Technology continues to shape the world we live in. Cars can be hailed to your doorstep from Uber in five minutes. Computers continue to increase in power and decrease in price. Entire movies can be downloaded and streamed faster than it used to take to download a song to one’s iPod.
Source: Getty Images.
Investors would be downright small-“f” foolish not to allocate at least a portion of their investment portfolios toward this dymanic sector. With this modern fact of life in mind, we asked some of The Motley Fool’s best and brightest to come up with three tech stocks worthy of Foolish consideration in July. Here’s what they came up with.
A victim of Brexit
Tim Green: Shares of Dutch company NXP Semiconductors (NASDAQ:NXPI) tumbled along with most stocks when the United Kingdom voted to leave the European Union. While the market has largely recovered since then, NXP stock is still depressed, creating a buying opportunity for those willing to accept some uncertainty.
NXP is a diversified semiconductor company, although following its acquisition of Freescale Semiconductor last year, the company is more heavily tilted toward the automotive industry. During the first quarter, the automotive segment accounted for 36% of the company’s total revenue, up from just 20% in the prior-year period. The Freescale acquisition has positioned NXP well for the march toward a mass-market self-driving car. In May, NXP announced a self-driving car platform called BlueBox, which combines many of its products and provides a complete solution to automotive companies developing and testing autonomous cars.
NXP is currently facing weak demand in some of its markets, and the result has been a decline in earnings. Analysts are expecting $5.70 per share in non-GAAP earnings this year, putting the P/E ratio at about 13.5. That’s an attractive price, assuming NXP can meet expectations. The Freescale acquisition did add quite a bit of debt to the balance sheet, but NXP’s recent sale of its Standard Products business will help knock that debt down.
There will be plenty of uncertainty in the near term for NXP, given continuing headwinds and the fallout from the Brexit vote. But for long-term investors, July looks like a great time to pick up some shares.
We need more bandwidth
Sean O’Reilly: If there’s one thing you can be sure of about the future of technology, the entertainment industry, or, heck, our world as we know it, it’s that we’re moving at increasingly faster internet speeds. Planet Earth becomes more and more connected every day, and that means lots and lots of data — it’s that simple.
Enter Infinera Corp. (NASDAQ:INFN)(NASDAQ:INFN)which provides optical networking equipment (think light-based fiber optics), software, and services to internet service providers and other owners of networks that connect us to one another. To date, well over 100 major internet and networking service providers have chosen Infinera’s technology and platforms to increase the bandwidth of their fiber-optic networks.
Alas, the endorsement of some of the biggest ISP’s in the world hasn’t been enough to save Infinera from recent difficulties. In addition to a current soft market for its products, its acquisition of Swedish Transmode, where there were thought to me a plethora of cross-selling opportunities, has turned out to be more trouble than it was worth. These difficulties have caused Infinera’s share price to fall 35% year to date.
Current travails aside, the long-term picture is positive, and it seems likely that this is a classic case of a great business being sold by Wall Street for short-term minded reasons. Infinera has been free cash flow-positive for the past three years, trades for 29.4 times forward earnings, and is expected to more than double earnings per share, according to S&P Capital IQ estimates, over the next two years into fiscal 2018.
Bottom line: As the world becomes more and more connected, it’s going to need Infinera.
An action-packed turnaround
Steve Symington: With shares of GoPro (NASDAQ:GPRO) having declined nearly 80% over the past year as of this writing, I think now could be the perfect time for opportunistic investors to take advantage of a potential rebound for the action-camera specialist.
Shares have traded roughly flat over the past two months, after GoPro told investors in early May that revenue in its first quarter plunged 49.5% year over year, to $183.5 million, which translated to an adjusted EBITDA loss of $86.8 million, and an adjusted net loss of $86.7 million. But keep in mind that all of these figures significantly exceeded GoPro’s guidance. And CEO Nick Woodman noted that unit sell-through rates were roughly 50% higher than sell-in, helping global channels to reduce an inventory glut that has stubbornly held back the company’s results in recent quarters.
Meanwhile, GoPro is widely expected to launch both its new Karma quadcopter — which marks its long-awaited entry into the fast-growing consumer-drone market — and a new HERO5 line of wearable cameras in time for the 2016 holiday season. If either or both these launches gains any meaningful traction, it could rejuvenate investors’ enthusiasm for GoPro stock and, in turn, result in a fast and furious rebound from its recent lows. If that happens, investors who buy in July should be more than happy with their decision.
Sean O’Reilly has no position in any stocks mentioned. Steve Symington has no position in any stocks mentioned. Timothy Green has no position in any stocks mentioned. The Motley Fool owns shares of and recommends GoPro, Infinera, and NXP Semiconductors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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