
3 Top Tech Stocks: Back to School Edition
Editor's note: As part of our partnership with PBS's Nightly Business Report, TheStreet's James Rogers will appear on NBR Tuesday (check local listings) to discuss top back-to-school tech stocks.
NEW YORK (TheStreet) -- With the back-to-school season well underway, tech stocks such as Amazon (AMZN) - Get Report, AT&T (T) - Get Report and even SanDisk (SNDK) -- perhaps not the most obvious beneficiary of academic spending -- could help turn student dollars into investor upside.
In a
weak consumer spending environment,
PC companies such as
HP
(HPQ) - Get Report
and
Dell
(DELL) - Get Report
, typically big back-to-school winners, are losing their luster. Even
Apple
(AAPL) - Get Report
, immensely popular with the sneakers and backpack brigade, may see some customers hold off on spending this year.
"Normally, I'd say Apple's in the catbird seat for this back-to-school season, but with so much bad economic news coming out of the company's core U.S. and European markets, the premium its products command will hinder cautious or cash-strapped consumers," said Charles King, principal analyst at Pund-IT, in an email to
TheStreet
.
Cue Amazon, AT&T and SanDisk, which all have something to offer for the coming school year.
|
Amazon
Stock Performance in 2011: Up 2.03%
While talk of a recession spells bad news for the U.S. economy, it's hardly the end of the world for online behemoth Amazon as folks search for back-to-school bargains.
"A tight economy really plays to Amazon's strengths," said Pund-IT's King, pointing to the retailer's aggressive prices, free shipping and easy comparison shopping. "Plus, with e-books crossing the divide
to become more popular than Amazon's physical books, 2011 could be the year that kids 'hit' the e-books in a very big way."
A late fall debut of an
Android-powered Kindle tablet
-- potentially a serious challenger to Apple's iPad -- could also ring in some big upside for the company, if
turn to be true.
"I think Amazon is perhaps the best-positioned name," added Sandeep Aggarwal, an Internet analyst at research firm Digital Route, citing its strength in e-commerce. "Besides, its Kindle has emerged as the undisputed market leader."
Tapping harder into the student market, Amazon recently launched a textbook rental service on Kindle. By letting students rent textbooks for the time period they need them, Amazon says that the service will be 80% cheaper than actually buying textbooks. Amazon also recently launched a student-focused version of its mobile shopping app, which helps students shop for dorm-focused products such as textbooks, electronics, clothes and bedding.
History is also on Amazon's side: The third quarter is typically a strong one for the Seattle-based company, which saw its revenue surge almost 40% year-over-year and earnings jump 16% during its
.
Amazon
offered impressive third-quarter guidance
, hinting at good things to come during this back-to-school season.
AT&T
Stock Performance in 2011: Down 2.28%
The telecom giant enjoys great brand awareness among parents, something extremely useful at this time of year.
A recent report by brand equity specialist Millward Brown rated AT&T as parents'
, thanks largely to its long heritage in the telecom market.
Ma Bell ranked No. 7 out of 100 top global brands such as
Nike
(NKE) - Get Report
,
Wal-Mart
(WMT) - Get Report
and
Target
(TGT) - Get Report
. The telco was also comfortably ahead of rival
Verizon
(VZ) - Get Report
. Millward Brown based its rankings on a combination of earnings performance and customer perception.
"Smartphones and wirelessly-connected iPads are on every back-to-school list," added Craig Moffett, senior analyst at Sanford Bernstein, in an email to
TheStreet
, noting that this bodes well for the telecom giant.
AT&T has also been cited as a
relatively stable stock
thanks to its regular dividend of about 6%, which can provide solid investor returns even in a tough market.
"AT&T may be a good bet," explained Moffett. "Its out-sized dividend and stable cash flows make it a relatively safe stock to own, and that may be the best thing you can ask for if you're shelling out big bucks for your child's tuition."
Then, of course, there's the likely fall debut of a new AT&T iPhone, which analysts say will be the next big catalyst for the telco's shares.
"In this back to school period, for the first time in well over a year, you're going to have an iPhone launched at AT&T in October that will be faster than its equivalent at Verizon because it's based on
the HSPA+
standard," explained Kevin Smithen, an analyst at Macquarie Securities. "You could get a strong refresh cycle in Q4 once that product is launched -- we think that net adds could improve significantly in Q4 and that could be a positive for the stock."
AT&T has also proved adept at overcoming recent hurdles, which should cheer tech investors desperate for some good news in an unforgiving market. Despite losing its exclusive U.S. iPhone deal earlier this year, the telecom giant
enjoyed strong smartphone sales
during its recent second quarter.
The next big challenge on the company's horizon is
for its $39 billion acquisition of
T-Mobile USA
, which has run into heavy deliberation from federal regulators.
"They need to do well in this iPhone refresh and they need to get some resolution on this deal with T-Mobile," said Macquarie's Smithen.
SanDisk
Stock Performance in 2011: Down 33.5%
What analysts cite as an
underappreciated company
in a tough economy, storage specialist SanDisk has been grabbing
-- if not investor love -- during the back-to-school season.
"I am pretty positive on SanDisk, I think it's quite undervalued at this point," Srinivasan Sundararajan, an executive director at Oppenheimer & Co., told
TheStreet
. "I think that the
back to school season is going to be good for SanDisk, but not as good as last year because of the overall economic climate."
Like Amazon, SanDisk typically
at this time of year, thanks to rising demand for its USB drives as students and teachers start downloading work from classroom PCs.
Speaking during the firm's recent second-quarter results, SanDisk CEO Sanjay Mehrotra said that the company's retail teams were busily preparing for the back-to-school and holiday seasons, adding that the firm is well-positioned in key accounts.
Now selling its wares in more than 220,000 stores around the world, SanDisk also cited strong demand in emerging markets.
SanDisk's role providing Flash memory for smartphones and mobile devices from the likes of Apple and
Research In Motion
(RIMM)
should also drive growth, according to Pund-IT's King.
"High-volume Flash cards for cell phones definitely have a place in back-to-school sales," he said, noting that the firm is well positioned in the broader mobile market. "The growing emphasis on thinner/more powerful laptops like Apple's MacBook and Dell's Inspiron could
also open up opportunities for SanDisk."
SanDisk recently posted
stellar second-quarter results
, although concerns about the economy weighed on its third-quarter guidance, spooking jittery investors. With the company's shares down more than 33% this year, it presents a gilt-edge opportunity, according to Oppenheimer's Sundararajan.
"SanDisk is definitely a buy," he said.
--Written by James Rogers in New York.
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