Some companies with solid product lines that tend to be at the leading edge of their respective markets have seen their stocks slip of late, as earnings comparisons have been under pressure. That said, results, for many, are apt to turn positive be it in the current quarter or later this year. Their combinations of strengthening customer demand, along with fundamentally sound business models, ought to support rebounds in profitability, and thus share prices.
Here’s an overview of several stocks you may consider as portfolio additions.
Corning Incorporated (NYSE:GLW) — LCD Glass market expansion likely to support upturn
Market expectations are that sales of LCD televisions will climb a high single-digit percentage this year. With pricing anticipated to decline only about 2% to 3% sequentially per quarter, growth appears to be on tap. Therefore, sales and earnings from Corning Incorporated (NYSE:GLW)‘s wholly-owned display business and Samsung Corning Incorporated (NYSE:GLW) equity holding ought to improve as the year progresses.
Another factor driving resumed bottom-line gains at Corning Incorporated (NYSE:GLW) should be rising sales of small-form factor Gorilla Glass utilized in notebook computers and smartphones. This growth business is likely to ignite sales improvements in the second half of this year. Given slight improvements in its telecom and environmental unit sales, as well, an overall upturn could be in store.
Corning Incorporated (NYSE:GLW) shares offer favorable bounce-back potential at the current quote, along with a decent dividend. Their forward P/E is 10.1x, based on 2013 earnings of $1.30 a share.
Semtech Corporation (NASDAQ:SMTC) — Results to get back on pace with acquisition integrated
Semtech Corporation (NASDAQ:SMTC)’s March 2012 acquisition of Gennum has been a boon to revenue though dilutive to its bottom line. In its favor, for the latest quarter ended in April, Gennum’s contribution was about break-even. Accordingly, I think the full inclusion of Gennum’s optical and video broadcast product lines into Semtech Corporation (NASDAQ:SMTC)’s offerings will begin to have a positive effect on results soon.
In addition, Semtech Corporation (NASDAQ:SMTC)’s advanced communications unit looks poised for growth, thanks to the roll-out of high-bandwidth networks in China and the U.S. to support the increasing usage of smartphones and other mobile devices. Based on these factors, the outlook seems favorable for the balance of fiscal 2014 (ends in January).
I have always liked Semtech Corporation (NASDAQ:SMTC) as a long-term semiconductor holding in light of its consistently aggressive levels of R&D spending, allowing gross margins to expand above 61%. I believe the company will remain a beneficiary of product development, particularly in its power management and high reliability unit, where it is gaining a presence with automakers. Look back on my recent blog as to the opportunities for electronics/semi companies in the auto market. (see blog).
Polycom Inc (NASDAQ:PLCM) — Investments in product offerings might well be catlysts
Polycom Inc (NASDAQ:PLCM), a producer of voice and video communications solutions such as telepresence-related products, has struggled a bit of late partly due to soft spending from the public sector. Still, sequential improvements in share profits are apt to resume as new product lines take hold. Specifically, demand for new group (including telepresence, video and voice) product launches is healthy. Polycom Inc (NASDAQ:PLCM)’s CloudAXIS suite video conferencing and collaboration software is being received well, for instance, and related sales should ramp up later this year.
Polycom Inc (NASDAQ:PLCM) will probably still be up against softness in public sector outlays. However, it should be better situated within its key product markets. In the past, Polycom Inc (NASDAQ:PLCM) has been challenged by excess operating costs, as it spends to maintain its competitive position. It competes with the likes of Cisco Systems, Inc. (NASDAQ:CSCO), the networking giant, in telepresence.
In all, Polycom Inc (NASDAQ:PLCM) shares are a bit more of a risk than the previous two. If you think it can leverage its relationships with those such as Microsoft Corporation (NASDAQ:MSFT), AT&T Inc. (NYSE:T) and International Business Machines Corp. (NYSE:IBM) to drive revenue and profit growth over the long term, the shares could prove lucrative. Based on prospects for its solutions businesses, I advise purchasing them for their turnaround potential. The stock is trading at a forward P/E of 13.4x, based on 2013 share net of $0.64.
Summary
Technology markets, such as display, broadcast and video communications, have favorable prospects as the products are marketed to businesses and consumers alike. At this juncture, certain such businesses could well be poised for upturns in the latter half of 2013. Thus, their stocks might well jump. Regardless, these companies seem to be investing in the right markets for long-term profit expansion, and would be good selections for most buy and hold accounts.
The article 3 Technology Stocks You Want to Watch originally appeared on Fool.com and is written by Damon Churchwell.
Damon Churchwell has no position in any stocks mentioned. The Motley Fool recommends Corning and Polycom. The Motley Fool owns shares of Corning. Damon is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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