We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
It’s been a long-fought battle in the market in 2022, with a hawkish Federal Reserve, geopolitical issues, and lingering COVID-19 uncertainties spoiling the fun at every turn.
On a much more positive note, it’s created a massive buying opportunity.
Many investor-favorite stocks have seen their valuation multiples slashed, particularly those in the Zacks Computer and Technology sector.
Of course, nobody has a crystal ball telling them where the market will move next, and it’s impossible to time the market just right.
However, it’s a gold mine out there for those with a long-term horizon, with an extensive list of companies trading at a discount to their historic levels.
Three beaten-down tech stocks that have seen their valuation multiples fall notably – Nvidia (NVDA - Free Report) , Adobe (ADBE - Free Report) , and Alphabet (GOOGL - Free Report) – could all be of significant interest to those with a bit of patience.
Below is a chart illustrating the share performance of all three stocks YTD with the S&P 500 blended in as a benchmark.
Image Source: Zacks Investment Research
Let’s dive deeper into how the companies currently shape up for those interested in buying tech at a discount.
Adobe
Adobe shares have become notably cheaper amid the stretch of poor price action; the company’s forward earnings multiple of 26.4X is well beneath its five-year median of a steep 45.3X and a fraction of 2021 highs of 65.5X.
Image Source: Zacks Investment Research
Further, ADBE is still forecasted to grow at a solid pace; earnings are forecasted to climb 9% in FY22 and a further double-digit 14% in FY23.
The forecasted bottom-line growth comes on top of projected revenue increases of 11.5% and 12.4% in FY22 and FY23, respectively.
Image Source: Zacks Investment Research
The company posted a solid Q3 2022, exceeding the Zacks Consensus EPS Estimate by 2.1%. Top-line results were strong, too, reported at $4.4 billion and reflecting a strong 13% Y/Y uptick.
Dan Durn, EVP and CFO, said, “Adobe achieved record revenue and strong profitability in the quarter, demonstrating that our products are mission-critical to individuals, small businesses and the world’s largest enterprises.”
Below is a chart illustrating the company’s revenue on a quarterly basis.
Image Source: Zacks Investment Research
Nvidia
Nvidia shares currently trade at a 47.5X forward earnings multiple, certainly not cheap by any stretch. However, the current value is nowhere near the steep 2021 highs of 93.5X during the semiconductor melt-up.
Image Source: Zacks Investment Research
While the company’s Gaming revenue has taken a hit amid a slowdown in demand, NVDA’s Data Center results are definitely worth highlighting – Data Center revenue climbed 61% Y/Y to $3.8 billion in its latest quarter, with sales from hyperscale customers nearly doubling.
Nvidia’s Automotive results are undoubtedly worth a spotlight as well; Automotive revenue climbed a double-digit 45% Y/Y and 59% sequentially, with the strong growth driven by Auto AI Solutions (this includes AI Cockpit and Self-Driving revenue).
While the company’s Gaming revenue has experienced quite a slowdown, other areas of its business are still enjoying strong growth.
NVDA’s earnings are forecasted to decline by more than 20% in its current fiscal year (FY23), but things kick back into the green for FY24, with estimates calling for 30% growth.
Further, revenue is forecasted to climb a marginal 1.8% in FY23 and a sizable 14% in FY24.
Image Source: Zacks Investment Research
Alphabet
Alphabet shares could be the most enticing of all three – the company’s shares trade at a 19.2X forward earnings multiple, reflecting a 7% discount relative to its Zacks Computer and Technology sector.
Further, the current value reflects a sizable 32% discount relative to the five-year median of 26.7X.
Image Source: Zacks Investment Research
GOOGL knows how to generate cash – Alphabet came in hot in its latest print, reporting quarterly free cash flow of $12.6 billion, the fourth highest of any S&P 500 company in Q2.
Image Source: Zacks Investment Research
The company’s Google Cloud platform has been a notable success; in its latest quarter, Google Cloud revenue came in at $6.3 billion, reflecting a stellar 35.6% Y/Y uptick and a 9% sequential increase.
Keeping a Long-Term Mindset
It’s been anything but fun for tech stocks in 2022, with a vast number witnessing double-digit percentage share price declines.
However, amid all the negativity, long-term investors have been presented with a buying opportunity not seen in some time.
Of course, there is always risk to the downside, but that’s why investors need to keep a long-term mindset, especially during uncertain times.
Image: Bigstock
3 Beaten-Down Tech Stocks Trading at a Discount
It’s been a long-fought battle in the market in 2022, with a hawkish Federal Reserve, geopolitical issues, and lingering COVID-19 uncertainties spoiling the fun at every turn.
