Tech stocks have witnessed a massive sell-off this year, with the tech-heavy Nasdaq Composite index slumping 30.7% year-to-date. The Fed’s aggressive policy tightening to bring prices down, supply chain logjams, a tight labor market, and geopolitical unrest have all contributed to the correction.
However, with the rapid evolution of technology, organizations are investing in keeping up with the trends in this fast-changing environment. Given the surging demand for tech products and solutions and consistent breakthroughs, the industry is expected to generate substantial revenues in the long run.
The global information technology market is expected to hit $13.81 trillion by 2026, growing at a CAGR of 10.3%. Emerging technologies such as the internet of things (IoT), artificial intelligence, cloud computing, AR & VR are expected to be the key drivers of the industry’s growth.
Thus, we think investors should buy the dip in quality tech stocks Apple Inc. (AAPL), Salesforce, Inc. (CRM), and Palo Alto Networks, Inc. (PANW).
Apple Inc. (AAPL)
AAPL designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories and sells various related services. Its product offerings include iPhone, Mac, AirPods Max, iPad, Wearables, home, and accessories.
On July 6, 2022, APPL detailed its initiatives to expand its industry-leading commitment to protect users from highly targeted mercenary spyware. The company ‘Lockdown Mode’ is a ground-breaking security capability that offers protection to small users who face targeted threats to their digital security. It also shared the details of its $10 million grant to bolster research exposing such threats.
AAPL’s net sales increased 9% year-over-year to $97.28 billion for the second quarter ended March 26, 2022. Its operating income grew 9% from its year-ago value to $29.98 billion. The company’s net income increased 5.8% year-over-year to $25.01 billion, while its EPS came in at $1.52, up 8.6% from its year-ago value.
The consensus revenue estimate of $90.40 billion for the fiscal fourth quarter (ending September 2022) represents an 8.4% increase from the same period last year. The consensus EPS estimate of $1.32 for the ongoing quarter represents a 6.3% increase from the same period last year.
The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has declined 17.2% year-to-date to close the last trading session at $147.04. It is currently trading 19.6% below its 52-week high of $182.94, which it hit on January 4, 2022.
AAPL’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a B grade for Sentiment and Quality. Within the Technology - Hardware industry, it is ranked #16 out of 45 stocks. Click here to see the other ratings of AAPL for Growth, Value, Momentum, and Stability.
Salesforce, Inc. (CRM)
CRM offers a customer relationship management platform that binds companies and customers globally. Its Customer 360 platform delivers a source, which connects customer data across systems, applications, and devices to help companies sell, service, market, and conduct commerce from anywhere.
On June 29, 2022, CRM introduced MuleSoft, a unified solution for every team with easy automation and integration across any system or workflow. This solution is expected to be demanded by various business teams to drive growth and increase operational efficiency, productivity, and agility.
For the fiscal first quarter ended April 30, 2022, CRM’s total revenues increased 24.2% year-over-year to $7.41 billion. Its gross profit grew 21.7% from its year-ago value to $5.37 billion, while its non-GAAP income from operations improved 8.5% from its prior-year quarter to $1.31 billion.
The company’s cash and cash equivalents came in at $6.86 billion, up 25.5% compared to $5.46 billion as of January 31, 2022.
For the quarter ending October 31, 2022, CRM’s EPS and revenue are expected to increase 1.2% and 17.8% year-over-year to $1.28 and $8.09 billion, respectively. The stock has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has declined 35.6% over the past nine months and 30.9% year-to-date to close the last trading session at $175.50. It is currently trading 43.7% below its 52-week high of $311.75, which it hit on November 9, 2021.
CRM’s POWR Ratings reflect solid prospects. The stock has a B grade for Sentiment in our proprietary rating system. It is ranked #48 out of 156 stocks in the Software - Application industry. To see the other ratings of CRM for Growth, Value, Momentum, Stability, and Quality, click here.
Palo Alto Networks, Inc. (PANW)
PANW is a provider of cybersecurity solutions. It offers a security platform that continuously allows enterprises, service providers, and government entities to secure all users, applications, data, networks, and devices with comprehensive visibility and context across all locations.
On June 23, 2022, PANW launched its Out-of-Band Web Application and API Security to Prisma Cloud. This new product aims to help organizations secure web applications with maximum flexibility amid the rapidly evolving digital world.
On May 24, 2022, PANW announced that Oracle Corporation (ORCL) had chosen Palo Alto Networks VM-Series Next-Generation Firewall (NGFW) as the technology to power the Oracle Cloud Infrastructure (OCI) Network Firewall. This reflects the company’s strong demand for its solutions and solid positioning in the cybersecurity space.
PANW’s total revenue increased 29.1% year-over-year to $1.39 billion in the fiscal third quarter ended April 30, 2022. Its non-GAAP net income grew 38.4% year-over-year to $193.10 million, while its non-GAAP EPS increased 29.7% from its year-ago value to $1.79.
Analysts expect PANW’s revenue for the current quarter ending July 31, 2022, to increase 26.6% year-over-year to $1.54 billion. The Street expects its EPS to increase 42.4% year-over-year to $2.28 in the same period. It has surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past three months, the stock has declined 13.8% to close the last trading session at $524.22. It is currently trading 18.2% below its 52-week high of $640.90, which it hit on April 20, 2022.
PANW’s strong fundamentals are reflected in its POWR Ratings. It has an A grade for Growth and a B grade for Quality. Among 29 stocks in the Software - Security industry, it is ranked #8. Click here to see the other ratings of PANW for Value, Momentum, Stability, and Sentiment.
AAPL shares were trading at $146.31 per share on Monday afternoon, down $0.73 (-0.50%). Year-to-date, AAPL has declined -17.38%, versus a -18.10% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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