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Goldilocks US Economy to Boost Stock Price of ANET, QCOM, MU
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U.S. economic growth in the second quarter beat estimates on robust consumer outlays. All at once, receding inflationary pressure has paved the way for an interest rate cut as early as fall. This has opened the door to a Goldilocks economy, which bodes well for growth-oriented tech stocks.
Economic Growth Faster Than Expected
US GDP registered an annualized growth of 2.8% in the second quarter, per the advance estimate of the Bureau of Economic Analysis, which is above analysts’ expectations of 2%. The second-quarter GDP reading was higher than the first quarter’s downwardly revised growth of 1.4%.
In the April to June quarter, economic growth was driven by an uptick in consumer outlays particularly in the housing, healthcare and recreational sectors. Improvement in the goods segment, which includes motor vehicles and parts, furnishing, gasoline, and energy, also boosted economic growth.
Inflationary Pressure Ebbing
Price pressures on goods and services have begun to subside. The Federal Reserve’s preferred core personal consumption expenditures index, which excludes volatile fuel and food categories, increased by 2.9% in the second quarter but is less than the 3.7% increase in the previous quarter, added the Bureau of Economic Analysis.
Meanwhile, the consumer price index (CPI) declined 0.1% in June after remaining unchanged in May, according to the Labor Department. It’s the first time that monthly consumer prices dipped since the pandemic in 2020. The CPI’s year-over-year rate of 3% was at its lowest in June since April 2021.
Goldilocks Scenario a Boon for ANET, QCOM, MU
With the economy growing steadily, and not strong enough to stoke inflation, things are hunky-dory for tech stocks. This is because the chances of an imminent recession have lessened, a good omen for tech players that are mostly perceived to be growth stocks.
At the same time, falling price pressures have increased the chances of a rate cut as soon as September. A low interest rate situation doesn’t impact tech stocks’ cash inflows, instead, their cost of borrowing gets reduced, eventually boosting profit margins.
Thus, a Goldilocks economic scenario is a blessing in disguise for tech stocks such as Arista Networks, Inc. (ANET - Free Report) , QUALCOMM Incorporated (QCOM - Free Report) and Micron Technology, Inc. (MU - Free Report) . These stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a Growth Score of A or B, a combination that offers the best opportunities in the growth investing space. You can see the complete list of today’s Zacks Rank #1 stocks here.
Arista Networks
Arista Networks provides cloud networking solutions for data centers and cloud computing environments. Arista Networks’ data-centric approach is boosting its cloud networking business. Arista Networks, currently, has a Zacks Rank #1 and a Growth Score of B.
The Zacks Consensus Estimate for its current-year earnings has increased 0.1% over the past 60 days. ANET’s expected earnings growth rate for the current year is 14.3%.
QUALCOMM
QUALCOMM designs high-performance, low-power chip designs for mobile devices. The increase in demand for Android handsets and growth in the automotive business is helping QUALCOMM. The company, currently, has a Zacks Rank #2 and a Growth Score of B.
The Zacks Consensus Estimate for its current-year earnings has increased 0.2% over the past 60 days. QCOM’s expected earnings growth rate for the current year is 17.3%.
Micron Technology
Micron Technology is one of the leading worldwide providers of semiconductor memory solutions. Improvement across multiple business units is benefiting Micron Technology. The company, currently, has a Zacks Rank #1 and a Growth Score of B.
The Zacks Consensus Estimate for its current-year earnings has increased 26.1% over the past 60 days. MU’s expected earnings growth rate for the current year is 126.1%.
Shares of Arista Networks, QUALCOMM and Micron Technology have gained 33.4%, 21.3%, and 25.9%, respectively, so far this year.
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Goldilocks US Economy to Boost Stock Price of ANET, QCOM, MU
U.S. economic growth in the second quarter beat estimates on robust consumer outlays. All at once, receding inflationary pressure has paved the way for an interest rate cut as early as fall. This has opened the door to a Goldilocks economy, which bodes well for growth-oriented tech stocks.
Economic Growth Faster Than Expected
US GDP registered an annualized growth of 2.8% in the second quarter, per the advance estimate of the Bureau of Economic Analysis, which is above analysts’ expectations of 2%. The second-quarter GDP reading was higher than the first quarter’s downwardly revised growth of 1.4%.
In the April to June quarter, economic growth was driven by an uptick in consumer outlays particularly in the housing, healthcare and recreational sectors. Improvement in the goods segment, which includes motor vehicles and parts, furnishing, gasoline, and energy, also boosted economic growth.
Inflationary Pressure Ebbing
Price pressures on goods and services have begun to subside. The Federal Reserve’s preferred core personal consumption expenditures index, which excludes volatile fuel and food categories, increased by 2.9% in the second quarter but is less than the 3.7% increase in the previous quarter, added the Bureau of Economic Analysis.
Meanwhile, the consumer price index (CPI) declined 0.1% in June after remaining unchanged in May, according to the Labor Department. It’s the first time that monthly consumer prices dipped since the pandemic in 2020. The CPI’s year-over-year rate of 3% was at its lowest in June since April 2021.
Goldilocks Scenario a Boon for ANET, QCOM, MU
With the economy growing steadily, and not strong enough to stoke inflation, things are hunky-dory for tech stocks. This is because the chances of an imminent recession have lessened, a good omen for tech players that are mostly perceived to be growth stocks.
At the same time, falling price pressures have increased the chances of a rate cut as soon as September. A low interest rate situation doesn’t impact tech stocks’ cash inflows, instead, their cost of borrowing gets reduced, eventually boosting profit margins.
Thus, a Goldilocks economic scenario is a blessing in disguise for tech stocks such as Arista Networks, Inc. (ANET - Free Report) , QUALCOMM Incorporated (QCOM - Free Report) and Micron Technology, Inc. (MU - Free Report) . These stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a Growth Score of A or B, a combination that offers the best opportunities in the growth investing space. You can see the complete list of today’s Zacks Rank #1 stocks here.
Arista Networks
Arista Networks provides cloud networking solutions for data centers and cloud computing environments. Arista Networks’ data-centric approach is boosting its cloud networking business. Arista Networks, currently, has a Zacks Rank #1 and a Growth Score of B.
The Zacks Consensus Estimate for its current-year earnings has increased 0.1% over the past 60 days. ANET’s expected earnings growth rate for the current year is 14.3%.
QUALCOMM
QUALCOMM designs high-performance, low-power chip designs for mobile devices. The increase in demand for Android handsets and growth in the automotive business is helping QUALCOMM. The company, currently, has a Zacks Rank #2 and a Growth Score of B.
The Zacks Consensus Estimate for its current-year earnings has increased 0.2% over the past 60 days. QCOM’s expected earnings growth rate for the current year is 17.3%.
Micron Technology
Micron Technology is one of the leading worldwide providers of semiconductor memory solutions. Improvement across multiple business units is benefiting Micron Technology. The company, currently, has a Zacks Rank #1 and a Growth Score of B.
The Zacks Consensus Estimate for its current-year earnings has increased 26.1% over the past 60 days. MU’s expected earnings growth rate for the current year is 126.1%.
Shares of Arista Networks, QUALCOMM and Micron Technology have gained 33.4%, 21.3%, and 25.9%, respectively, so far this year.
Image Source: Zacks Investment Research