Three stocks to plug into the future of consumer technology

From healthcare to communication, automobiles to entertainment, these companies are developing cutting edge technologies that disrupt and transform existing industries

Vikram Barhat 23 January, 2019 | 6:00PM
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The Consumer Electronics Show, billed as the biggest tech convention on the planet, never fails to put on an awe inspiring show. As every year, the recently concluded annual edition (CES 2019), in Las Vegas, allowed a sneak peek into the future of consumer technology as it paraded some of the digital world’s latest and greatest innovations. The show generated considerable amount of buzz around emerging tech themes, particularly 5G, wearable tech, artificial intelligence, display technologies, futuristic autonomous vehicles, and digital health.

While there were the usual clickbait equivalent gimmicky gadgets, it was the cutting-edge advances in everyday technology showcased by leading tech behemoths that really stole the show. These consumer tech heavyweights are behind some of the brightest ideas that are shaping and advancing every aspect of human existence. From healthcare to communication and automobiles to entertainment, there isn’t an industry they are not disrupting and transforming. They’re also generating billions of dollars in revenue in the bargain.

The following businesses have resources, expertise and agility to defend against market forces and stay ahead of the competition in a world where the next best thing is just around the corner. Long-term investors seeking a piece of the consumer tech action may want to keep these names on their screen as they represent attractive buying opportunities.

Qualcomm Inc
Ticker: QCOM
Current yield: 4.45%
Forward P/E: 13.51
Price: US$55.74
Fair value: US$72
Value: 23% Discount
Data as of Jan. 16, 2019

Maker of digital wireless communications equipment for mobile phones, Qualcomm (QCOM) is also the world's largest wireless chip vendor. The firm, whose client list includes such powerhouses as Samsung and Apple, holds patents that are licensed by virtually all wireless device makers as they revolve around CDMA and OFDMA technologies, which underpin all 3G and 4G networks.

The chip giant created plenty of excitement at CES 2019 with its latest offerings. “Qualcomm’s CES 2019 booth showcased its efforts in automotive and 5G, in addition to its typical products featured in smartphones and wearables,” says a Morningstar report, noting that some of the leading automakers showed off communications features that employed Qualcomm technology.

Morningstar equity analyst Abhinav Davuluri pegs the stocks fair value at US$72 and says says “Qualcomm has strengthened its offerings at the flagship smartphone level while also branching off into new growth vectors including data centre, automotive, and IoT.”

However, he points out, Qualcomm is first and foremost the leader of the digital communication technology known as CDMA, which is commonly referred to as a third-generation, or 3G, wireless communications standard. With a near monopoly on CDMA technology patents, the firm is likely to “earn significant royalty fees over the next decade and likely beyond.”

Intel Corp
Ticker: INTC
Current yield: 2.47%
Forward P/E: 10.59
Price: US$48.36
Fair value: US$65
Value: 25% Discount
Data as of Jan. 16, 2019

The world's largest chipmaker, Intel (INTC) designs and makes microprocessors and platform solutions for personal computers and data centres. With the PC market in decline, the firm has been pursuing new growth areas including the Internet of Things, memory, artificial intelligence, and automotive, through strategic acquisitions such as Mobileye.

More recently, though, the firm has been making a major thrust into the autonomous vehicles market. It amply displayed that focus at the recent CES 2019 where, through its subsidiary Mobileye, it revealed many new partnerships and updates on progress in the areas of self driving and advanced driver-assistance systems (ADAS).

“We remain positive on Intel’s future prospects and see an attractive margin of safety relative to our unchanged US$65 fair value estimate for this wide-moat chip titan,” says Davuluri, calling Mobileye’s push into autonomous vehicles “a pragmatic and economical move.”

International Business Machines Corp
Ticker: IBM
Current yield: 5.16%
Forward P/E: 8.72
Price: US$121.29
Fair value: US$158
Value: 23% Discount
Data as of Jan. 16, 2019

IBM Corp (IBM) is a global IT juggernaut that offers a range of services, software, and hardware with operations across 170 countries. The firm generates more than half of its revenue outside the Americas. It has a deep-rooted presence within the largest multinational firms as the provider of IT infrastructure, platforms, applications, and services.

Showcasing IBM’s transformative technologies at CES 2019, CEO Ginni Rometty revealed the company’s plans and progress in the fields of cloud computing, artificial intelligence and blockchain. The company has already cemented its position as a leading innovator in AI with its cognitive computing business, Watson.

“IBM is in the middle of yet another digital revolution, and while the jury is still out on the long-term strategic and financial success of initiatives like analytics and cloud computing, we think rising sales from these products will mostly offset slow declines in legacy businesses,” says a Morningstar report.

As more enterprises move to cloud, IBM has been bulking up its cloud offerings through acquisitions such as the planned US$34 billion buyout of the enterprise software firm Red Hat. The deal will provide cloud boost and “at least give IBM a fighting chance against other cloud providers,” says Morningstar equity analyst, Andrew Lange, adding that “there can be scale-related revenue synergies based on cross-selling opportunities.” He appraises the stock to be worth US$158.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Intel Corp30.84 USD1.26Rating
International Business Machines Corp169.27 USD0.03Rating
Qualcomm Inc220.34 USD2.33Rating

About Author

Vikram Barhat

Vikram Barhat  A Toronto-based financial writer specializing in investing, stock markets, personal finance and other areas of the financial services industry, Vikram also writes for CNBC, BBC, The Globe and Mail, and Toronto Star.

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