Technology stocks have been one of the few bright spots in an otherwise underwhelming earnings season. While the higher priced Facebook, Amazon, Netflix, and Google (FANG) stocks have been sending the tech sector higher, there are a large number of great technology penny stocks that have been outperforming the markets and, thanks to their more palatable entry level, could provide investors with solid gains in the second half of 2016 and 2017.
Technology Sector Penny Stocks
The technology sector is home to the tech penny stocks for 2017. In fact, tech stocks are at their highest levels in 16 years. The Technology Select Sector SPDR ETF (NYSEARCA:XLK) is up 13% year-to-date and is at its highest levels in 16 years. By comparison, the S&P 500 is up seven percent and the NASDAQ is up 6.6%.
One of the reason technology stocks are doing so well is that they’re actually making money. At the sector level, Health Care (86%) and Information Technology (82%) have the highest percentage of firms reporting earnings above estimates. The biggest dogs are Telecom Services (40%), Utilities (54%), and Materials (56%). (Source: Earnings Insight, Factset, August 8, 2016.)
On top of that, Information Technology (+7.2%) has reported the largest upside aggregate difference between actual earnings and estimated earnings. The one sector to avoid right now, if earnings are important to you, is Energy (-17.6%), with the largest downside difference between actual earnings and estimated earnings.
Overall, the blended earnings decline for the second quarter of 2016 stands at -3.5%. While seven sectors have recorded an increase in earnings growth since the end of the quarter, Technology leads (to -1.5% from -7.3%).
Earnings are more important than ever right now. We’re deep in the throes of an earnings recession with no end in sight. The blended earnings decline for the second quarter is -3.5, with roughly 90% of S&P 500 companies having reported earnings.
Should the S&P 500 report a decrease in earnings for the quarter, it will mark the first time the index has reported five consecutive quarters of year-over-year declines in earnings since the financial crisis.
Much of the focus has been on the FANG stocks. Facebook, Amazon, and Google all reported awesome second-quarter results. Facebook is trading near an all-time high near $125 and Amazon is at the top of its game at $775 per share, while Alphabet is also in the stratosphere at $782 per share. Only Netflix had a disappointing quarter, but that won’t last for long, and at $96.00 per share, it is one of the better large-cap tech stock bargains out there.
But investors looking to enjoy the technology sector renaissance need not have their laser-like focus on just the bigger tech stocks. There are a lot of excellent technology sector penny stocks posting strong results and solid outlooks, and it would be a shame to miss out on triple-digit gains just because the stock isn’t trading at triple-digit prices.
That’s why I’m digging into the best tech penny stocks for 2017. Tiny, little-known companies that have the potential for huge gains. So without further delay, let’s dig into the top technology penny stocks to watch for 2017.
Advanced Micro Devices, Inc.
Advanced Micro Devices, Inc. (NASDAQ:AMD) continues to be one of the best tech sector penny stocks out there. At $6.55 per share, AMD is up roughly 140% year-to-date and still has lots of room to run.
An international semiconductor company that designs integrated technology found in personal computers, game consoles, and cloud servers, AMD might be a penny stock, but it has a market cap of $5.25 billion. (Source: “Investors Relations,” Advanced Micro Devices, Inc., last accessed August 12, 2016.)
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In July, AMD reported second-quarter revenue of $1.02 billion, a year-over-year increase of nine percent, and a 23% increase over the first quarter of 2016. Second-quarter net income came in at $69.0 million, or $0.08 per share. In the second quarter of 2015, AMD had a net loss of $181 million, or $0.23 per share. (Source: “AMD Reports 2016 Second Quarter Results,” Advanced Micro Devices, Inc., July 21, 2016.)
Going forward, AMD expects third-quarter revenue to advance around 18% sequentially to $1.21 billion. This is well above the Wall Street projection of 9.5% growth.
Over the last few months, AMD has announced a number of strategic moves to help with this growth. The company announced a new $300-million joint venture that will give it further access to the lucrative Chinese server market. It also launched a new graphics card and acquired software company HiAlgo Inc.
Aware, Inc. (NASDAQ:AWRE) is another great tech penny stock making serious gains. Trading at $5.00 per share, Aware’s share price is up 62% so far in 2016 and is hovering near its highest level in 18 months.
Based in Bedford, Massachusetts, Aware, Inc. is a leading provider of biometrics software products and services, including fingerprint, face, and iris recognition and authentication solutions. Not surprisingly, the company’s products are used by border management, law enforcement, defense, intelligence, banking, and ID. (Source: “About Aware,” Aware, Inc., last accessed August 12, 2016.)
On July 26, Aware announced that second-quarter revenue increased 53% year-over-year to $6.9 million. Net income was up significantly at $1.4 million, or $0.06 per share, compared to $0.3 million, or $0.01 per share, in the same prior-year period. (Source: “Aware, Inc. Reports Second Quarter 2016 Financial Results,” Aware, Inc. July 26, 2016.)
Revenue for the first six months advanced 36% to $8.6 million while net income was up 250% at $2.1 million, or $0.09 per share.
Cash and investments were $53.1 million as of June 30, 2016.
In April, the company announced a stock repurchase plan to buy up to 10 million shares of common stock. During the first quarter, the company repurchased 81,980 shares for $349,000. That could make this tiny company a top tech penny stock for 2017.
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CYREN, Ltd. (NASDAQ:CYRN) has been rewarding investors this year. The company’s share price is up 44% since the beginning of January and, trading near $2.50, continues to have excellent momentum.
CYREN is a leading provider of cloud-based web and email security and anti-malware solutions. The company’s cloud-based technologies protect more than 600 million users in 190 countries, processing more than 17 billion daily transactions and blocking over 130 million threats daily. Clients include Google, Microsoft, Netgear, Intel, Panda, Dell, and Deutsche Telekom. (Source: “About Us,” CYREN, Ltd. last accessed August 12, 2016.)
It also has rock-solid fundamentals. At the end of the second quarter, CYREN had a cash balance of $13.0 million, compared to $7.9 million on June 30, 2015. It recently terminated its line of credit and finished the second quarter with no debt. (Source: CYREN Reports 2016 Second Quarter Financial Results, CYREN, Ltd., August 10, 2016.)
On August 19, CYREN announced that second-quarter revenue advanced 12% year-over-year to $7.6 million. The company reported a second quarter net loss of $0.8 million, or $0.02 per share, compared to a net loss in the second quarter of 2015 of $0.6 million, or $0.02 per share.
“CYREN turned in a solid second quarter financial performance, resulting in the fourth straight quarter of top line revenue growth, while beating our expectations for bottom line results,” said Lior Samuelson, CEO and chairman of the board at CYREN.
That’s why this company is on my list of top technology penny stocks to watch in 2017.
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