Top 5 Nasdaq-listed technology shares in 2021

Nasdaq 100

The Nasdaq index continues to suggest that the US tech sector remains in good health. Year-to-date (YTD) the index has gained more than 7% , roughly half of its broader industry peer the S&P 500. The short-term underperformance (relative to the S&P 500) does however follow last year’s significant outperformance, with the US tech sector having been one of the top performing asset classes globally.

Currently, the Nasdaq trades on a historical price-to-earnings (P/E) ratio of around 32, highlighting a sector which remains priced for growth.

The above chart of the Nasdaq reinforces the long-term trend for the index remains up. The price is currently testing resistance at the 13,760 level, a break of which would see channel resistance a further longer-term target at 15,375. The channel provides us with the resistance target should the index move into new all-time high territory.

Top 5 US tech companies listed on the Nasdaq

The below table information is as of the 8 June 2021, with consensus broker ratings and price targets sourced from Refinitiv data.

Apple

Apple, remains not only the largest company listed on the Nasdaq 100, but also the largest company (in terms of market capitalisation) in the world, currently valued at around $2.1 trillion. The share price has underperformed its peers for the YTD, despite having reported a record March 2021 quarter in which revenue surged 54% year on year (YoY).

The share remains in analyst favour carrying a consensus rating of ‘buy’, with the share price currently trading at a 21.24% to the mean of long-term forecasts.

The share price of Apple remains in in a short to medium-term trading range with support considered at the $115.70 level, and resistance at the $138.50 level. Range traders might prefer to look for long entry on a bullish reversal closer to the $115.70 level, although a retracement past the major low at $103.50 could instead suggest longer-term change in directional trend.

Microsoft

Microsoft is both the second largest (in terms of market capitalisation) Nasdaq and globally listed company in the world. The group has and will continue to benefit from its market-leading positions in the cloud, personal computing, productivity and business process solutions spaces from the acceleration in digital adoption through and post the current Covid-19 pandemic cycle.

The consensus of broker ratings remain a buy for the company, which also trades at a discount to long-term price forecasts (albeit a narrower discount than Apple Inc. at present).

The share price of Microsoft remains in a long-term uptrend, while in the short term, the price is finding resistance at the $253.40 level. A confirmed break above this level could suggest the continuation of the longer-term uptrend with $262.60 and $275.15 providing upside resistance targets from the move. Only on a move below the $238.60 support level would be needed to reassess the primary trend bias for Microsoft.

Amazon

Amazon which often rotates with Alphabet for the honour of third largest Nasdaq listed company, trades at the highest valuation premium to the peers listed in this article, with a forward P/E ratio of nearly 50 times. The premium highlights the markets belief in the group’s prospects for growth within the shopping, entertainment and device businesses within which it operates. However recent guidance from the company suggests that net sales revenue will grow between 24% and 30% in the third quarter (Q3), versus Q2, perhaps a little short of market expectations and perhaps reason for the underperformance YTD.

Nevertheless, Amazon remains a firm favourite among analysts with a consensus rating of buy, with the current price trading at suggested 24.57% discount to long-term forecasts.

The share price of Amazon remains in in a short to medium-term trading range with support considered at the $2880 level, and resistance at the $3555 level. Range traders might prefer to look for long entry on a bullish reversal closer to the $2880 level, although a retracement past this level could instead suggest longer-term change in directional trend.

Alphabet

Alphabet (more commonly known as Google by a broader audience), has been a clear outperformer for the YTD, with its share price having added more than 37% in 2021. Share price gains have followed stellar results which saw the group increasing revenue by more than 30% and operating income by more than 100% against the prior year’s comparative quarter. The earnings momentum is expected to continue suggesting that current price earnings assumptions are far from onerous.

While share price gains this year for Alphabet have far exceeded its peers on this list, it does suggest the company to trade at a narrower discount (12.5%) to long-term price estimates.

The share price of Alphabet trades in an upward channel and is currently testing resistance of the high at $2450. A confirmed break above this high would call for a continuation of the uptrend and targeting a move towards channel resistance at $2655. Only on a move below the major low at $2230 would we instead need to reassess the primary trend bias for Alphabet.

Facebook

Facebook, the fifth largest Nasdaq listed company, comes off what was a very strong quarter for the group, with advertising revenue having increased by 46% from the prior year’s comparative quarter. The 2021 Q2 outlook sees the group expecting revenue to ‘remain stable or moderately accelerate’ from 2021 Q1.

Facebook has been an outperformer YTD, having seen capital gains over the period in excess of 23.22%. The share carries an average analyst rating of ‘buy’ and trades at roughly a 12.8% discount to a median of long-term price estimates.

The price trend for Facebook remains up as highlighted by the channel drawn on the chart above. Breakout traders might wait for a confirmed move above the $332.30 resistance level before targeting the next level of (channel) resistance considered at $359.00. The amount of $298.95 provides us with a key support level. Should the share price not manage to break the near-term high and instead retrace below our key level, the upwards trend bias would need to be reassessed.

Summary

• Apple, Microsoft, Amazon, Alphabet and Facebook are the five largest companies on the Nasdaq 100
• These companies all carry long-term consensus ratings of ‘buy’
• Microsoft, Alphabet and Facebook have all seen YTD gains outperforming the Nasdaq index benchmark
• Apple and Amazon have both yielded negative returns YTD and underperformed the Nasdaq index benchmark
• Apple and Amazon currently trade at the largest discount to a consensus of long-term price target estimates