2 Upgraded Tech Stocks to Buy as the Nasdaq Remains Near All-Time Highs

The tech-heavy Nasdaq Composite jumped to an all-time high last week on investor optimism about tech stocks amid the second-quarter earnings season, with companies beating estimates at a record rate. The accelerated pace of digital transformation around  the globe continues to favor the technology industry amid concerns over the rapidly spreading COVID-19 Delta variant.

The technology industry has mostly been resilient in the face of the pandemic, rewarding investors with solid returns. This is evidenced by the Technology Select Sector SPDR Fund’s (XLK) 35.7% gains over the past year. The industry has benefited largely from rapid digitization and growing reliance on tech products and solutions for working from home, digital payments, and the digitization of healthcare, to name a few areas. In fact, the increasing use of cloud computing and continuous innovations in AI, machine learning, and IoT are likely to create massive opportunities for the industry in the coming months.

The continuing low-interest-rate environment is anticipated to drive the tech industry's growth further. Hence, tech stocks Checkpoint Software Technologies Limited (CHKP) and GoPro Inc (GPRO) are well-positioned to capitalize on the current industry momentum and, thus, could be the best picks now. These stocks were recently upgraded from Neutral to Buy in our proprietary POWR Ratings system.

Checkpoint Software Technologies Limited (CHKP)

CHPK in San Carlos, Calif., creates, markets, and supports a wide range of IT security products and services globally. The company provides solutions for network security, endpoint security, data security, and management. It offers its goods and services to corporations, service providers, small- and medium-sized organizations, and consumers.

This month, CHKP's board of directors approved a $2 billion increase in its ongoing share repurchase program. The company will continue to repurchase its shares for up to $325 million each quarter under the expanded share repurchase program. This decision reflects the company’s robust financial health.

During the second quarter, ended June 30, 2021, CHKP’s revenue increased 4.1% year-over-year to $526.1 million. Its non-GAAP operating income increased marginally year-over-year to $257.1 million, while its non-GAAP net income came in at $217 million. The company’s non-GAAP EPS increased 2% year-over-year to $1.61 over this period.

The $7.2 consensus EPS estimate for the current year represents a 6.5% improvement year-over-year. The $2.14 billion consensus revenue estimate for the current year represents a 3.5% increase from the same period last year. The stock has gained 3.3% over the past three months and 3.6% over the past nine months.

CHKP's POWR Ratings reflect this promising outlook. On August 6, the stock’s rating was upgraded from C (Neutral) to B (Buy) in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

CHKP is also rated an A grade for Quality and a B for Value. Within the Software - Security industry, it is ranked #5 of 26 stocks.

To see additional POWR Ratings for Growth, Sentiment, Momentum, and Stability for CHKP, click here.

Click here to check out our Software Industry Report for 2021

GoPro Inc (GPRO)

GPRO produces and sells cameras, drones, and mountable and wearable accessories in the United States and internationally. The company’s product range includes cloud-connected waterproof cameras HERO7 Silver, HERO7 Black, HERO8 Black, HERO9 Black, MAX, 360-degree waterproof camera, and GoPro. In addition, the San Mateo, Calif., company offers mobile, desktop, and online applications that allow media workflow for archiving, editing, multi-clip story creation, and on-the-fly sharing of content.

GPRO’s revenue increased 85.9% year-over-year to $249.59 million in the second quarter. ended June 30, 2021. The company reported  $20.72 million in non-GAAP operating income, compared to a $26.66 million non-GAAP operating loss in the prior-year quarter. Its non-GAAP net income came in at $19.86 million for this period, compared to a $29.72 million non-GAAP net loss in the first quarter of 2020. The company’s non-GAAP EPS came in at $0.12, versus a  $0.20 non-GAAP loss per share in the prior-year period.

The company’s EPS is expected to grow 725% year-over-year to $0.66 in the current year. The Street expects GPRO’s revenue to increase 25.9% year-over-year to $1.12 billion in its fiscal year 2021. GPRO’s stock has gained 120.5% over the past year and 31.5% year-to-date.

GPRO’s strong fundamentals are reflected in its POWR Ratings. On August 9, the stock was upgraded from C (Neutral) to B (Buy) in our proprietary rating system. GPRO also has an A grade for Growth and Quality, and a B for Value and Momentum. The stock is ranked #7 of 45 stocks in the B-rated Technology - Hardware industry.

In addition to the POWR Ratings grades we have just highlighted, one can see the GPRO ratings for Sentiment and Stability here.

CHKP shares were trading at $123.06 per share on Tuesday morning, down $0.70 (-0.57%). Year-to-date, CHKP has declined -7.41%, versus a 19.14% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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