Analysts at Goldman Sachs have highlighted a handful of tech stocks with upside as earnings season begins to wind down. The S & P 500 tech sector posted an earnings growth rate of 21.6% in the fourth quarter. That compares to an overall expansion in S & P 500 earnings of 9.5% last quarter, according to LSEG, formerly known as Refinitiv. CNBC Pro combed through top Goldman Sachs research to find the firm’s best ideas in tech. The names below are all rated buy. They include Arista Networks, Arm Holdings, Monday.com , AppLovin and ASML Holding. Arm Analyst Toshiya Hari is standing by shares of the semiconductor and software design company. Arm delivered a blowout fiscal third-quarter earnings report earlier this month, and the sky is the limit for the company, according to the firm. Indeed, shares are up a whopping 70% in 2024. Hari said he expects Arm to “extend its reach across applications to which it is under-indexed today including Data Center, Automotive, and [Internet of Things].” The firm is especially bullish on Arm’s data center business, which boasts customers from the likes of powerhouse companies such as Microsoft, Nvidia and Amazon. Arm also has a “robust margin profile,” the firm said. Meanwhile, there’s more upside ahead for the company’s shares, Hari added. “Looking ahead, as we indicated in our initiation report, we expect Arm to exhibit strong operating leverage over the medium- to long-term while investing appropriately to address its expanding [total addressable market],” the analyst said. Monday.com The project management software company is firing on all cylinders, according to analyst Kash Rangan. “Monday.com reported solid 4Q23 results across all metrics while setting more modest 2024 revenue and operating margin guidance,” the analyst said after the company’s quarterly report. But despite the conservative guidance, Rangan said he’s standing by the stock with a slew of untapped growth opportunities on deck. In particular, the analyst said Monday.com is well-positioned to expand its business reach in divisions such as finance, marketing and human resources. “As the macro environment begins to improve, Monday may also see more organic expansion, driving benefits to its sales efforts,” he added. Shares are up about 20% in 2024. “With strong topline growth, shift to the enterprise market, large under penetrated TAM and strong competitive moat, Monday.com has ample runway for growth in our view,” he said. ASML The semiconductor company posted beats on its latest earnings report , but warned that it expects sales to be flat this year compared to 2023. Nevertheless, shares are up about 23% this year, and analyst Alexander Duval thinks additional gains will follow. The “commentary since [the] 4Q23 results further reinforces our confidence in a near-term inflection and [a] robust 2025 ramp,” he wrote recently. Orders and demand remain robust, and geopolitical risk is low as the company’s exposure to China is rather minimal, the firm said. Further, Duval said ASML has a “deep competitive moat” in its extreme ultraviolet lithography technology, also known as EUV , which it uses to make microchips . Duval acknowledged that shares of ASML have lagged some of its semiconductor peers, but he said that just leaves more room for upside. The stock also sits on the firm’s prestigious conviction buy list. “While the stock has outperformed global semicap peers since 4Q23 results, we believe that the current stock price and valuation still do not reflect ASML’s stronger growth story,” he added. Arista Networks “Beat and reiterate 2024 guidance against elevated expectations for AI winner. … As the leading branded provider of switches to US hyperscalers, ANET is well positioned to capitalize on the ongoing growth in data, the continued digital transformation driving workloads from on-premise to public and hybrid-cloud, and the growing demand for higher bandwidth, faster speed, and lower latency.” Arm “Consistent with our thesis at the time of our initiation, we expect Arm to not only grow dollar content in smartphones, primarily through higher royalty rates, but to also extend its reach across applications to which it is under-indexed today including Data Center, Automotive & IoT. … Looking ahead, as we indicated in our initiation report, we expect Arm to exhibit strong operating leverage over the medium- to long-term while investing appropriately to address its expanding TAM.” Monday.com “MNDY reported solid 4Q23 results across all metrics while setting more modest 2024 revenue and operating margin guidance … As the macro environment begins to improve, Monday may also see more organic expansion, driving benefits to its sales efforts. … With strong topline growth, shift to the enterprise market, large under penetrated TAM and strong competitive moat, Monday.com has ample runway for growth in our view.” ASML “While stock is up +19% since its earnings we highlight that the stock has still lagged its semicap peers in the last 12M, suggesting scope for further upside in our view. … We continue to believe that the current valuation does not fully capture the improved near-term visibility & improvement in AI demand dynamics across different end markets, materially higher growth opport. in 2025 & beyond, as well as ASML’s deep competitive moat in EUV technology … Commentary since 4Q23 results further reinforces our confidence in a near-term inflection & robust 2025 ramp.” AppLovin “We recap APP’s Q4’23 earnings report, which continued a trend that started in early 2023 with operating momentum in its Software business and outsized incremental Adj EBITDA margins on its scaling revenue base. … In our view, we continue to look long-term at the collection of businesses under AppLovin as producing above average industry growth and a strong margin profile in a normalized mobile ads/mobile gaming landscape.”
