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Wall Street’s Resilience and the Rise of Tech Stocks
Wall Street has shown resilience in the face of trade war uncertainties and tariff updates, with the Nasdaq reaching new all-time highs on Wednesday. This positive momentum suggests that investors are beginning to adapt to the challenges posed by trade tensions, betting that the Trump administration is unlikely to take actions that could harm the U.S. economy or the stock market.
As Q2 earnings season approaches, investors may look to take profits from high-flying tech stocks. However, the outlook for the tech sector remains strong, especially if AI-driven earnings growth continues. Additionally, the Federal Reserve is expected to cut interest rates again in 2025, which could further support market gains.
For those looking to capitalize on this trend, now might be an ideal time to consider buying tech stocks that are currently trading below their all-time highs. These stocks have the potential to surge in July and beyond, offering significant upside for patient investors.
Lumentum: A Hidden Gem in the Tech Sector
Lumentum (LITE) is a company that designs and manufactures optical and photonic technologies used in high-speed telecommunications, data centers, and advanced manufacturing. The company provides critical components such as transceivers and lasers for fiber-optic networks, which are essential for supporting the rapid growth of artificial intelligence, cloud computing, and 5G connectivity.
Lumentum’s industrial lasers are also used in precision manufacturing, including cutting semiconductors and solar cells. The company also develops 3D sensing laser diodes for applications like facial recognition in smartphones and autonomous vehicle sensors.
Despite its role in key technological advancements, Lumentum’s stock has only climbed 10% over the past five years, while the broader tech sector has surged by 110%. This underperformance can be attributed to several factors, including the company’s decision to stop shipments to Huawei in 2019 due to U.S. government restrictions. Additionally, Lumentum’s reliance on Apple for growth became a concern as the iPhone market slowed down.
However, Lumentum is showing signs of a turnaround, driven by increasing demand for AI technologies. The company has consistently exceeded earnings expectations, with an average beat of 42% in the trailing four quarters. Its recent Q3 FY25 results included a big beat-and-raise, earning it a Zacks Rank #1 (Strong Buy).
Under the leadership of new CEO Michael Hurlston, Lumentum is focusing on next-generation optics that are helping create energy-efficient AI networks. The company is projected to grow its revenue by 20% in FY25 and 33% in FY26, with adjusted EPS expected to double in both years.
Lumentum’s stock has kept pace with the broader tech sector over the past decade and is up 60% in the past year. It recently completed a long-term golden cross, where its 50-week moving average overtook its 200-week moving average. A strong earnings report could help the stock break out above its 2021 peaks after several failed attempts.
HubSpot: A Strong Contender in the CRM Space
HubSpot (HUBS) has been a standout in the customer relationship management (CRM) space, posting blockbuster growth over the last decade as businesses race to digitalize their operations. HUBS stock has roughly tripled the tech sector during this period, fueled by massive growth that took it from $182 million in 2015 revenue to $2.6 billion last year.
Despite its strong performance, HUBS trades 30% below its highs even as the tech sector reaches new records. The stock has cooled due to slowing sales growth and challenges in consistently posting profits. However, the company is well-positioned for a breakout, given its robust adjusted earnings and revenue growth outlook.
HubSpot’s solutions are designed to help clients attract customers, build relationships, and keep them happy. The company launched its Breeze AI platform last year, integrating AI tools throughout its entire CRM platform. This AI-powered solution helps businesses manage marketing, sales, customer service, content, and operations more efficiently.
Projected revenue growth for HubSpot is around 16% in 2025 and 2026, with adjusted earnings expected to grow by 15% and 21%, respectively. HUBS has beaten quarterly earnings estimates for five consecutive years, and its recent upward earnings revisions have earned it a Zacks Rank #1 (Strong Buy).
HUBS stock is trading near its 21-day moving average and has held its ground at or near its long-term 200-week moving average several times in the past year. The 200-week moving average is a favorite technical indicator for long-term investors, including Warren Buffett’s longtime right-hand man, Charlie Munger.
With a robust balance sheet and a focus on stock buybacks, HubSpot presents an attractive opportunity for both near-term upside and long-term AI-driven growth. Wall Street remains optimistic about the stock, with 26 of the 33 brokerage recommendations from Zacks being “Strong Buys.”
