Today I am looking at three tech titans that could deliver sterling shareholder returns in coming years.
Apple
The blockbuster appeal of smartphone and tablet manufacturer Apple (NASDAQ: AAPL.US) shows no signs of abating, bucking many analyst predictions of nosediving premium device sales due to market saturation. The excitement surrounding the launch of the iPhone 6 in September led to the most successful product unveiling in the firm’s history, a promising precursor for the next hardware unveiling expected towards the middle of next year, tipped by many to be the iPhone7.
Barring a hiccup in 2013, Apple’s position at the top of the tech tree has enabled it to enjoy surging earnings growth for many years now, and has seen the bottom line expand at a compound annual growth rate of 31% during the past five years alone.
And City analysts do not expect this trend to grind to a halt anytime soon, and an additional 21% advance — to 777.6 US cents per share — is pencilled in for the year concluding September 2015. This projection produces a P/E multiple of just 14.4 times, below the bargain watermark of 15 times and in my opinion a steal given the company’s position at the coalface of technological innovation.
On top of this, Apple’s relatively-recent drive to reward shareholders through buybacks and dividends is also expected to keep rolling. Current forecasts indicate an 10% hike in the full-year dividend this year to 199.3 cents per share, in turn creating a tasty 1.8% yield.
ARM Holdings
Microchip builder ARM Holdings (LSE: ARM) (NASDAQ: ARMH.US) has experienced a turbulent year as fears over smartphone demand have dented investor appetite. But with Apple’s sales in recent months illustrating a still-robust market for high-end smartphones, and ARM Holdings also diversifying into the potentially-explosive networking and servers sectors, revenues should continue to climb at the Cambridge firm.
At face value the business may not seem the most attractively-priced stock on the market, however, with the P/E multiple for 2014 and 2015 clocking in at 40.9 times and 33.6 times respectively.
But ARM Holdings could arguably justify this premium given its ability to generate double-digit earnings growth year after year, and the chipbuilder is expected to post increases of 14% this year — to 23.8p per share — and an extra 22% in 2015 to 29p.
ARM Holdings is also becoming an increasingly-tantalising choice for income chasers, too, owing to its tremendous cash-generative abilities. The number crunchers expect the business to lift the full-year payout 14% this year to 6.5p per share, and an additional 28% in 2015 to 8.3p. Although these projections yield just 0.7% and 0.9%, I expect these yields to surge should earnings continue to climb.
Blinkx
Online video specialists Blinkx (LSE: BLNX) has been one of the biggest stock market casualties in 2014, shares in which have slumped by almost nine-tenths since the start of the year.
The company helps users find content and sells on-screen advertising, but a report in January from Harvard professor Ben Edelman alleged that the firm’s software exaggerated hit counts, speculation which smashed investor confidence in the business.
Blinkx remains a high-risk proposition owing to the rather opaque nature of its business, while a significant fixed cost base — combined with the implications of its strategic change to concentrate on the fast-growing mobile sector from desktop — could start to eat into the cash pile.
Brokers expect Blinkx to see earnings crumble 95% in the year concluding March 2015, to 0.23p per share, as the company’s strategic transition eats away at revenues. But a blistering 308% improvement is pencilled in for fiscal 2016 as turnover treks higher once again.
Consequently a stratospheric P/E reading of 220.9 times for 2015 slips to a much-improved 42.9 times for next year. Although the move to mobile could supercharge sales growth in the long term, the uncertainty still surrounding the firm could make it a risk too far for many investors.
