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5 Technology Bigwigs to Buy to Gain From Fed-Led Rally
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Wall Street saw an impressive rally on Jul 27 after the Fed raised the benchmark lending rate by 75 basis points. This came as a major relief to market participants as a section of them were expecting a 1% rate hike after inflation skyrocketed in June.
Moreover, for the first time since March (when Fed started raising rates after pandemic), Fed Chairman has indicated that the magnitude of the rate hike may decline going forward depending on data.
Wall Street is witnessing a welcome rally in July after reeling under severe volatility in the first half of 2022. The rally is expected to gain pace after the Fed revealed its July FOMC decisions. The technology sector is likely to benefit the most it has also suffered the most year to date.
We have selected five technology giants with a favorable Zacks Rank. These are - CrowdStrike Holdings Inc. (CRWD - Free Report) , Motorola Solutions Inc. (MSI - Free Report) , Synopsys Inc. (SNPS - Free Report) , Intuit Inc. (INTU - Free Report) and Palo Alto Networks Inc. (PANW - Free Report) .
Rate Hike In Line With Expectation
After the conclusion of the July FOMC meeting, Fed Chairman Jerome Powell in his statement said that the central bank has decided to raise the Fed Fund rate by another 75 basis points after June. As a result, the range of the benchmark interest rate has gone up to 2.25 -2.50%. The moves in June and July represent the most stringent consecutive action since the early 1990s.
Most importantly, Fed Chairman has indicated that the central bank may reduce the magnitude of rate hikes going forward depending on data. According to Powell, “As the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation.” The next FOMC meeting will be in September.
Moreover, the Fed Chair said that he does not think the economy is in recession or will be in recession in the near future. “Think about what a recession is. It’s a broad-based decline across many industries that’s sustained more than a couple of months. This doesn’t seem like that now. The real reason is the labor market has been such a strong signal of economic strength that it makes you question the GDP data,” Powell said.
Following Fed Chairman’s comment, Wall Street had a strong rally. The three major stock indexes – the Dow, the S&P 500 and the Nasdaq Composite – have advanced 1.4%, 2.6% and 4.1%, respectively. The tech-laden Nasdaq Composite recorded its best single-day performance since April 2020. Month to date, these indexes have rallied 4.6%, 6.3% and 9.1%, respectively.
Technology is the Best Bet for Recovery
The technology sector witnessed a meteoric rise in the last two coronavirus-ridden years. Therefore, Wall Street started 2022 with a highly overvalued technology sector. Therefore, investors started profit booking in these stocks. Moreover, a higher interest rate is detrimental to growth sectors like technology. Consequently, the technology sector has suffered significantly year to date.
However, the recent meltdown of the technology sector is a temporary phenomenon. The fundamentals of this sector are rock solid. We must not forget that the growing demand for hi-tech superior products has been a catalyst for the sector in an otherwise tough environment. At present, this sector is highly lucrative as a long list of tech behemoths are available at attractive valuations.
A series of breakthroughs in 5G wireless network, cloud computing, predictive analysis, AI, self-driving vehicles, digital personal assistants and IoT, has given a boost to the overall space. Consequently, the technology sector has vast potential.
Our Top Picks
We have narrowed our search to five technology bigwigs that have strong potential for the rest of 2022. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our five picks in the past month.
Image Source: Zacks Investment Research
CrowdStrike Holdings is benefiting from the rising demand for cyber-security solutions owing to a slew of data breaches and the increasing necessity for security and networking products amid the COVID-19 pandemic-led remote working trend.
Continued digital transformation and cloud-migration strategies adopted by organizations are the key growth drivers. CRWD’s portfolio strength, mainly the Falcon platform’s 10 cloud modules, boosts its competitive edge and helps add users. Strategic acquisitions, like that of Humio and Preempt, are expected to drive growth for CrowdStrike Holdings.
CRWD has an expected earnings growth rate of 83.6% for the current fiscal-year (ending January 2023). The Zacks Consensus Estimate for current fiscal-year earnings has improved 9.8% over the last 60 days.
Palo Alto Networks has been benefiting from continuous deal wins and the increasing adoption of its 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 are acting as a tailwind. PANW continues to acquire new customers and increase wallet share with existing customers. Palo Alto Networks’ higher sales incentives related to next-generation Security products are likely to continue to negatively impact its bottom line.