On a much more positive note, it’s created a massive buying opportunity.
Many investor-favorite stocks have seen their valuation multiples slashed, particularly those in the Zacks Computer and Technology sector.
Of course, nobody has a crystal ball telling them where the market will move next, and it’s impossible to time the market just right.
However, it’s a gold mine out there for those with a long-term horizon, with an extensive list of companies trading at a discount to their historic levels.
Three beaten-down tech stocks that have seen their valuation multiples fall notably – Nvidia (NVDA - Free Report) , Adobe (ADBE - Free Report) , and Alphabet (GOOGL - Free Report) – could all be of significant interest to those with a bit of patience.
Below is a chart illustrating the share performance of all three stocks YTD with the S&P 500 blended in as a benchmark.
Image Source: Zacks Investment Research
Let’s dive deeper into how the companies currently shape up for those interested in buying tech at a discount.
Adobe
Adobe shares have become notably cheaper amid the stretch of poor price action; the company’s forward earnings multiple of 26.4X is well beneath its five-year median of a steep 45.3X and a fraction of 2021 highs of 65.5X.
Image Source: Zacks Investment Research
Further, ADBE is still forecasted to grow at a solid pace; earnings are forecasted to climb 9% in FY22 and a further double-digit 14% in FY23.
The forecasted bottom-line growth comes on top of projected revenue increases of 11.5% and 12.4% in FY22 and FY23, respectively.
Image Source: Zacks Investment Research
The company posted a solid Q3 2022, exceeding the Zacks Consensus EPS Estimate by 2.1%. Top-line results were strong, too, reported at $4.4 billion and reflecting a strong 13% Y/Y uptick.
Dan Durn, EVP and CFO, said, “Adobe achieved record revenue and strong profitability in the quarter, demonstrating that our products are mission-critical to individuals, small businesses and the world’s largest enterprises.”
Below is a chart illustrating the company’s revenue on a quarterly basis.
Image Source: Zacks Investment Research
Nvidia
Nvidia shares currently trade at a 47.5X forward earnings multiple, certainly not cheap by any stretch. However, the current value is nowhere near the steep 2021 highs of 93.5X during the semiconductor melt-up.
Image Source: Zacks Investment Research
While the company’s Gaming revenue has taken a hit amid a slowdown in demand, NVDA’s Data Center results are definitely worth highlighting – Data Center revenue climbed 61% Y/Y to $3.8 billion in its latest quarter, with sales from hyperscale customers nearly doubling.
Nvidia’s Automotive results are undoubtedly worth a spotlight as well; Automotive revenue climbed a double-digit 45% Y/Y and 59% sequentially, with the strong growth driven by Auto AI Solutions (this includes AI Cockpit and Self-Driving revenue).
While the company’s Gaming revenue has experienced quite a slowdown, other areas of its business are still enjoying strong growth.
NVDA’s earnings are forecasted to decline by more than 20% in its current fiscal year (FY23), but things kick back into the green for FY24, with estimates calling for 30% growth.
Further, revenue is forecasted to climb a marginal 1.8% in FY23 and a sizable 14% in FY24.
Image Source: Zacks Investment Research
Alphabet
Alphabet shares could be the most enticing of all three – the company’s shares trade at a 19.2X forward earnings multiple, reflecting a 7% discount relative to its Zacks Computer and Technology sector.
Further, the current value reflects a sizable 32% discount relative to the five-year median of 26.7X.
Image Source: Zacks Investment Research
GOOGL knows how to generate cash – Alphabet came in hot in its latest print, reporting quarterly free cash flow of $12.6 billion, the fourth highest of any S&P 500 company in Q2.
Image Source: Zacks Investment Research
The company’s Google Cloud platform has been a notable success; in its latest quarter, Google Cloud revenue came in at $6.3 billion, reflecting a stellar 35.6% Y/Y uptick and a 9% sequential increase.
Keeping a Long-Term Mindset
It’s been anything but fun for tech stocks in 2022, with a vast number witnessing double-digit percentage share price declines.
However, amid all the negativity, long-term investors have been presented with a buying opportunity not seen in some time.
Of course, there is always risk to the downside, but that’s why investors need to keep a long-term mindset, especially during uncertain times.
Many strong companies, such as Nvidia (NVDA - Free Report) , Adobe (ADBE - Free Report) , and Alphabet (GOOGL - Free Report) , have seen their valuation multiples pull back notably.
Implementing a dollar-cost average strategy would be great for those looking to build up their positions and reap the rewards on the way back up.