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May 10, 2019, 7:06 a.m. EDT

These 15 tech stocks are backed by the quarter’s best sales figures

Autodesk tops the list, as revenue growth for the biggest tech companies slows

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By Philip van Doorn, MarketWatch


autodesk
Renderings made with Autodesk’s virtual reality technology.

Despite this week’s China trade angst, U.S. stocks have rallied this year, led by the information technology sector. It’s now close to the end of earnings season, so it’s wise to review tech companies to see how they stack up.

You may be used to seeing high sales-growth numbers from the most familiar technology companies. Still, it may help you as an investor to look at the growth trends and also identify rapidly growing industry players you may have overlooked.

First, here’s how the 11 sectors of the S&P 500 /zigman2/quotes/210599714/realtime SPX -1.51%  have performed:

S&P 500 sector YTD 2018 3 years 5 years 10 years 15 years
Information Technology 24% 0% 101% 144% 478% 427%
Consumer Discretionary 20% 1% 55% 100% 477% 386%
Communications Services 19% -13% 11% 29% 155% 185%
Industrials 19% -13% 41% 56% 289% 268%
Real Estate 16% -2% 22% 54% 336% 322%
Financials 15% -13% 54% 69% 209% 70%
Consumer Staples 13% -8% 16% 47% 235% 273%
Energy 12% -18% 6% -21% 53% 177%
Materials 9% -15% 26% 27% 163% 223%
Utilities 9% 4% 30% 59% 209% 343%
Health Care 3% 6% 36% 68% 321% 277%
 
S&P 500 Index   16% -4% 49% 70% 282% 257%
Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA   12% -3% 57% 77% 290% 275%
Source: FactSet

Information technology is the clear winner for most periods, but you can see the consumer discretionary sector, led by Amazon.com /zigman2/quotes/210331248/composite AMZN -0.64% , is close to the 10-year crown.

You shouldn’t confine yourself to the information technology sector as defined by S&P Dow Jones Indices, because some of the biggest industry players are in other sectors. So the following lists are derived from the 68 IT companies included in the S&P 500, but also Amazon and eight companies in the new communications services sector, including Netflix /zigman2/quotes/202353025/composite NFLX -2.25% , Facebook /zigman2/quotes/205064656/composite FB -2.53% , Twitter /zigman2/quotes/203180645/composite TWTR +0.30% , Google holding company Alphabet /zigman2/quotes/205453964/composite GOOG -2.05%   /zigman2/quotes/202490156/composite GOOGL -2.18% , TripAdvisor /zigman2/quotes/206118480/composite TRIP -3.50%  and three video-game developers: Take-Two Interactive /zigman2/quotes/204008930/composite TTWO -0.85% , Activision Blizzard /zigman2/quotes/200717283/composite ATVI -1.32%  and Electronic Arts /zigman2/quotes/206954087/composite EA +0.53% .

Quarterly sales winners

M S&P 500 companies have already reported results for the quarter ended March 31, but earnings season is never really over, because many companies have fiscal-quarter end dates that don’t match the calendar. So the numbers below are for fiscal quarters ended Jan. 25 or later.

Take-Two Interactive isn’t listed because the company is scheduled to announce results for its fiscal fourth quarter ended March 31 on May 13. Analysts polled by FactSet expect quarterly sales to come in at $512 million, 25% higher than a year earlier, with earnings per share increasing to 76 cents from 70 cents. Video-game sales are, of course, very lumpy. For the fiscal third quarter, sales jumped to $1.25 billion (from $480 million a year earlier), mainly because of heavy volume for the new “Red Dead Redemption 2.”

Here are the 15 “technology” companies among the S&P 500 whose sales were up at least 15% for the most recently reported quarter from a year earlier, along with year-over-year sales increases for the previous three quarters:

