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Buy These 5 Tech Stocks That Have Lost Half Their Value
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The U.S. equity market has been witnessing a downturn since the beginning of 2022 due to prolonged macroeconomic headwinds like coronavirus pandemic-induced supply-chain challenges and ongoing geopolitical tensions, which have shot up the inflation rate.
A stubbornly high inflation rate has pushed the equity market into the negative territory, which is evident from 28.1%, 15.7% and 6.1% year-to-date declines in the Nasdaq composite, the S&P 500 and the Dow Jones Industrial Average indices, respectively.
The annual inflation rate is 7.1% for the 12 months ended November 2022,according to the U.S. Labor Department data published on Dec 13, 2022. Almost every sector, including technology, manufacturing, industrial and automotive, is witnessing slow growth due to aggravating fears of economic recession.
To counter the high inflation, the Federal Reserve hiked interest rates four times this year by 0.75 basis points on each occasion. Fed’s aggressive stance on inflation control is responsible for the huge sell-off in the broader equity market.
Nevertheless, the situation is likely to improve in the near term, as it is expected that Fed would spike the interest rates by 50 basis points this time instead of 75 basis points.
Against this backdrop, we advise investors looking for good investment opportunities to park their money in tech stocks with strong fundamentals.
Technology Sector Holds Promise
Although the technology sector has been suffering from supply-chain disruptions, it has shown maximum resiliency throughout the pandemic and is highly resistant to volatility.
Moreover, the said sector, which is widely-diversified, holds the potential to defy recessionary woes and minimize the anticipated contraction of the world economy despite rising interest rates, supply-chain constraints and geopolitical tensions.
Per The Express Wire report, the global technology market is expected to reach $3.2 billion by 2027, witnessing a CAGR of 25.7% during the 2022-2027 period.
The technology sector is continuously riding on ongoing worldwide digitization. Growing 5G deployments, the rising proliferation of cloud services, cybersecurity solutions, IoT, AI, machine learning, blockchain, autonomous driving technology and the increasing trend of hybrid work are likely to be the major tailwinds for technology companies.
Our Top Picks
Considering the above factors, here we recommend five technology stocks, which have lost half their values this year but are still worth buying as we enter 2023.
In this highly volatile situation, one should look for stocks that are undervalued or less valued but have bright growth prospects to ensure solid portfolio returns.
The following chart shows the price performance of the five picks in the year-to-date period.
Image Source: Zacks Investment Research
Shopify provides a multi-tenant, cloud-based, multi-channel commerce platform for small and medium-sized businesses. The company hosts a huge database of merchant and customer interactions in its platform.
Shopify, which has lost 71.9% in the year-to-date (YTD) period, is benefiting from strong growth in the merchant base. It has been focused on winning merchants regularly, based on product offerings, including Shop Pay and Shop Pay Installments. The solid adoption of new merchant-friendly applications holds promise. Partnerships with YouTube, Twitter, Facebook, Instagram and Google are expected to expand its merchant base in the days ahead.
SHOP has a market capitalization of $48.5 billion.
Datadog is a monitoring and analytics platform for developers, IT operations teams and business users in the cloud age. The company’s business runs around its portfolio of over 400 out-of-the-box integrations, including public cloud, private cloud, on-premise hardware, databases and third-party software.
Datadog, which has lost 55.3% YTD, is riding on new customer additions and increased adoption of its cloud-based monitoring and analytics platform, driven by accelerated digital transformation and cloud migration across organizations. The solid adoption of Synthetics and Network Performance Monitoring products is expected to aid customer wins in the near term. Contributions from a solid cloud partner base, including Google Cloud, Microsoft Azure and Amazon Web Services, remain a key growth driver besides an expanding portfolio.
DDOG has a market capitalization of $24.5 billion.
Zscaler is one of the world’s leading providers of cloud-based security solutions. Zscaler, which has lost 61.4% in the YTD period, offers a full range of enterprise network security services, including web security, internet security, antivirus, vulnerability management, firewalls, and control over user activity in mobile, cloud computing, and Internet of things environments.
Zscaler is benefiting from the rising demand for cyber-security solutions owing to the slew of data breaches. The increasing demand for privileged access security on digital transformation and cloud-migration strategies is a key growth driver. Zscaler’s portfolio strength boosts its competitive edge and helps it in expanding user base.
ZS has a market capitalization of $17.5 billion.
Cloudflare is a U.S.-based content delivery network and DDoS (distributed denial of service) mitigation company. It acts as a reverse proxy between a website’s visitor and Cloudflare customer’s hosting provider.
Cloudflare is riding on a growing customer base on the back of a robust portfolio of solutions. Moreover, its growing momentum among large customers remains a major tailwind. Notably, the company generates 61% of total revenues from large customers. Cloudflare has lost 60.6% in the year-to-date period.
NET has a market capitalization of $16.7 billion.
Twilio is a U.S.-based provider of programmable communication tools to help customers make and receive phone calls, send and receive text messages, and perform other communication functions using its web service APIs.
Twilio, which has lost 81.1% in the YTD period, is benefiting from accelerated digital transformation amid a growing hybrid working trend. Its selective acquisitions and strategic investments in businesses and technologies are enhancing its product portfolio and fortifying its global presence.
TWLO has a market capitalization of $8.9 billion.
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Buy These 5 Tech Stocks That Have Lost Half Their Value
The U.S. equity market has been witnessing a downturn since the beginning of 2022 due to prolonged macroeconomic headwinds like coronavirus pandemic-induced supply-chain challenges and ongoing geopolitical tensions, which have shot up the inflation rate.
