StockRank Movers: Which tech stocks are taking off?

Apple (AAPL) made history last week, announcing the biggest quarterly earnings of any company, ever. It remains the world's most valuable publicly traded firm and some people have even started to compare Apple to a country (see this article). Apple isn't the only tech company that investors are getting bullish about. HSBC rejects the idea of a bubble in technology equities and thinks that technology stocks will go 'nuts' in 2015, thanks to growth in the U.S. and the 'normalisation' of interest rates (see here). So at Stockopedia, we've been exploring StockRanks which have been rising, or falling, across the technology sector.

As American as Apple Computer

In an interview with Charlie Rose, Oracle CEO, Larry Ellison, predicted that Steve Job's death would cause Apple to slip into a period of long-term decline. Ellison said "We saw Apple [rise] with Steve Jobs [in the 1970s]. We saw Apple [decline] without Steve Jobs [in the 1980s]. We saw Apple [rise] with Steve Jobs [in the 2000s]. Now, we're gonna see Apple without Steve Jobs."

However, Apple's stock price has doubled since Tim Cook became CEO. Revenues have grown by 85%, from $108 billion (2011) to $199 billion (TTM). This is partly because Apple has consistently produced products which, to borrow Jim Slater's phrase, can be 'cloned'. Once the process of building an iPhone or MacBook has been refined, the same product can be reproduced again and again, and expanded internationally as sales go through the roof.

Furthermore, profit margins have remained steady at around 30%. Apple's brand enables the company to charge hefty prices without having to worry too much about losing business to competitors. This combination of strong sales and steady profit margins supports Apple's excellent QualityRank (95 out of 100).

Investors and analysts are getting excited. The company has a strong MomentumRank (98 out of 100) as Apple has beaten the market by a whopping 43% over the last year. Furthermore, analysts are becoming more optimistic about the company's earnings. Since December 2013, EPS estimates have risen from $6.82 to $8.51. Brokers expect earnings to grow by another 22% over the next twelve months, partly on the back of the Apple Pay system, alongside strong demand for Apple products in China. Apple's overall StockRank is 96. 

British Stocks on the Move

Vislink's MomentumRank has risen to 83 and the company has beaten the market by 6.5% over the last twelve months. The firm makes high end video equipment, serving the broadcast and security markets, where EPS growth is set to be driven by the growing importance of live televised content, coupled with increasing survaillence. This stimulates demand for Vislink's wireless cameras. Last year, Vislink also acquired Pebble Beach, which lists Fox News as a client, and has long-term contracts providing recurring revenues. That being said, Vislink's ValueRank has fallen to 74, indicating that the company is becoming more expensive.

The MomentumRank of Playtech PLC (an online gaming software supplier) has fallen to 81, whereas the company's overall StockRank has dropped to 88.  Playtech PLC beat the market in November and December, but under performed the market by 2.3% the last month. The company now trades 14% below its 52 week high. 

Losing Facebook Friends?

Facebook has a stellar P/E (68) and a ValueRank of just 10, meaning that the company is more expensive than 90% of companies in the US. So why does the market prescribe such a high multiple to Facebook? Investors are most probably expecting future growth. Some believe that Facebook could expand from social media into banking. Indeed, the company could in theory facilitate the transfer of money between billions of Facebook friends, and take a small percentage of each transaction along the way.

Despite this potential, Facebook's QualityRank has fallen from 100 (out of 100) back in July, to 81 out of 100 today. The company has a Beneish M-Score of -0.36. A score above the -1.78 threshold indicates a potential risk that the company may be manipulating earnings. Indeed, sales growth is excessive and the qualify of assets is unstable according to the Beneish model.

Facebook also has a declining MomentumRank. The company beat the market by 152% in the twelve months ending July 2014. However, in October 2014, Facebook warned that costs would rise dramatically and revenue growth would slow in the last quarter of the year. In the year ending February 2015, Facebook only beat the market by 5%.

Conclusions

So there is good news and bad news in the tech sector. Companies like Apple are taking off, whereas firms like Facebook are stagnating. Furthermore, the 6 month relative strength of all tech sub-sectors is negative - as you can see from the Stockopedia directory. As always - these are not share tips and should not be read as investment advice. Please do your own research before investing.