Company Ticker Sales growth - quarter Sales growth - quarter-1 Sales growth - quarter-2 Sales growth - quarter-3
Autodesk Inc. /zigman2/quotes/209828392/composite ADSK 33% 29% 23% 16%
Microchip Technology Inc. /zigman2/quotes/208326291/composite MCHP 33% 38% 42% 25%
Arista Networks Inc. /zigman2/quotes/206966450/composite ANET 26% 27% 29% 28%
Facebook Inc. Class A 26% 30% 33% 42%
Salesforce.com Inc. /zigman2/quotes/200515854/composite CRM 26% 26% 27% 25%
Adobe Inc. /zigman2/quotes/200389143/composite ADBE 25% 21% 24% 25%
Paychex Inc. /zigman2/quotes/202030365/composite PAYX 24% 7% 9% 9%
Xilinx Inc. /zigman2/quotes/209389378/composite XLNX 23% 34% 19% 14%
Netflix Inc. 22% 27% 34% 40%
Keysight Technologies Inc. /zigman2/quotes/207530903/composite KEYS 20% 19% 21% 31%
Fortinet Inc. /zigman2/quotes/205733290/composite FTNT 18% 22% 21% 21%
Twitter Inc. 18% 24% 29% 24%
Amazon.com Inc. 17% 20% 29% 39%
Alphabet Inc. Class A 15% 20% 20% 26%
Broadridge Financial Solutions Inc. /zigman2/quotes/203884665/composite BR 15% -5% 6% -2%
Source: FactSet

You can click on the tickers for more about each company, including earnings and other coverage, along with charts, stock information and financials.

Autodesk’s  fiscal fourth quarter ended on Jan. 31. The company is scheduled to announce results for its fiscal first quarter on May 23. Analysts expect a 32% increase in sales and for EPS of 46 cents, compared with an adjusted profit of 6 cents a year earlier.

It is interesting to see slowing trend for sales growth for Facebook, Twitter, Amazon and Alphabet. Then again, the numbers remain impressive and improvements in profitability can continue to support rising stock prices.

The year-over-year sales comparison for Paychex  jumped because the company acquired Oasis Outsourcing in December. Excluding that acquisition, sales for the company’s third fiscal quarter ended Feb. 28 would have risen 7% from a year earlier.

Leaving the companies in the same order, here’s how their shares have performed:

Total returns
Company Ticker 2019 through May 8 2018 3 years 5 years
Autodesk Inc.   33% 23% 192% 266%
Microchip Technology Inc.   28% -17% 102% 119%
Arista Networks Inc.   26% -11% 298% N/A
Facebook Inc. Class A 45% -26% 59% 234%
Salesforce.com Inc. 15% 34% 111% 213%
Adobe Inc. 22% 29% 193% 368%
Paychex Inc. 30% -1% 77% 141%
Xilinx Inc. 39% 29% 191% 185%
Netflix Inc. 36% 39% 301% 693%
Keysight Technologies Inc. 40% 49% 234% N/A
Fortinet Inc. 16% 61% 155% 295%
Twitter Inc. 34% 20% 168% 21%
Amazon.com Inc. 28% 28% 185% 565%
Alphabet Inc. Class A 12% -1% 61% 125%
Broadridge Financial Solutions Inc. 21% 8% 102% 233%
Source:FactSet

Here’s a summary of ratings and consensus price targets among analysts polled by FactSet:

Company Ticker Share 'buy' ratings Share neutral ratings Share 'sell' ratings Closing price - May 8 Consensus price target Implied 12-month upside potential
Autodesk Inc. 70% 19% 11% $171.51 $182.09 6%
Microchip Technology Inc. 77% 23% 0% $91.54 $104.76 14%
Arista Networks Inc. 65% 35% 0% $266.25 $306.48 15%
Facebook Inc. Class A 83% 15% 2% $189.54 $221.02 17%
Salesforce.com Inc. 93% 7% 0% $156.86 $182.30 16%
Adobe Inc. 61% 39% 0% $276.77 $296.68 7%
Paychex Inc. 9% 82% 9% $84.19 $79.53 -6%
Xilinx Inc. 41% 52% 7% $117.69 $131.60 12%
Netflix Inc. 69% 26% 5% $364.37 $407.24 12%
Keysight Technologies Inc. 89% 11% 0% $86.75 $97.22 12%
Fortinet Inc. 32% 58% 10% $81.65 $91.60 12%
Twitter Inc. 28% 57% 15% $38.58 $39.09 1%
Amazon.com Inc. 98% 2% 0% $1,917.77 $2,224.52 16%
Alphabet Inc. Class A 93% 7% 0% $1,170.78 $1,341.55 15%
Broadridge Financial Solutions Inc. 44% 56% 0% $115.78 $124.38 7%

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Philip van Doorn covers various investment and industry topics. He has previously worked as a senior analyst at TheStreet.com. He also has experience in community banking and as a credit analyst at the Federal Home Loan Bank of New York.

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