Goldman Sachs likes these five tech stocks
Analysts at Goldman Sachs have highlighted a handful of technology stocks with upside as the reporting season begins to wind down.
The technology sector of the S&P 500 showed earnings growth of 21.6% in the fourth quarter. That compares with an overall S&P 500 gain of 9.5 percent last quarter, according to LSEG, formerly known as Refinitiv.
CNBC Pro combed through top research from Goldman Sachs to find the company’s best ideas in technology. The names below are all classified as Buy.
They include Arista Networks, Arm Holdings, Monday.com, AppLovin and ASML Holding.
Arm Holdings
Analyst Toshiya Hari defends the software and semiconductor design company’s stock. Arm delivered a spectacular third quarter financial performance report earlier this month and the sky is the limit for the company, according to the company. In fact, the stock will rise as much as 70% in 2024.
Hari said he expects Arm to “expand its reach into applications that it is under-indexed for today, including data centers, vehicles and [Internet-of-Things].”
The company is particularly positive about Arm’s data center business, which has customers from Microsoft, Nvidia and Amazon.
Arm also has a “strong margin profile”, the company said.
At the same time, the company’s stock has more upside ahead, Hari added.
“Looking ahead, as we indicated in our initial report, we expect Arm to demonstrate strong operating leverage in the medium to long term while investing appropriately to meet its expanding [total adresserbara marknad],” the analyst said.
monday.com
The project management software company is firing on all cylinders, according to analyst Kash Rangan. “Monday.com reported strong 4Q23 results across all metrics, while setting more modest revenue and operating margins for 2024,” the analyst said after the company’s quarterly report.
But despite the conservative guidance, Rangan said he supports the stock with plenty of untapped growth opportunities.
In particular, the analyst said Monday.com is well positioned to expand its business reach in divisions such as finance, marketing and human resources.
“As the macroeconomic environment begins to improve, Monday will also see further organic expansion, generating benefits for your sales efforts” he added.
“With strong revenue growth, a shift towards the enterprise market, a large and underpenetrated TAM, and a strong competitive moat, Monday.com has plenty of runway for growth, in our view” he said.
ASML
The semiconductor company reported better results in its latest earnings report, but warned that it expects sales to remain flat this year compared to 2023.
However, the stock has risen about 23 percent this year and analyst Alexander Duval believes further gains will follow.
“The commentary since the 4Q23 results further strengthens our confidence in a near-term inflection and [en] solid ramp to 2025,” he wrote recently.
Orders and demand remain strong and geopolitical risk is low as the company’s exposure to China is quite minimal, the company said.
In addition, Duval said ASML has a “deep competitive moat” in its extreme ultraviolet lithography technology, also known as EUV, which it uses to manufacture microchips.
Duval acknowledged that ASML stock has lagged behind its semiconductor peers, but said that leaves more room for upside. The stock is also on the company’s prestigious conviction buy list.
“Although the stock has outperformed its global semi-cap peers since the 4Q23 results, we believe the current share price and valuation do not yet reflect ASML’s stronger growth story,” he added.
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