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4 Beaten-Down Tech Stocks to Buy for Long-Term Gains

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The broader equity market has been witnessing wild swings since the beginning of 2022 with major U.S. indexes, including the Dow Jones Industrial Average, Nasdaq Composite and S&P 500 plunging 16%, 30.9% and 21.3%, respectively, year to date (YTD).

The volatility in the equity market has been triggered by concerns over inflation, rising interest rates and increasing oil prices. The ongoing Russia-Ukraine war has further increased worries for investors about the global economic recovery.

Technology stocks are among the most battered sector amid the broader market sell-off this year so far. Technology Select Sector SPDR Fund, which seeks to provide investment results that, before expenses, generally correspond to the price and yield performance of the Technology Select Sector Index, has lost approximately 28% of its value YTD.

However, this sell-off in the broader equity market has led to a massive correction in several technology companies’ stock prices, which were considered to be widely overvalued at the sector’s peak in 2021. With this correction, several tech stocks are currently trading way below their 52-week high and at attractive valuation as well, despite their strong fundamentals.

In our opinion, Synopsys (SNPS - Free Report) , Paycom Software (PAYC - Free Report) , Monolithic Power Systems (MPWR - Free Report) and CrowdStrike Holdings (CRWD - Free Report) are among the most beaten-down stocks in the technology space. Given the strength of their fundamentals and solid prospects, it seems wise to add these stocks to your portfolio.

Why Invest in the Aforementioned Stocks?

Amid the financial instability, it is a prudent idea to pick solid growth companies as these are financially stable, accruing profits in established markets. These stocks, with their solid fundamentals, allow investors to hedge their funds from any economic downturn.

Apart from having solid fundamentals, the long-term earnings growth rate for the aforementioned four stocks is more than 10%. These stocks also have a favorable combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Per the Zacks’ proprietary methodology, stocks with such a favorable combination offer solid investment opportunities.

Additionally, these stocks are currently trading way below their 52-week high and are now available at attractive valuations.

Our Picks

Synopsys is a vendor of electronic design automation (EDA) software to the semiconductor and electronics industries. It is benefiting from strong design wins due to a robust product portfolio.

The growth in the work-and-learn-from-home trend is driving the demand for bandwidth. The  increasing clout of AI, 5G and advanced driver-assistance systems chip-set making is fueling the demand for computational software tools, which favor Synopsys’ prospects. Given the company’s capability to cater to the growing complex design requirements of customers, we believe SNPS is well-poised to capitalize on this opportunity.

SNPS currently sports a Zacks Rank #1 and has a Growth Score of B. Shares of the company have plunged 21.2% YTD and currently trade 23.1% lower than its 52-week high of $377.60 attained on Dec 28, 2021. Moreover, the stock trades at a one-year forward price-to-earnings multiple of 31.25X compared with its five-year average of 41.17X.

The Zacks Consensus Estimate for Synopsys’ fiscal 2022 earnings has improved to $8.47 per share from $7.90 over the past 30 days, reflecting a year-over-year increase of 23.8%. For fiscal 2023, the consensus mark for earnings has been revised upward by 6.8% to $9.79 per share over the past 30 days, indicating year-over-year growth of 15.6%. The long-term earnings growth rate for the stock is pegged at 19.6%.

Paycom Software is a provider of cloud-based human capital management software as a service solution for integrated software for both employee records and talent management processes. The company’s latest quarterly results reflect continued growth despite disruptions caused by the COVID-19 pandemic. Its revenues increased mainly driven by new client additions and continued focus on cross-selling to existing clients.

The company’s differentiated employee strategy, measurement capabilities and comprehensive product offerings are helping it win new customers. Further, solutions like Ask Here and Manager on-the-Go, both focusing on employee usage and efficiency, are tailwinds.

PAYC currently sports a Zacks Rank #1 and a Growth Score of B. Shares of the company have plunged 35.3% YTD and currently trade 52% lower than its 52-week high of $558.97 attained on Nov 2, 2021. Moreover, the stock trades at a one-year forward price-to-earnings multiple of 43.6X compared with its five-year average of 77.99X.

The Zacks Consensus Estimate for Paycom Software’s 2022 earnings has improved by 7 cents to $5.53 per share over the past 60 days, suggesting a year-over-year increase of 23.4%. For 2023, the consensus mark for earnings has been revised upward by 6 cents to $6.92 per share over the past 60 days, indicating year-over-year growth of 25.1%. The long-term earnings growth rate for the stock is pegged at 25%.

Monolithic Power designs, develops and markets high-performance power solutions. The company focuses on the market for high-performance analog and mixed-signal integrated circuits. It is benefiting from solid demand across the automotive, industrial, computing and storage, and communications markets.

Monolithic Power is on track to expand capacity in 2022 well beyond $2 billion, which will ramp up new product revenues. It is likely to gain from the rapid deployment of 5G on the back of a robust portfolio of legacy routers, wireless applications and 5G networking infrastructure-related products.

Further, the company is witnessing sales growth in infotainment, lighting and Advanced Driver Assistance Systems products in the automotive market, which remains a positive. Moreover, MPWR’s deep-rooted partnerships with leading auto suppliers are expected to continue driving its top line in the days ahead.

MPWR currently sports a Zacks Rank #1 and has a Growth Score of B. Shares of the company have plunged 21% YTD and are currently trading 32.8% lower than its 52-week high of $580 attained on Nov 22, 2021. Moreover, the stock trades at a one-year forward price-to-earnings multiple of 31.12X compared with its five-year average of 50.03X.

The Zacks Consensus Estimate for Monolithic Power’s 2022 earnings has improved by 20.6% to $11.61 per share over the past 60 days, implying a year-over-year increase of 43.3%. For 2023, the consensus mark for earnings has been revised upward by 22.6% to $13.63 per share over the past 60 days, indicating year-over-year growth of 19.4%. The long-term earnings growth rate for the stock is pegged at 25%.

CrowdStrike is a leader in next-generation endpoint protection, threat intelligence and cyberattack response services. The company is benefiting from the rising demand for cyber-security solutions owing to the slew of data breaches and the increasing necessity for security and networking products amid the COVID-19 pandemic-led remote working trend.

Continued digital transformation and cloud-migration strategies adopted by organizations are key growth drivers. CrowdStrike’s portfolio strength, mainly the Falcon platform’s 10 cloud modules, boosts its competitive edge and helps add users. Additionally, strategic acquisitions, like that of Humio and Preempt, are expected to drive growth for the company.

CRWD currently carries a Zacks Rank #2 and has a Growth Score of A. Shares of the company have plunged 24.5% YTD and are currently trading 48.2% lower than its 52-week high of $298.48 on Nov 10, 2021. Moreover, the stock trades at a one-year forward price-to-sales multiple of 14.3X compared with its five-year average of 24.7X.

The Zacks Consensus Estimate for CrowdStrike’ fiscal 2023 earnings has improved by 12 cents to $1.24 per share over the past 30 days, implying a year-over-year increase of 85%. For fiscal 2024, the consensus mark for earnings has been revised upward by 10 cents to $1.75 per share over the past 30 days, indicating year-over-year growth of 41.4%. The long-term earnings growth rate for the stock is pegged at 38.9%.

CrowdStrike Price and Consensus

CrowdStrike Price and Consensus

CrowdStrike price-consensus-chart | CrowdStrike Quote

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