The benchmark indexes have been suffering significant volatility of late, owing to the concerns over the Fed’s decision to raise interest rates several times this year to control record-high inflation, and deepening supply disruptions caused by the Russia-Ukraine war. The tech-heavy Nasdaq Composite has slumped 13% year-to-date, while the S&P 500 has retreated 7.4% over this period.
Given heightened geopolitical uncertainty currently and concerns surrounding the potential for a global recession, shares of fundamentally sound companies have also declined lately. However, mega-cap companies are well-positioned to withstand the bearish market trends given their substantial cash balances and profit margins. Thus, the current market downturn offers an opportunity for long-term investors to add quality mega-cap stocks to their portfolios at reasonable prices.
We think mega-cap stocks Taiwan Semiconductor Manufacturing Company Limited (TSM), Visa Inc. (V), and Oracle Corporation (ORCL) could be wise bets on the dip because their fundamental strength could help them rebound soon.
Taiwan Semiconductor Manufacturing Company Limited (TSM)
TSM manufactures, markets, and sells integrated circuits and semiconductors in North America, Europe, Japan, China, and South Korea. It is headquartered in HsinChu, Taiwan. In addition, the company provides account management, customer service, and engineering services. It serves customers in the computer, communications, industrial segments. TSM has a market capitalization of $526.26 billion.
In November, TSM announced plans to set up a new chip factory in Taiwan and a specialty technology fab in Kumamoto, Japan. The new chip fabrication plant will produce advanced 7-nanometer and 28-nanometer semiconductors. This is expected to expand TSM’s manufacturing capacity and boost its revenues.
In its fiscal 2021 fourth quarter, ended Dec. 31, 2021, TSM's net revenue increased 21.2% year-over-year to $15.74 billion. Its gross profit grew 18.2% year-over-year to $8.29 billion. TSM's income from operations rose 16.3% year-over-year to $6.56 billion. Its net income grew 16.5% year-over-year to $5.98 billion. The company's earnings per ADR increased 16.4% from the year-ago value to $1.15.
The $16.52 billion consensus revenue estimate for its fiscal 2022 first quarter, ending March 31, 2022, represents 29.2% year-over-year growth. The $1.28 consensus EPS estimate for the current quarter indicates a 33.4% year-over-year rise. Also, the company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of all the trailing four quarters.
Shares of TSM have declined 11.5% in price year-to-date and 10.3% over the past year. It closed yesterday’s trading session at $106.49.
TSM's POWR Ratings reflect this promising outlook. It has an overall B rating, which translates to Buy in our proprietary system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
TSM has an A grade for Quality and B for Stability and Momentum. Within the A-rated Semiconductor & Wireless Chip industry, it is ranked #40 of 97 stocks.
To see additional POWR Ratings (Growth, Value, and Sentiment) for TSM, click here.
Click here to checkout our Semiconductor Industry Report for 2022
Visa Inc. (V)
V is a payments technology company. The company operates a transaction processing network, VisaNet, that enables payment transactions. V also offers card products, platforms, and value-added services. The company provides its services under the Visa, Visa Electron, Interlink, VPAY, and PLUS brands. V serves consumers, merchants, financial institutions, businesses, and government entities. It has a market capitalization of $425.98 billion.
On March 10, 2022, V completed the acquisition of Tink, an open banking platform. With this transaction, V is expected to allow clients to deliver substantial benefits, including greater choice and quality of digital money services for consumers to control their financial experiences effectively.
V's net revenues increased 24% year-over-year to $7.06 billion in its fiscal 2022 first quarter, ended Dec. 31, 2021. V’s operating income grew 28% year-over-year to $4.94 billion. The company's net income rose 25% year-over-year to $3.90 billion. Its earnings per share improved 27% year-over-year to $1.81.
Analysts expect V’s revenue for its fiscal 2022 second quarter, ending March 31, 2022, to be $6.86 billion, representing a 19.7% rise year-over-year. The Street expects the company’s EPS to be $1.66, representing a 20.1% increase year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the four trailing quarters.
The stock has declined 1.5% in price year-to-date and 4.3% over the past year. V closed yesterday’s trading session at $213.45.
V's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has a grade of B for Sentiment and Quality. Within the Consumer Financial Services industry, it is ranked #7 of 52 stocks.
To see additional component grades of POWR Ratings (Stability, Value, Growth, and Momentum) for V, click here.
Oracle Corporation (ORCL)
ORCL in Redwood City, Calif., provides products and services that address enterprise information technology (IT) environments worldwide. In addition, the company offers cloud-based industry solutions, cloud and license business infrastructure technologies, hardware products, enterprise servers, storage solutions, consulting services, and other hardware-related software offerings. ORCL has a market capitalization of $207.81 billion.
On February 15, 2022, ORCL partnered with Bharti Airtel, India’s premier communications solutions provider. ORCL will help Airtel transform its shared services operations with increased productivity and agility. This partnership might boost ORCL’s revenue streams and global reach.
On Feb. 10, 2022, ORCL and Telefonica S.A. (TEF) signed an agreement to jointly offer cloud platform-as-a-service and applications to enterprises and public sector organizations across TEF’s customer base. This partnership is expected to boost the company’s profitability.
In its fiscal year 2022 third quarter, ended Feb. 28, 2022, ORCL’s total revenues increased 4.2% year-over-year to $10.51 billion. Its operating income rose marginally year-over-year to $4.81 billion in the third quarter.
The $11.71 billion consensus revenue estimate for its fiscal year 2022 fourth-quarter, ending May 31, 2022, represents 4.3% year-over-year growth. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has slumped 7.6% in price year-to-date and 16.6% over the past three months. ORCL closed the last trading session at $80.60.
ORCL's POWR Ratings reflect this strong outlook. The stock has an overall B rating, which translates to Buy in our POWR Ratings system.
It has a grade of B for Value, Stability, and Quality. It is ranked #23 of 163 stocks in the Software - Application industry.
Click here to see ORCL’s POWR Ratings for Growth, Momentum, and Sentiment.
Click here to check out our Software Industry Report for 2022
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TSM shares fell $0.99 (-0.93%) in premarket trading Friday. Year-to-date, TSM has declined -11.15%, versus a -7.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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