The long-term growth prospects among many technology companies is still intriguing even with the short-term headwinds that correlate with inflation and the broader economic slowdown.
Moving through earnings seasons, here are two tech stocks that look attractive before their earnings reports next week.
Allegro MicroSystems (ALGM – Free Report)
Set to report its fiscal third-quarter earnings on Tuesday, January 31, Allegro MicroSystems (ALGM – Free Report) is a semiconductor stock that investors may want to consider buying.
Allegro MicroSystems designs, develops, manufactures, and markets sensor integrated circuits and application-specific analog power ICs enabling emerging technologies in the automotive and industrial markets.
Despite the dire warning in Intel’s (INTC – Free Report) earnings outlook and struggles among other chip stocks, Allegro MicroSystems has seen its fiscal year earnings estimate revisions rise over the last quarter landing the stock a Zacks Rank #2 (Buy).
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Q3 Preview: Allegro’s fiscal Q3 earnings are expected to increase 68% year over year to $0.32 a share compared to $0.19 a share in Q3 2022. Even better, Allegro’s earnings are now forecasted to jump 51% in fiscal 2023 and rise another 4% in FY24 to $1.23 per share.
On the top line, Q3 sales are expected to leap 67% YoY to $245.40 million, compared to $147.17 million in Q3 2022. Total sales are now projected to climb 31% in FY23 and rise another 5% in FY24 to $1 billion.
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Earnings ESP: The Zacks Expected Surprise Prediction indicates that Allegro should reach its Q3 bottom-line expectations with the Most Accurate Estimate also at $0.32 a share and in line with the Zacks Consensus.
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Takeaway: The outlook continues to look bright for Allegro MicroSystems with the stock sporting an “A” Style Scores grade for Growth. Allegro’s stock performance has been very impressive over the last year, with ALGM moving toward higher highs at around $35 a share.
Since its IPO in October 2020, Allegro stock is now up +38%. Even better, while Intel stock as a primary example is down -42% in the last year, Allegro is up a very stellar +33% to crush the S&P 500’s -10% and the Nasdaq’s -16%.
Super Micro Computer (SMCI – Free Report)
Another tech stock investors should keep an eye on before earnings next week is Super Micro Computer (SMCI – Free Report) which is set to report its fiscal second-quarter earnings on Tuesday, January 31.
Super Micro Computer is a designer, manufacturer, and distributor of energy-efficient, application-optimized server solutions based on the x86 architecture.
Going into its fiscal Q2 report, SMCI stock also sports a Zacks Rank #2 (Buy) and an “A“ Style Scores grade for Growth, with earnings estimates significantly higher for the current quarter, fiscal 2023, and FY24.
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Q2 Preview: Super Micro earnings are expected at $2.95 a share for its fiscal Q2, up an outstanding 235% from EPS of $0.88 in Q2 2022. Overall, earnings are now projected to climb 73% in FY23 to $9.77 a share and then dip -17% in FY24 after an exceptional year although estimates are going up.
Sales for Q2 are forecasted to be $1.77 billion, a 51% YoY increase from sales of $1.17 billion in Q2 2022. Total sales are expected to jump 31% in FY23 and rise another 10% in FY24 to $7.50 billion.
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Earnings ESP: With the Most Accurate Estimate for Super Micro’s Q2 EPS at $3.15 and the Zacks Consensus at $2.95 per share the company is expected to top bottom-line expectations.
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Takeaway: The rising earnings estimate revisions certainly make Super Micro Computer stock intriguing ahead of its fiscal Q2 report and the company looks poised to beat bottom-line expectations for an 11th consecutive quarter.
More impressive, SMCI stock is up +87% over the last year to crush the broader indexes but still trades 21% below its 52-week high at around $75 a share at the moment. Plus, SMCI is trading at just 8.2X forward earnings which is 71% below its decade high of 29.1X and a 47% discount to the median of 15.7X.
Bottom Line
Going into their earnings reports next week, both Allegro MicroSystems and Super Micro Computer stock look poised to continue giving investors the expansive growth they look for out of the technology sector.
There could indeed be more upside in these tech stocks if they are able to reach or beat expectations while offering positive guidance in their outlooks.
