Stocks surged Tuesday on signs that the long-awaited economic stimulus deal might be signed in Washington. On top of that, the Fed on Monday said it would purchase practically unlimited amounts of government debt to help provide liquidity and extend loans to big and small businesses amid the coronavirus economic downturn.
The coronavirus selloff saw the S&P 500 fall 30% in 22 days, which was the fastest ever recorded. Despite Tuesday’s jump, with all three major U.S. indexes up around 7% through morning trading—and the Dow up 8.4%—the uncertainty of the spreading coronavirus and its economic impact creates a rough spot for Wall Street.
With that said, longer-term investors don’t need to attempt to call a bottom, which is often only truly possible in hindsight. Instead, investors can start to take smaller positions in solid companies, with long-term growth prospects.
Today, we break down three growth-focused tech stocks that investors might want to consider buying, or at least putting on their watchlists as the U.S. government tries to help stabilize the market and the economy as the coronavirus spreads.
ServiceNow (NOW - Free Report)
ServiceNow was founded in 2004, went public in 2012, and was added to the S&P 500 index in November. The firm provides cloud-based services and solutions to its over 6,200 enterprise customers, which includes “nearly 80% of the Fortune 500.” ServiceNow’s tagline is that it “makes work, work better for people.” The digital workflow company topped our Q4 estimates at the end of January and earlier this month it introduced new artificial intelligence features to its business software aimed to help fix practical problems.
Last summer, ServiceNow expanded its partnership with Microsoft (MSFT - Free Report) to help NOW sell to highly regulated industries and house its full SaaS offerings on MSFT’s Azure cloud—one of Amazon’s (AMZN - Free Report) biggest rivals. The company has also continued to expand its larger customer base and it closed fiscal 2019 with 892 total customers with over $1 million in annual contract value, up 32%.
Looking ahead, our Zacks estimates call for NOW’s sales to climb 28% in 2020 and another 26.5% in fiscal 2021 to hit $5.59 billion, which would come on top of 2019’s 33% expansion. Meanwhile, its adjusted earnings are projected to soar 29% in both 2020 and 2021 to reach $5.52 a share. NOW is currently a Zacks Rank #3 (Hold) that rocks an “A” grade for Growth in our Style Scores system.
ServiceNow appears to be a solid longer-term buy given its ability to expand as more businesses transform their operations for the digital age. Plus, CFO Gina Mastantuono said last quarter it’s looking to “scale our business to $10 billion in revenue and beyond.” NOW shares have soared in recent years, but they are down about 23% from their 52-week highs. ServiceNow is certainly not a value play, but it is trading at its lowest forward sales multiple in the last 12 months.
CrowdStrike (CRWD - Free Report)
CrowdStrike was founded in 2011 and went public in June 2019. The firm focuses on cloud-delivered endpoint protection “built to stop breaches.” CRWD shares have soared over 55% since last Monday and it topped our Q4 fiscal 2020 earnings and revenue estimates on March 19. The cybersecurity firm also provided upbeat guidance amid the ongoing coronavirus economic downturn that has forced many to work remotely.
The firm’s free cash flow came in at $12.5 million, against 2019’s negative $65.6 million. Plus, CrowdStrike has attracted larger clients to its SaaS subscription-based model. Despite CrowdStrike’s recent climb, CRWD stock rests 45% below its 52-week highs. And its strong longer-term earnings revision picture helps it hold a Zacks Rank #1 (Strong Buy) right now. And despite the firm providing conservative, coronavirus-based guidance, it still came in far above Wall Street estimate.
Our Zacks estimates call for the company’s fiscal 2021 revenue to surge 52% to reach $730.06 million, with its 2022 sales set to jump another 28% higher to $936.31 million. Plus, CRWD’s adjusted fiscal year loss is expected to be cut in half from -$0.42 to -$0.21 a share in 2020. Then it is projected to post positive adjusted earnings of +$0.04 in FY22.
In the end, CrowdStrike appears to be somewhat immune to the coronavirus selloff because as firms big and small start to work remotely, their cybersecurity concerns hardly disappear. CrowdStrike also clearly looks poised to grow in the long run as part of the growing cybersecurity industry, which means now might not be the worst time to think about taking a small position in the tech stock trading at $55 a share.
Nvidia (NVDA - Free Report)
Nvidia is a GPU giant that returned to growth and wowed Wall Street when it easily topped our fourth fiscal 2020 earnings and revenue estimates in mid-February. NVDA’s video game business remains strong as its graphics chips provide more realistic gameplay to the $152 billion global gaming market. Perhaps more importantly, it has expanded its data center business, which is vital in the cloud computing age.
Plus, the company is set to benefit from the expansion of artificial intelligence, IoT, and more.“New NVIDIA computing applications in 5G, genomics, robotics and autonomous vehicles enable us to continue important work that has great impact,” CEO Jensen Huang said in prepared remarks. “We are well positioned for the greatest technology trends of our time.”
Nvidia’s longer-term earnings revisions have soared since it reported to help it earn a Zacks Rank #2 (Buy), alongside an “A” grade for Growth. NVDA’s adjusted fiscal 2021 earnings are projected to jump over 32% on the back of 20.2% higher sales. The company’s 2022 sales are then set to jump 16% higher to lift its EPS figure by over 19%.
NVDA stock has also already showed signs of a comeback after its initial coronavirus selloff. Shares of Nvidia have soared over 25% since Monday, March 16. Yet they still rest over 22% below their 52-week highs. And NVDA pays a dividend, even though its yield rests at only 0.30%.
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