A stubbornly high inflation rate has pushed the equity market into the negative territory, which is evident from 28.1%, 15.7% and 6.1% year-to-date declines in the Nasdaq composite, the S&P 500 and the Dow Jones Industrial Average indices, respectively.
The annual inflation rate is 7.1% for the 12 months ended November 2022,according to the U.S. Labor Department data published on Dec 13, 2022. Almost every sector, including technology, manufacturing, industrial and automotive, is witnessing slow growth due to aggravating fears of economic recession.
To counter the high inflation, the Federal Reserve hiked interest rates four times this year by 0.75 basis points on each occasion. Fed’s aggressive stance on inflation control is responsible for the huge sell-off in the broader equity market.
Nevertheless, the situation is likely to improve in the near term, as it is expected that Fed would spike the interest rates by 50 basis points this time instead of 75 basis points.
Against this backdrop, we advise investors looking for good investment opportunities to park their money in tech stocks with strong fundamentals.
Technology Sector Holds Promise
Although the technology sector has been suffering from supply-chain disruptions, it has shown maximum resiliency throughout the pandemic and is highly resistant to volatility.
Moreover, the said sector, which is widely-diversified, holds the potential to defy recessionary woes and minimize the anticipated contraction of the world economy despite rising interest rates, supply-chain constraints and geopolitical tensions.
Per The Express Wire report, the global technology market is expected to reach $3.2 billion by 2027, witnessing a CAGR of 25.7% during the 2022-2027 period.
The technology sector is continuously riding on ongoing worldwide digitization. Growing 5G deployments, the rising proliferation of cloud services, cybersecurity solutions, IoT, AI, machine learning, blockchain, autonomous driving technology and the increasing trend of hybrid work are likely to be the major tailwinds for technology companies.
Our Top Picks
Considering the above factors, here we recommend five technology stocks, which have lost half their values this year but are still worth buying as we enter 2023.
In this highly volatile situation, one should look for stocks that are undervalued or less valued but have bright growth prospects to ensure solid portfolio returns.
Our top picks include the likes of Shopify (SHOP - Free Report) , Datadog (DDOG - Free Report) , Zscaler (ZS - Free Report) , Cloudflare (NET - Free Report) and Twilio (TWLO - Free Report) . These have strong fundamentals, carry a Zacks Rank #2 (Buy) and have a market capitalization of $5 billion or more. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The following chart shows the price performance of the five picks in the year-to-date period.
Image Source: Zacks Investment Research
Shopify provides a multi-tenant, cloud-based, multi-channel commerce platform for small and medium-sized businesses. The company hosts a huge database of merchant and customer interactions in its platform.
Shopify, which has lost 71.9% in the year-to-date (YTD) period, is benefiting from strong growth in the merchant base. It has been focused on winning merchants regularly, based on product offerings, including Shop Pay and Shop Pay Installments. The solid adoption of new merchant-friendly applications holds promise. Partnerships with YouTube, Twitter, Facebook, Instagram and Google are expected to expand its merchant base in the days ahead.
SHOP has a market capitalization of $48.5 billion.
Datadog is a monitoring and analytics platform for developers, IT operations teams and business users in the cloud age. The company’s business runs around its portfolio of over 400 out-of-the-box integrations, including public cloud, private cloud, on-premise hardware, databases and third-party software.
Datadog, which has lost 55.3% YTD, is riding on new customer additions and increased adoption of its cloud-based monitoring and analytics platform, driven by accelerated digital transformation and cloud migration across organizations. The solid adoption of Synthetics and Network Performance Monitoring products is expected to aid customer wins in the near term. Contributions from a solid cloud partner base, including Google Cloud, Microsoft Azure and Amazon Web Services, remain a key growth driver besides an expanding portfolio.
DDOG has a market capitalization of $24.5 billion.
Zscaler is one of the world’s leading providers of cloud-based security solutions. Zscaler, which has lost 61.4% in the YTD period, offers a full range of enterprise network security services, including web security, internet security, antivirus, vulnerability management, firewalls, and control over user activity in mobile, cloud computing, and Internet of things environments.
Zscaler is benefiting from the rising demand for cyber-security solutions owing to the slew of data breaches. The increasing demand for privileged access security on digital transformation and cloud-migration strategies is a key growth driver. Zscaler’s portfolio strength boosts its competitive edge and helps it in expanding user base.
ZS has a market capitalization of $17.5 billion.
Cloudflare is a U.S.-based content delivery network and DDoS (distributed denial of service) mitigation company. It acts as a reverse proxy between a website’s visitor and Cloudflare customer’s hosting provider.
Cloudflare is riding on a growing customer base on the back of a robust portfolio of solutions. Moreover, its growing momentum among large customers remains a major tailwind. Notably, the company generates 61% of total revenues from large customers. Cloudflare has lost 60.6% in the year-to-date period.
NET has a market capitalization of $16.7 billion.
Twilio is a U.S.-based provider of programmable communication tools to help customers make and receive phone calls, send and receive text messages, and perform other communication functions using its web service APIs.
Twilio, which has lost 81.1% in the YTD period, is benefiting from accelerated digital transformation amid a growing hybrid working trend. Its selective acquisitions and strategic investments in businesses and technologies are enhancing its product portfolio and fortifying its global presence.
TWLO has a market capitalization of $8.9 billion.