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The technology industry offers numerous opportunities to outperform the stock market.
Investors can see the differences through comparison S&P 500 Index and S&P 500 Information Technology Index index. So far this year, the information technology sector has outperformed the broader S&P 500 (YTD), the past year and the past five years. Funds like IUIT give investors exposure to the S&P 500 Information Technology Index.
While the industry offers many opportunities, some tech stocks are better than others. If you’re in the market for some tech stocks, be sure to consider these options.
Microsoft (MSFT)
Microsoft (NASDAQ:Microsoft Corporation) has delivered substantial returns to long-term investors. The stock is up 252% over the past five years and is already off to a strong start with another 15% gain year to date.
Despite its impressive gains, Microsoft should continue to rise. The second quarter fiscal 2024 earnings report delivered solid results. Revenue increased by 18% year-on-year (Year-on-year) and net profit increased by 33% annually. Companies are applying artificial intelligence (AI) scale across its product suite.
Analysts are almost universally positive on the stock. The average price target implies 11% upside, which prompts a Strong Buy rating. The top price target of $550 per share suggests the stock could rise another 29% from current levels.
Microsoft’s growing cloud division suggests the stock can continue to rise. Cloud revenue increased by 24% year-on-year, accounting for more than half of the company’s total revenue. If this growth continues, Microsoft’s profit margins should also increase.
Amazon (AMZN)
also, Amazon (NASDAQ:Amazon) has won over many analysts. The stock is rated a Strong Buy and is expected to rise 13%. A peak price of $230 per share suggests the stock could rise another 24% from current levels.
The technology conglomerate once again posted impressive fourth-quarter 2023 earnings. Revenue increased 14% year over year to a record $170 billion. The company’s online marketplace and cloud computing businesses both achieved double-digit growth rates. Moreover, Amazon expanded its profit margin to 6.25%.
Additionally, the company continues to expand market share in its two most important categories. However, it has also made great strides in advertising, video streaming and artificial intelligence (AI). Amazon’s strong leadership team can still innovate and pioneer new industries. AMZN has been the top holding for many funds, delighting shareholders with an 81% gain last year.
CRWD
mass strike (NASDAQ:Add, delete, modify and check) has built a compelling recurring revenue model around cybersecurity. Hackers are getting smarter, using more sophisticated tools to penetrate corporate databases. But businesses are also getting smarter, by partnering with companies like Crowdstrike to detect and neutralize threats before they become serious.
Additionally, CRWD consistently delivers impressive revenue growth rates. The company’s revenue increased 33% year over year, with annual recurring revenue reaching $3.44 billion.
Fortunately, the company was in the right industry at the right time. Cybersecurity is expected to achieve a compound annual growth rate of 12.3% between now and 2030. Despite such high growth rates, many cybersecurity companies reported lower revenue growth rates and cut guidance.
However, Crowdstrike is one of the few exceptions to this rule. The company improved its net profit margin while growing. Crowdstrike posted GAAP net income of $53.7 million for the fourth consecutive quarter. Net profit margin for the quarter was 6.35%.
As of the date of this article, Marc Guberti held long positions in MSFT and AMZN. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com Publishing Guidelines.
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