One of the trends that can be seen in the equity market in recent years is the growing interest in companies related in one way or another to technology.
- In 2020 the companies of the sector will increase their profits by 10%.
- Apple will be the firm that wins more this year
- Microsoft is the favorite of analysts
Investors and analysts have fed back on their appetite for this type of company over the last few years in a trend that has accelerated in recent months, in which they have shown great resistance on the trading floor while achieving less impact on the income statement. Proof of this is that the profits of listed companies in the sector will increase by 10% this year, according to FactSet forecasts, and in 2021 this growth will reach 17%.
The boom in teleworking brought about by the pandemic has only perpetuated the role of technology. Companies in this sector have an increasingly important role in the market, and have even become a sort of lifeline in times of stock market crashes.
So far this year, the most relevant companies in the technology industry are pointing to increases of more than 27% in the stock market as reflected in the behavior of the Nasdaq 100. And this despite having recorded a lower rise than the rest of the sectors in recent sessions. This is despite the fact that the ghost of the tax increase proposed by the Democratic candidate Joe Biden for capital gains has been spreading among investors and analysts, leaving the way open for technology sales.
In addition, the fact that the U.S. Department of Justice recently filed a lawsuit against Google, owned by Alphabet, accusing Mountain View of abusing its monopoly in the online search business has been described as a serious threat to the stock markets, because a good part of the market belongs to the sector in which the U.S. is one of the big heavyweights.
Nevertheless, according to the latest Dow Jones Market Data, which was echoed in the Wall Street Journal last month, technology and its influence in all areas – from those dedicated to manufacturing cell phones to those of social networks – weigh 40% in the S&P 500, even surpassing the 1999 record.
Apple leads the ranking
However, among the largest in the sector, there is one that stands out from the rest. This is the case of Apple. The U.S. firm is established in 2020 as the company that will obtain the highest net profits in 2020 and 2021. Analysts’ forecasts -increased in recent weeks after announcing their results for the first nine months of the year- point to a net profit of more than 49,200 million euros in 2020, 1% more than in 2019 despite the turbulent year. A figure that will rise to 57,100 million in 2021.
Behind this figure, Microsoft, Alphabet and Facebook will complete the list of companies that will obtain the most benefits in 2020, according to the market consensus gathered by FactSet. On the other hand, Salesforce.com, the Australian Xero Limited and the Chinese Baidu will be, according to analysts, those who will manage to increase their meager profits for 2019 at the end of this year.
In the ranking of the cheapest companies in the sector, it is the French company Atos that stands out. Its profit multiplier -the number of times its earnings per share are reflected in the price of its stocks- is the lowest among the largest companies in the sector. Its PER of 7.8 times puts it at the head of the industry giants in that respect.
However, there are other smaller firms that also trade at a similar or lower profit multiplier, such as Indra or the lesser-known Micro Focus International, DXC Technology or Econocom Group.
However, the most complete firm for analysts is Microsoft. The American firm has taken over the position as the company with the strongest buy recommendation for market consensus from Alphabet in the last few sessions, which has seen legal disputes hindering its advice.