Earnings from some of the biggest U.S. technology companies will take center stage this week, giving investors a chance to re-evaluate the sector's state of health.
The tech sector has the highest projected earnings growth rate among the 10 S&P sectors for the second quarter at 12.3 percent, its best quarter since the first quarter of 2012. This forecast marks a sharp rebound from a drop of 3.2 percent just a year ago, according to a Thomson Reuters poll. Some of the big names include Intel Corp and Yahoo on Tuesday; eBay on Wednesday and Google on Thursday.
According to analysts at Goldman Sachs, the information technology sector appears to be the most undervalued sector, giving investors more reasons to be bullish on tech stocks.
Both the Dow Jones industrial average and the S&P 500 have hit record highs recently. And while the NASDAQ is up 5.7 percent for the year, it is still more than 700 points away from its all-time intraday high on March 10, 2000, suggesting to some investors that the sector may have more room to the upside. The semiconductor index is up 20.3 percent.
The implied earnings-per-share growth for the tech sector has been 5.4 percentage points above the S&P 500 on average over the past 10 years, but it is now just 1.0 percentage point above the benchmark index, according to the Goldman Sachs note.
Nine of the 13 sub-industries in the tech sector are expected to report higher earnings than a year ago, with semiconductors and semiconductor equipment having the highest growth rates within the sector.