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.
Time to Buy the Dip? 2 Highly Ranked Tech Stocks for Investors to Consider
Read MoreHide Full Article
After a strong start to the year, February was much more challenging. The broad market traded lower throughout the month, and the S&P was down -5%. Tech and the riskier sectors in the market led the way lower, just as they had led it higher.
Some technology stocks were still able to outperform the market over this period though. With the assistance of Zacks Rank, I have identified 3 highly ranked stocks for investors to consider buying.
Image Source: Zacks Investment Research
Salesforce
Salesforce (CRM - Free Report) announced its Q4 and FY earnings after the market closed on Wednesday. Investors are very happy with the results and as of Thursday midday, the stock was up 12% on the day. Salesforce is the leader in cloud-based, enterprise business relationship software.
Q4 sales for CRM came in at $8.4 billion beating estimates of $7.9 billion and adjusted earnings of $1.68 per share smashed expectations of $1.36 per share. Management also provided very strong guidance with Q1 and FY23 sales and earnings above analysts' expectations. CRM also guided higher on operating margins which it expects to reach 30% by 2023 and increased its stock buy-back program.
These results didn’t come easily. Salesforce laid off 8,000 people or 10% of its employees over the last few months. After becoming a target for activist investors like Elliot Management and Starboard Value, CRM has made profitability its new priority and shareholders seem to be happy about it. This looks like the early stages of a turnaround as CRM stock has underperformed the market over the last 3 years.
Image Source: Zacks Investment Research
Even before the strong earnings announcement CRM held a Zacks Rank #2 (Buy), indicating improving earnings expectations. Analysts had been somewhat mixed on earnings expectations, but leaned towards higher, and clearly, they were correct as Salesforce beat even the highest expectations.
Image Source: Zacks Investment Research
Following this report CRM has a one-year forward earnings multiple of 28x, well below its median of 63x. It is still a premium valuation, but these new business fundamentals are very promising. Furthermore, at least one of the activist investors, Elliot Management, has signaled it intends to continue to work with CRM management, indicating even more upside in Salesforce stock.
Image Source: Zacks Investment Research
Airbnb
Airbnb (ABNB - Free Report) , the vacation home rental platform, has thus far been one of the strongest performing stocks in the market up 42% YTD. This impressive performance comes after a -62% correction from its 2021 all-time high.
Image Source: TradingView
Things are looking up for ABNB though, and the stock currently boasts a Zacks Rank #1 (Strong Buy), indicating a positive trend in earnings revisions. Airbnb seems to be another tech stock that will be prioritizing profits over growth. Earnings estimates for the current quarter have flipped from negative to positive over the last 60 days.
Image Source: Zacks Investment Research
Analysts are expecting sales growth from ABNB as well. Current quarter sales are expected to grow 19% YoY to $1.8 billion, and current year sales are expected to grow 15% YoY to $9.6 billion. These are strong numbers, but they still mark a considerable deceleration against 40% annual sales growth in FY22, and FY21’s 77%.
Premium companies come with premium valuations and ABNB is no exception. Trading at 36x one-year forward earnings, ABNB is below its 3-year median of 38x. It is worth noting that its short history, and extreme swings in valuation make it a harder to pin an accurate historical valuation. Airbnb’s forward earnings ratio has swung from 561x to -761x since IPO.
Image Source: Zacks Investment Research
Bottom Line
After getting wrecked in 2022 it seems technology may be having a comeback. It is very important to note that high multiple technology and growth stocks are very sensitive to changes in interest rates. Of course, front and center in this market is the Federal Reserve interest rate policy. Any major shifts in interest rates, or rhetoric from the Fed can rapidly change the direction of these stocks.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Time to Buy the Dip? 2 Highly Ranked Tech Stocks for Investors to Consider
After a strong start to the year, February was much more challenging. The broad market traded lower throughout the month, and the S&P was down -5%. Tech and the riskier sectors in the market led the way lower, just as they had led it higher.
Some technology stocks were still able to outperform the market over this period though. With the assistance of Zacks Rank, I have identified 3 highly ranked stocks for investors to consider buying.
Image Source: Zacks Investment Research
Salesforce
Salesforce (CRM - Free Report) announced its Q4 and FY earnings after the market closed on Wednesday. Investors are very happy with the results and as of Thursday midday, the stock was up 12% on the day. Salesforce is the leader in cloud-based, enterprise business relationship software.
Q4 sales for CRM came in at $8.4 billion beating estimates of $7.9 billion and adjusted earnings of $1.68 per share smashed expectations of $1.36 per share. Management also provided very strong guidance with Q1 and FY23 sales and earnings above analysts' expectations. CRM also guided higher on operating margins which it expects to reach 30% by 2023 and increased its stock buy-back program.
These results didn’t come easily. Salesforce laid off 8,000 people or 10% of its employees over the last few months. After becoming a target for activist investors like Elliot Management and Starboard Value, CRM has made profitability its new priority and shareholders seem to be happy about it. This looks like the early stages of a turnaround as CRM stock has underperformed the market over the last 3 years.
Image Source: Zacks Investment Research
Even before the strong earnings announcement CRM held a Zacks Rank #2 (Buy), indicating improving earnings expectations. Analysts had been somewhat mixed on earnings expectations, but leaned towards higher, and clearly, they were correct as Salesforce beat even the highest expectations.
Image Source: Zacks Investment Research
Following this report CRM has a one-year forward earnings multiple of 28x, well below its median of 63x. It is still a premium valuation, but these new business fundamentals are very promising. Furthermore, at least one of the activist investors, Elliot Management, has signaled it intends to continue to work with CRM management, indicating even more upside in Salesforce stock.
Image Source: Zacks Investment Research
Airbnb
Airbnb (ABNB - Free Report) , the vacation home rental platform, has thus far been one of the strongest performing stocks in the market up 42% YTD. This impressive performance comes after a -62% correction from its 2021 all-time high.
Image Source: TradingView
Things are looking up for ABNB though, and the stock currently boasts a Zacks Rank #1 (Strong Buy), indicating a positive trend in earnings revisions. Airbnb seems to be another tech stock that will be prioritizing profits over growth. Earnings estimates for the current quarter have flipped from negative to positive over the last 60 days.
Image Source: Zacks Investment Research
Analysts are expecting sales growth from ABNB as well. Current quarter sales are expected to grow 19% YoY to $1.8 billion, and current year sales are expected to grow 15% YoY to $9.6 billion. These are strong numbers, but they still mark a considerable deceleration against 40% annual sales growth in FY22, and FY21’s 77%.
Premium companies come with premium valuations and ABNB is no exception. Trading at 36x one-year forward earnings, ABNB is below its 3-year median of 38x. It is worth noting that its short history, and extreme swings in valuation make it a harder to pin an accurate historical valuation. Airbnb’s forward earnings ratio has swung from 561x to -761x since IPO.
Image Source: Zacks Investment Research
Bottom Line
After getting wrecked in 2022 it seems technology may be having a comeback. It is very important to note that high multiple technology and growth stocks are very sensitive to changes in interest rates. Of course, front and center in this market is the Federal Reserve interest rate policy. Any major shifts in interest rates, or rhetoric from the Fed can rapidly change the direction of these stocks.