10 Worst Tech Stocks in the S&P 500 This Year

NEW YORK (TheStreet) -- Technology stocks have somewhat underperformed the broader markets this year, and the worst performing tech company this year lost nearly 50% of its stock price.

The S&P 500 Information Technology Index is down .02% in the first six months of 2015, slightly underperforming the broader S&P 500 Index, which rose 0.2%

That said not all of the stocks are sells; sometimes the discount bin of stocks is where you find the best bargains. TheStreet pairs each of these tickers with TheStreet Ratings to let you know if you should buy, sell, or hold these worst performing stocks.

These S&P tech stocks had big losses in the first half of the year. Check out which tech stocks were among the worst S&P 500 performers to date. And when you're done check out the best performing tech stocks so far this year. 

TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

KLAC ChartKLAC data by YCharts
10. KLA-Tencor Corp. (KLAC)
Sub-Industry: Semiconductor Equipment
Market Cap: $9 billion
Rating: Hold, C
Year-to-date return: -20.1%

KLA-Tencor Corporation designs, manufactures, and markets process control and yield management solutions worldwide.

TheStreet said: "We rate KLA-TENCOR CORP (KLAC) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its notable return on equity, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and a generally disappointing performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, KLA-TENCOR CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has slightly increased to $242.42 million or 1.97% when compared to the same quarter last year. Despite an increase in cash flow, KLA-TENCOR CORP's cash flow growth rate is still lower than the industry average growth rate of 28.23%.
  • The gross profit margin for KLA-TENCOR CORP is rather high; currently it is at 59.43%. Regardless of KLAC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 17.82% trails the industry average.
  • The share price of KLA-TENCOR CORP has not done very well: it is down 17.86% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Semiconductors & Semiconductor Equipment industry average. The net income has significantly decreased by 35.3% when compared to the same quarter one year ago, falling from $203.58 million to $131.64 million.

YHOO ChartYHOO data by YCharts
9. 
Yahoo! Inc. (YHOO)
Sub-Industry: Internet Software & Services  
Market Cap: $36.9 billion 
Rating: Buy, B
Year-to-date return: -22.2%

Yahoo! Inc. provides search and display advertising services on Yahoo properties and affiliate sites worldwide.

TheStreet said: "We rate YAHOO INC (YHOO) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, reasonable valuation levels and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • YHOO's revenue growth has slightly outpaced the industry average of 5.9%. Since the same quarter one year prior, revenues slightly increased by 8.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Although YHOO's debt-to-equity ratio of 0.04 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 4.44, which clearly demonstrates the ability to cover short-term cash needs.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, YAHOO INC's return on equity exceeds that of both the industry average and the S&P 500.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.

 

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