Are These 2 Tech Stocks Bubbling Up?

While stocks of some technology companies like Amazon.com (NASDAQ: AMZN  ) and LinkedIn (NYSE: LNKD  ) appear to be overpriced, there are plenty of others that are not bubbling up.

Some investors have taken note, and Amazon and LinkedIn have shed value this year. Even after the drop, both stocks are still relatively expensive, trading at triple-digit multiples, and probably should be passed on until the companies can make some money. 

AMZN Chart

AMZN data by YCharts

On the other hand, Apple  (NASDAQ: AAPL  ) and Qualcomm (NASDAQ: QCOM  )  haven't missed a beat and currently sport P/Es more in line with the overall market and industry peers. The businesses have good stories going forward, too.

Investors might want to consider one or both of these more reasonably priced companies, both of which are focused on the growth prospects in wireless hardware.

This star is still burning bright
Apple has been the star performer in wireless for many years now. The company has sold hundreds of millions of iPhones, iPads, and iPods and returned billions in cash to shareholders. 

And Apple might have more room to grow. Many analysts thought the high-end smartphone market would dry up and the company would lose its primary cash cow. They thought wrong, as the iPhone continues to impress. Apple sold 43 million in the first three months of the year, far exceeding expectations that only 37 million devices would be shipped. 

The future appears bright, too, as the next-generation phone, which will probably feature a larger display to satisfy the growing chorus of consumer demand, is due out later this year. Apple might have a few other things up its sleeve, too. There are other rumors floating around that a wearable device and an in-store retail payments platform based upon Apple technology may be brewing in the labs at One Infinite Loop in Cupertino. 

In addition, the company plans to return more cash to shareholders in the form of another dividend increase and an expanded buyback program. 

Investors can't go wrong with Apple right now, but don't wait too long. Shares rose nearly 15% after quarterly results were announced in late April.

Communication is key
Investors in Qualcomm, which sells communication chips to handset and tablet manufacturers, will continue to benefit as the company is positioned well in an expanding market.

Qualcomm has no debt and has been growing both revenue and EPS at double-digit rates over the last few years. The trend should continue going forward if demand for low-end phones increases in emerging markets as expected and if the company can continue to innovate and reduce the prices it charges for its products.

Qualcomm has a strong record of dividend increases. And with a low payout ratio and increasing levels of free cash flow, that trend is likely to continue. 

QCOM Dividend Chart

QCOM Dividend data by YCharts

The problem is the "E"
Amazon and LinkedIn have been very successful at selling products and services, and revenues are growing at both companies. However, the problem is in earnings, the "E" in the P/E. The companies simply do not make much money, and it seems that investors do not want to pay as high a premium for the shares right now because of that fact. 

Amazon is the dominant player in online retail today and commands the majority of market share. The company has attempted to expand by adding web services and hardware to its offerings, too.

Amazon sacrifices profits and plows cash back into operations. It builds new warehouses to grow the e-commerce business and expands data centers to boost its web services segment. That strategy has worked for the most part, as the stock became a 70-bagger over the last decade. However, as the old adage goes, "What have you done for me lately?" If Amazon can become more efficient and grow income, it might be able to reverse the current downtrend.

LinkedIn has one of the most popular social media sites which is the go-to place for job leads and networking. But income has been spotty and EPS growth flat for most of the last three years. The company probably needs to be more effective at increasing the number of regular users and monetizing its website. Investors should stay away until it does.

Foolish conclusion
Investors considering two reasonably priced tech companies, Apple and Qualcomm, probably won't be sorry to take the plunge. Both have good prospects going forward as the wireless industry continues its march upward, and both regularly bump up their dividends.

Those looking at companies with triple-digit multiples like Amazon and LinkedIn might want to think twice. In spite of solid revenue growth, the companies are not making much money right now. Until prospects for profits are better, shares may lag.

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