Despite the market as a whole bouncing back with a vengeance of late, there are still several tech stocks with room to grow. We asked a few Foolish contributors to each select a tech stock that could double in share price by year-end 2016. No easy feat, to be sure -- but Apple (AAPL -2.41%) and Facebook (META 0.84%) each made the cut, as did chipmaker Advanced Micro Devices (AMD -4.76%).
Selena Maranjian (Apple): There's a lot to like about Apple. It has clearly treated its long-term investors very well, with its stock averaging annual growth of nearly 23% [S1] over the past 30 years and 38% over the past decade. So it's easy to question whether it can still grow briskly. Well, it can.
Consider that when the company reports its latest quarterly results, many expect it to have sold more than 50 million iPhones, reflecting year-over-year growth of more than 40%. In each of its last two quarters, more than 60 million phones were sold. (In total, Apple has sold more than 700 million iPhones.) Apple is about much more than just phones, though, despite iPhones contributing more than two-thirds of revenue at this point. The much-anticipated Apple Watch debuted this year, and its music-streaming business, Apple Music, debuted last month.
Apple Pay, which debuted last year, has the potential to let users make purchases not only in brick-and-mortar stores, but also online. Apple recently bought a company with strong GPS technology as well, suggesting that it means to beef up its Apple Maps service. It's adding features such as split screens to its iPads, too, in order to revive sales there. And the company is moving aggressively into promising regions abroad, such as China, where it has already become the top smartphone seller.
Apple has designed its many products to integrate well with each other, creating a competitive advantage, with customers reluctant to switch to competitors' products. Apple even offers a dividend that recently yielded 1.6%. That may not seem huge, but it's meaningful -- and likely to keep growing. (It was upped by 11% just a few months ago.) With more than $190 billion in cash and investments and proven innovation chops, you can expect a lot more from Apple.
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Tim Brugger (Facebook): At about $90 a share as of this writing -- and up about 16% already this year -- Facebook doubling in share price may seem a bit of stretch. Early this year when Facebook was trading in the mid $70 per share range, I suggested it would hit $100 per share by year-end. Looks like I may have been too conservative, so let's not make that same mistake again.
Facebook certainly has the potential to hit about $180 a share by next year based upon its past performance -- but even more important is its bevy of growth opportunities yet to be implemented. It will be too early to determine the impact of Facebook finally monetizing its Instagram property when the company announces Q2 earnings on July 29, but most industry folks agree it's a multi-billion dollar goldmine just waiting to take off.
Early next year Facebook is expected to release its industry-leading Rift virtual reality (VR) headset to the masses. The millions of gamers worldwide are Rift's first target audience, but Facebook CEO Mark Zuckerberg has plans to expand well beyond the gaming community. Like Instagram, the VR industry is primed to explode, growing to a $150 billion market in five years.
Depending on when Zuckerberg elects to test monetization of the nearly 1 billion monthly average users (MAUs) of WhatsApp and the over 600 million users of the now independent Messenger service, those may also boost Facebook's top and bottom lines by next year. Facebook at $180 a share in 2016? It's not just possible, it's probable.
Sean Williams: AMD dropped a bombshell on Wall Street in July when it updated its outlook for the second quarter. AMD was expecting its Q2 sales to range between up 3% and down 3%, with adjusted gross margin of 32%. Its updated forecast implies revenue will decline 8% with adjusted margins falling to 28%. AMD blamed a weaker-than-expected PC market for its slowing sales.
I can't spit-shine the ugly off of this update. PC demand weakness caught investors by surprise, and existing shareholders paid for it. But there are plenty of reasons to believe AMD's stock could double back to $4 per share (or higher).
AMD has made significant headway into gaming consoles, and its next-generation graphics add-ons are giving the dominant graphics player, NVIDIA (NVDA -3.00%), a run for its money. PCs will give AMD better margins overall, but consoles and graphics are two areas where AMD has a genuine opportunity to gain market share and grow by the mid-to-high single-digits annually. Co-promotions with game developers and the potential for new consoles hitting the market as early as 2017 may also spur excitement surrounding AMD.
AMD should also see steady orders in its enterprise business. Investors seem hell-belt on focusing on personal computing demands when it's actually data centers that could be the big profit-driver for AMD. Although we've seen some degree of movement toward next-generation data centers, it takes a lot of effort, time, and money to move away from x86-compatible chips. In other words, AMD's chips could remain a backbone for data centers for years to come.
Lastly, there's also the potential for buyout interest with a market value of just $1.5 billion. Even if a publicly traded player isn't interested, a private-equity firm might be, especially considering the dominance of x86 chips in data centers.
Source: http://finance.yahoo.com/news/amd-updates-second-quarter-outlook-201500023.html
