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3 Top Tech Stocks to Buy on a Likely Rate Hike Pause
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Inflation at the moment has started to show signs of cooling down both at the consumer and producer levels. Consumer prices in the United States recently fell below the coveted 5% mark for the first time in two years, while wholesale prices moderated.
This new development raised expectations that the Federal Reserve may lower rate hikes, a win-win situation for tech players. Thus, investors should consider sound tech companies such as Meta Platforms, Inc. (META - Free Report) , Broadcom Inc. (AVGO - Free Report) and CrowdStrike Holdings, Inc. (CRWD - Free Report) .
Inflation Pressures Ease
The Labor Department added that the Consumer Price Index (CPI) may have increased 0.4% month over month in April, but over the past 12-month period, the CPI has risen 4.9%, and that’s down from the 5% year-over-year increase in March. It’s also way below the 9.1% increase in the summer of last year, which by the way was the fastest increase since 1981.
The core rate of inflation did increase by 5.5% over the past 12 months in April. However, that’s down from March’s annual gain of 5.6%, and less than last fall’s high of 6.6%. In reality, an increase in shelter costs, to some extent, pushed the headline inflation higher. But the increase in shelter costs itself is coming down. Shelter costs increased 0.4% in April, but that’s the lowest gain in a year.
Wholesale prices, too, increased less than the estimate, providing more hope that inflation is ebbing. The Labor Department added that the Producer Price Index (PPI) increased 0.2% month over month in April, but that’s less than the Dow Jones estimate of an increase of 0.3%. On the other hand, the headline PPI rose just 2.3% year over year in April, less than the 2.7% increase in March. It also registered its lowest reading since January 2021.
Tech Stocks Poised to Benefit
With inflation starting to show signs of moderating, market pundits are now expecting that the Fed may refrain from hiking interest rates further, particularly in its next meeting to be held in mid-June. Having said that, the Fed-rate-hike cycle may not be completely over, but surely the central bank will ease off on interest rates. The Fed is also in no mood to push the economy into a recession through its aggressive monetary policy at a time when the economy is in the tank due to the ongoing banking disorder.
Thus, with the likelihood of interest rate hikes slowing down, growth-oriented tech stocks are positioned to gain the most. This is because higher interest rates generally impact tech stocks’ future cash inflows. In the process, it reduces tech companies’ ability to reinvestment in innovation, thereby disrupting growth prospects. Needless to say, a rate hike increases the cost of borrowings of tech companies, which burns cash and increases losses.
3 Solid Choices
Thus, with tech stocks now poised to gain traction, it’s prudent for investors to place their bets on the following solid tech companies that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) and have a Growth Score of A or B, a combination that offers the best opportunities in the growth investing space. You can see the complete list of today’s Zacks Rank #1 stocks here.
Meta Platforms is the world’s largest social media platform. An uptick in its user growth mostly in the Asia Pacific region, along with an increase in engagement in its various products like Facebook, Instagram, and WhatsApp, to name a few, is primarily driving growth.
META has a Zacks Rank #1 and a Growth Score of B. The Zacks Consensus Estimate for its current-year earnings has moved up 20.2% over the past 60 days. The company’s expected earnings growth rate for the current year is 19.6%.
Broadcom is a premier designer, developer and global supplier of a broad range of semiconductor devices. The company’s VMware acquisition, along with growth in its storage connectivity and strength in networking should boost its growth prospects.
AVGO has a Zacks Rank #2 and a Growth Score of B. The Zacks Consensus Estimate for its current-quarter earnings has moved up 0.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 9.5%.
CrowdStrike Holdings is a leader in next-generation endpoint protection, threat intelligence, and cyberattack response services. Thanks to a flurry of data breaches in recent times, demand for cyber security solutions has increased, thereby benefiting CrowdStrike.
CRWD has a Zacks Rank #2 and a Growth Score of B. The Zacks Consensus Estimate for its current-year earnings has moved up 3.1% over the past 60 days. The company’s expected earnings growth rate for the current year is 49.4%.
