on scaling both the freelancer and buyer sides of the marketplace, driving adoption through product innovation, and expanding geographically.
Hot Take: Goldman Sachs Identifies Top Tech Stocks with Strong Earnings Potential
Goldman Sachs has highlighted Apple, Fiverr, Microsoft, and Broadcom as top tech stocks to consider before earnings season. These companies have various catalysts for growth, including strong revenue potential in services (Apple), operating momentum as a two-sided marketplace (Fiverr), AI efforts (Microsoft), and AI-related businesses along with synergies from an acquisition (Broadcom). Analysts believe these stocks are well-positioned for success due to their innovative products, market conditions, and overall industry trends. Investors should keep an eye on these tech stocks as they have the potential to outperform and deliver positive earnings results.
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