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Friday, January 25, 2013 - 06:00
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Friday, January 25, 2013 - 06:00
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Friday, January 25, 2013 - 06:00

Acuity Brands Inc Larger Than S&P 500 Component JDS Uniphase Corp

Friday, January 25, 2013 - 6:00am

Wednesday was a big day for the tech sector, as all eyes were on bellwether Apple (Nasdaq: AAPL) and its fiscal first-quarter earnings.

About 40 minutes after the closing bell, the market heard what Apple had to say, and the reaction wasn't very good. The stock plunged more than 10% in after-hours trading as the company's revenue fell short of expectations, as did sales of iPads and iPhones.

The rotten reaction to the Apple numbers stood in stark contrast to the stellar numbers from two other tech giants, one "old school" and one "new school."

Representing the old school is International Business Machines (NYSE: IBM), and the new school rep is Google (Nasdaq: GOOG). Both of these companies saw their share price surge Wednesday, as the market reacted positively to their strong earnings reports.

In the case of IBM, we saw the Dow component's shares spike 4.4% on heavy volume after the company reported that earnings in 2013 will be at least $16.70 a share. That figure bested the $16.65 Wall Street was anticipating.

The upbeat forecast for IBM came along with huge fourth-quarter earnings of $5.83 billion, or $5.13 per share, in the October-December period. Those numbers represent a 6% rise during the same period a year ago. The strong quarterly showing by the company was due in large part to its shift away from hardware to the much more profitable cloud computing software services.

The uber-strength of the share price is a trend that I suspect will continue, especially as tech-oriented investment capital flows away from companies like Apple and into a company like IBM. For traders, this means that jumping on the "Big Blue" bandwagon now could be a profitable move, and possibly good for a quick and tidy 10% profit during the next three to four weeks.

Action to Take --> Buy IBM at the market price. Set stop-loss at $188.34 a share, 8% below the current price. Set initial price target at $225.19 for a potential 10% gain in four weeks.

As for Google, the search engine giant also posted robust profits, and the reaction from traders was a 5.5% gain on Wednesday. That gain was the single biggest one-day spike in the shares since 2011.

Fueling that buying was a fourth-quarter profit, excluding certain items, which came in at $10.65 a share. That number easily bested earnings per share (EPS) estimates for a $10.50 showing. Google's net income also rose 6.7% to $2.89 billion, or $8.62 a share. The key to the search engine operator's success was a surge in advertising from retailers during the holiday season.

The numbers during the fourth-quarter surprised some on Wall Street, as there has been much made lately about Google's inability to maximize advertising on mobile platforms. Yet the advertising numbers for Google's bread-and-butter online search prove that its business is still very much booming.

Technically speaking, we've seen Google shares bounce back after their October decline. The stock now has achieved escape velocity from its 50-day moving average of $699.50 a share. I suspect that the buying in Google will continue during the next month, as traders continue to rotate away from declining tech bellwethers and into techs on the ascent.

Action to Take --> Buy Google at the market price. Set stop-loss at $682.18 a share, 9% below the current price. Set initial price target at $815.65 for a potential 9% gain in four weeks.

This article originally appeared on
Forget Apple, These Tech Giants Could Soar in the Next Month

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Jim Woods does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.

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