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3 Top Tech Stocks to Buy on a Likely Rate Hike Pause
Inflation at the moment has started to show signs of cooling down both at the consumer and producer levels. Consumer prices in the United States recently fell below the coveted 5% mark for the first time in two years, while wholesale prices moderated.
This new development raised expectations that the Federal Reserve may lower rate hikes, a win-win situation for tech players. Thus, investors should consider sound tech companies such as Meta Platforms, Inc. (META - Free Report) , Broadcom Inc. (AVGO - Free Report) and CrowdStrike Holdings, Inc. (CRWD - Free Report) .
Inflation Pressures Ease
The Labor Department added that the Consumer Price Index (CPI) may have increased 0.4% month over month in April, but over the past 12-month period, the CPI has risen 4.9%, and that’s down from the 5% year-over-year increase in March. It’s also way below the 9.1% increase in the summer of last year, which by the way was the fastest increase since 1981.
The core rate of inflation did increase by 5.5% over the past 12 months in April. However, that’s down from March’s annual gain of 5.6%, and less than last fall’s high of 6.6%. In reality, an increase in shelter costs, to some extent, pushed the headline inflation higher. But the increase in shelter costs itself is coming down. Shelter costs increased 0.4% in April, but that’s the lowest gain in a year.
Wholesale prices, too, increased less than the estimate, providing more hope that inflation is ebbing. The Labor Department added that the Producer Price Index (PPI) increased 0.2% month over month in April, but that’s less than the Dow Jones estimate of an increase of 0.3%. On the other hand, the headline PPI rose just 2.3% year over year in April, less than the 2.7% increase in March. It also registered its lowest reading since January 2021.
Tech Stocks Poised to Benefit
With inflation starting to show signs of moderating, market pundits are now expecting that the Fed may refrain from hiking interest rates further, particularly in its next meeting to be held in mid-June. Having said that, the Fed-rate-hike cycle may not be completely over, but surely the central bank will ease off on interest rates. The Fed is also in no mood to push the economy into a recession through its aggressive monetary policy at a time when the economy is in the tank due to the ongoing banking disorder.
Thus, with the likelihood of interest rate hikes slowing down, growth-oriented tech stocks are positioned to gain the most. This is because higher interest rates generally impact tech stocks’ future cash inflows. In the process, it reduces tech companies’ ability to reinvestment in innovation, thereby disrupting growth prospects. Needless to say, a rate hike increases the cost of borrowings of tech companies, which burns cash and increases losses.
3 Solid Choices
Thus, with tech stocks now poised to gain traction, it’s prudent for investors to place their bets on the following solid tech companies that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) and have a Growth Score of A or B, a combination that offers the best opportunities in the growth investing space. You can see the complete list of today’s Zacks Rank #1 stocks here.
Meta Platforms is the world’s largest social media platform. An uptick in its user growth mostly in the Asia Pacific region, along with an increase in engagement in its various products like Facebook, Instagram, and WhatsApp, to name a few, is primarily driving growth.
META has a Zacks Rank #1 and a Growth Score of B. The Zacks Consensus Estimate for its current-year earnings has moved up 20.2% over the past 60 days. The company’s expected earnings growth rate for the current year is 19.6%.
Broadcom is a premier designer, developer and global supplier of a broad range of semiconductor devices. The company’s VMware acquisition, along with growth in its storage connectivity and strength in networking should boost its growth prospects.
AVGO has a Zacks Rank #2 and a Growth Score of B. The Zacks Consensus Estimate for its current-quarter earnings has moved up 0.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 9.5%.
CrowdStrike Holdings is a leader in next-generation endpoint protection, threat intelligence, and cyberattack response services. Thanks to a flurry of data breaches in recent times, demand for cyber security solutions has increased, thereby benefiting CrowdStrike.
CRWD has a Zacks Rank #2 and a Growth Score of B. The Zacks Consensus Estimate for its current-year earnings has moved up 3.1% over the past 60 days. The company’s expected earnings growth rate for the current year is 49.4%.