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.
Q1 2023 Belongs to Nasdaq Composite: Will Its Rally Continue?
Read MoreHide Full Article
Just a day of trading is left to conclude an eventful first quarter of 2023. We saw a pullback rally from the beginning of this year to mid-February buoyed by the Fed’s narrowing of the magnitude of the interest rate hike. However, the rally evaporated like many bear market rallies in 2022 as inflation remained stubborn and Fed Chairman Jerome Powell made it clear that the higher interest rate regime will continue for a longer-than-expected period.
The higher interest rate took its toll on the banking sector in the United States and Eurozone. This along with the recently released several weak economic data compelled the Fed to stick to a 25 basis-point rate hike in the March FOMC meeting and to reaffirm the terminal rate at 5.125%. Powell also said that the rate hike cycle is approaching its end.
Wall Street is set to close the first quarter on a mixed note. Of the three major stock indexes, The Dow — the best performer of 2022 — is down 0.9% year to date. The broad-market index — the S&P 500 — is up 5.5% so far this year. Surprisingly, the tech-heavy Nasdaq Composite has rallied 14.8% year to date.
Nasdaq Composite’s performance is primarily linked to the movement of interest rate. The performance of growth stocks like technology is inversely related to the interest rate trajectory. The Nasdaq Composite was the best performer in pandemic-ridden 2020 and 2021 as the Fed kept the benchmark interest rate to almost zero.
Just the opposite happened in 2022 as the central bank hiked the lending rate by a massive 4.5% to combat record-high inflation. The valuation of most of the technology behemoths plunged last year. The situation once again turned in favor of the Nasdaq Composite on expectation that rate hike is nearing its end.
Our Top Picks
We have narrowed our search to five technology giants (market capital > $50 billion) that have rallied more than 25% year to date. These stocks have strong potential for 2023 and have seen positive earnings estimate revisions in the past 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Meta Platforms Inc. (META - Free Report) is benefiting from steady user growth across all regions, particularly Asia Pacific. Increased engagement for its products like Instagram, WhatsApp, Messenger and Facebook has been a major growth driver. META is considered to have pioneered the concept of social networking.
However, as developed regions mature, Meta Platforms has taken measures to drive penetration in emerging markets of South East Asia, Latin America and Africa. Of all places, India deserves a special mention in terms of user growth. The world’s second-largest populated country offers tremendous potential for META. With China off the radar, India can prove to be a terrific growth engine for Meta.
Zacks Rank #1 Meta Platform has an expected revenue and earnings growth rate of 4.6% and 4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the past seven days. The stock price of META has soared 72.8% year to date.
Cadence Design Systems Inc. (CDNS - Free Report) offers products and tools that help customers design electronic products. Through the System Design Enablement strategy, CDNS offers software, hardware, services and reusable IC design blocks to electronic systems and semiconductor customers.
Cadence’s performance is being driven by strength across segments like digital & signoff solutions and functional verification suite. CDNS is also gaining from higher investments in emerging trends like IoT and autonomous vehicle sub-systems along with strength in the semiconductor end-market. Frequent product launches are expected to help CDNS sustain top-line growth.
Zacks Rank #1 Cadence Design Systems has an expected revenue and earnings growth rate of 13.4% and 16.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 10% over the past 60 days. The stock price of CDNS has advanced 28.9% year to date.
Airbnb Inc. (ABNB - Free Report) is riding on an improvement in the travel industry. Continued recovery in both longer-distance and cross-border travel owing to a reduction in travel restrictions is benefiting ABNB’s Nights & Experience bookings. Additionally, growth in average daily rates and gross booking value is a tailwind.
Growing active listings in Latin America, North America and EMEA are contributing well to the top line. Growing sales and marketing initiatives along with continuous efforts to upgrade various aspects of the Airbnb service are helping the company gain momentum among hosts and guests.
Zacks Rank #2 Airbnb has an expected revenue and earnings growth rate of 14.9% and 21.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 18.2% over the past 60 days. The stock price of ABNB has jumped 43.1% year to date.
Fortinet Inc. (FTNT - Free Report) is benefiting from rising demand for security and networking products amid the coronavirus crisis as a huge global workforce is working remotely. FTNT is also benefiting from robust growth in Fortinet Security Fabric, cloud and Software-defined Wide Area Network offerings.
Moreover, continued deal wins, especially those of high value, are solid drivers. Higher IT spending on cybersecurity is expected to aid Fortinet in growing faster than the security market. Also, focus on enhancing its unified threat management portfolio through product development and acquisitions is a tailwind for FTNT.
Zacks Rank #2 Fortinet has an expected revenue and earnings growth rate of 22.4% and 18.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the past seven days. The stock price of FTNT has surged 34.6% year to date.
Palo Alto Networks Inc. (PANW - Free Report) has been benefiting from continuous deal wins and the increasing adoption of PANW’s next-generation security platforms, attributable to the rise in the remote work environment and the need for stronger security.
Growing traction in Prisma and Cortex offerings is acting as a tailwind. PANW continues to acquire new customers and increase wallet share with existing customers. Our estimates suggests that Palo Alto’s revenues will witness a CAGR of 21.1% through fiscal 2023-2025.
Zacks Rank #2 Palo Alto Networks has an expected revenue and earnings growth rate of 25.2% and 59.1%, respectively, for the current year (ending July 2023). The Zacks Consensus Estimate for current-year earnings has improved 12.6% over the past 30 days. The stock price of PANW has climbed 38.8% year to date.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Q1 2023 Belongs to Nasdaq Composite: Will Its Rally Continue?
