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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, Adobe and Alphabet – could all be of significant interest to those with a bit of patience.
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.
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.
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.”
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.
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.
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.
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.
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, Adobe and Alphabet, 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.
Why Haven’t You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: Nvidia, Adobe and Alphabet
For Immediate Release
Chicago, IL – October 19, 2022 – Today, Zacks Investment Ideas feature highlights Nvidia (NVDA - Free Report) , Adobe (ADBE - Free Report) and Alphabet (GOOGL - Free Report) .
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, Adobe and Alphabet – could all be of significant interest to those with a bit of patience.
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.
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.
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.”
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.
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.
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.
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.
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, Adobe and Alphabet, 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.
Why Haven’t You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.