Just a day of trading is left to conclude an eventful first quarter of 2023. We saw a pullback rally from the beginning of this year to mid-February buoyed by the Fed’s narrowing of the magnitude of the interest rate hike. However, the rally evaporated like many bear market rallies in 2022 as inflation remained stubborn and Fed Chairman Jerome Powell made it clear that the higher interest rate regime will continue for a longer-than-expected period.
The higher interest rate took its toll on the banking sector in the United States and Eurozone. This along with the recently released several weak economic data compelled the Fed to stick to a 25 basis-point rate hike in the March FOMC meeting and to reaffirm the terminal rate at 5.125%. Powell also said that the rate hike cycle is approaching its end.
Wall Street is set to close the first quarter on a mixed note. Of the three major stock indexes, The Dow — the best performer of 2022 — is down 0.9% year to date. The broad-market index — the S&P 500 — is up 5.5% so far this year. Surprisingly, the tech-heavy Nasdaq Composite has rallied 14.8% year to date.
Nasdaq Composite’s performance is primarily linked to the movement of interest rate. The performance of growth stocks like technology is inversely related to the interest rate trajectory. The Nasdaq Composite was the best performer in pandemic-ridden 2020 and 2021 as the Fed kept the benchmark interest rate to almost zero.
Just the opposite happened in 2022 as the central bank hiked the lending rate by a massive 4.5% to combat record-high inflation. The valuation of most of the technology behemoths plunged last year. The situation once again turned in favor of the Nasdaq Composite on expectation that rate hike is nearing its end.
Our Top Picks
We have narrowed our search to five technology giants (market capital > $50 billion) that have rallied more than 25% year to date. These stocks have strong potential for 2023 and have seen positive earnings estimate revisions in the past 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Meta Platforms Inc. (META - Free Report) is benefiting from steady user growth across all regions, particularly Asia Pacific. Increased engagement for its products like Instagram, WhatsApp, Messenger and Facebook has been a major growth driver. META is considered to have pioneered the concept of social networking.
However, as developed regions mature, Meta Platforms has taken measures to drive penetration in emerging markets of South East Asia, Latin America and Africa. Of all places, India deserves a special mention in terms of user growth. The world’s second-largest populated country offers tremendous potential for META. With China off the radar, India can prove to be a terrific growth engine for Meta.
Zacks Rank #1 Meta Platform has an expected revenue and earnings growth rate of 4.6% and 4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the past seven days. The stock price of META has soared 72.8% year to date.
Cadence Design Systems Inc. (CDNS - Free Report) offers products and tools that help customers design electronic products. Through the System Design Enablement strategy, CDNS offers software, hardware, services and reusable IC design blocks to electronic systems and semiconductor customers.
Cadence’s performance is being driven by strength across segments like digital & signoff solutions and functional verification suite. CDNS is also gaining from higher investments in emerging trends like IoT and autonomous vehicle sub-systems along with strength in the semiconductor end-market. Frequent product launches are expected to help CDNS sustain top-line growth.
Zacks Rank #1 Cadence Design Systems has an expected revenue and earnings growth rate of 13.4% and 16.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 10% over the past 60 days. The stock price of CDNS has advanced 28.9% year to date.
Airbnb Inc. (ABNB - Free Report) is riding on an improvement in the travel industry. Continued recovery in both longer-distance and cross-border travel owing to a reduction in travel restrictions is benefiting ABNB’s Nights & Experience bookings. Additionally, growth in average daily rates and gross booking value is a tailwind.
Growing active listings in Latin America, North America and EMEA are contributing well to the top line. Growing sales and marketing initiatives along with continuous efforts to upgrade various aspects of the Airbnb service are helping the company gain momentum among hosts and guests.
Zacks Rank #2 Airbnb has an expected revenue and earnings growth rate of 14.9% and 21.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 18.2% over the past 60 days. The stock price of ABNB has jumped 43.1% year to date.
Fortinet Inc. (FTNT - Free Report) is benefiting from rising demand for security and networking products amid the coronavirus crisis as a huge global workforce is working remotely. FTNT is also benefiting from robust growth in Fortinet Security Fabric, cloud and Software-defined Wide Area Network offerings.
Moreover, continued deal wins, especially those of high value, are solid drivers. Higher IT spending on cybersecurity is expected to aid Fortinet in growing faster than the security market. Also, focus on enhancing its unified threat management portfolio through product development and acquisitions is a tailwind for FTNT.
Zacks Rank #2 Fortinet has an expected revenue and earnings growth rate of 22.4% and 18.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the past seven days. The stock price of FTNT has surged 34.6% year to date.
Palo Alto Networks Inc. (PANW - Free Report) has been benefiting from continuous deal wins and the increasing adoption of PANW’s next-generation security platforms, attributable to the rise in the remote work environment and the need for stronger security.
Growing traction in Prisma and Cortex offerings is acting as a tailwind. PANW continues to acquire new customers and increase wallet share with existing customers. Our estimates suggests that Palo Alto’s revenues will witness a CAGR of 21.1% through fiscal 2023-2025.
Zacks Rank #2 Palo Alto Networks has an expected revenue and earnings growth rate of 25.2% and 59.1%, respectively, for the current year (ending July 2023). The Zacks Consensus Estimate for current-year earnings has improved 12.6% over the past 30 days. The stock price of PANW has climbed 38.8% year to date.