PANW has an expected earnings growth rate of 24.3% for the current fiscal-year (ending July 2023). The Zacks Consensus Estimate for current fiscal-year earnings has improved 0.2% over the last 60 days.
Synopsys is benefiting from strong design wins owing to a robust product portfolio. Growth in the work-and-learn-from-home trend is driving demand for bandwidth. Moreover, strong traction for SNPS’ Fusion Compiler product boosted the top line.
Growing demand for advanced technology, design, IP and security solutions is also creating solid prospects for Synopsys. Moreover, the rising impact of artificial intelligence, 5G, Internet of Things and big data are driving investments in new compute and machine learning architectures.
Synopsys has an expected earnings growth rate of 26.8% for the current year (October 2022). The Zacks Consensus Estimate for its current-year earnings has improved 9.7% over the last 60 days.
Intuit is benefiting from strong momentum in online ecosystem revenues and solid professional tax revenues. The TurboTax Live offering is also driving growth in the Consumer tax business. Solid momentum in INTU’s lending product, QuickBooks Capital, remains a positive. Moreover, Intuit’s strategy of shifting its business to cloud-based subscription model will help generate stable revenues over the long run.
Intuit has an expected earnings growth rate of 16.3% for the current year (ending July 2023). The Zacks Consensus Estimate for its current-year earnings has improved 0.3% over the last 60 days.
Motorola is witnessing healthy demand trends in video security, command center software and land mobile radio services, while the demand for professional and commercial radio is rising. MSI is well poised to benefit from holistic growth initiatives, disciplined capital distribution and a favorable macroeconomic environment.
The acquisition of 911 Datamaster will facilitate Motorola to boost its organizational workflows as it aims to migrate to NG9-1-1 technologies. MSI reiterated its earlier bullish guidance for 2022.
Motorola has an expected earnings growth rate of 7.8% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 0.1% over the last 30 days.
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5 Technology Bigwigs to Buy to Gain From Fed-Led Rally
Wall Street saw an impressive rally on Jul 27 after the Fed raised the benchmark lending rate by 75 basis points. This came as a major relief to market participants as a section of them were expecting a 1% rate hike after inflation skyrocketed in June.
Moreover, for the first time since March (when Fed started raising rates after pandemic), Fed Chairman has indicated that the magnitude of the rate hike may decline going forward depending on data.
Wall Street is witnessing a welcome rally in July after reeling under severe volatility in the first half of 2022. The rally is expected to gain pace after the Fed revealed its July FOMC decisions. The technology sector is likely to benefit the most it has also suffered the most year to date.
We have selected five technology giants with a favorable Zacks Rank. These are - CrowdStrike Holdings Inc. (CRWD - Free Report) , Motorola Solutions Inc. (MSI - Free Report) , Synopsys Inc. (SNPS - Free Report) , Intuit Inc. (INTU - Free Report) and Palo Alto Networks Inc. (PANW - Free Report) .
Rate Hike In Line With Expectation
After the conclusion of the July FOMC meeting, Fed Chairman Jerome Powell in his statement said that the central bank has decided to raise the Fed Fund rate by another 75 basis points after June. As a result, the range of the benchmark interest rate has gone up to 2.25 -2.50%. The moves in June and July represent the most stringent consecutive action since the early 1990s.
Most importantly, Fed Chairman has indicated that the central bank may reduce the magnitude of rate hikes going forward depending on data. According to Powell, “As the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation.” The next FOMC meeting will be in September.
Moreover, the Fed Chair said that he does not think the economy is in recession or will be in recession in the near future. “Think about what a recession is. It’s a broad-based decline across many industries that’s sustained more than a couple of months. This doesn’t seem like that now. The real reason is the labor market has been such a strong signal of economic strength that it makes you question the GDP data,” Powell said.
Following Fed Chairman’s comment, Wall Street had a strong rally. The three major stock indexes – the Dow, the S&P 500 and the Nasdaq Composite – have advanced 1.4%, 2.6% and 4.1%, respectively. The tech-laden Nasdaq Composite recorded its best single-day performance since April 2020. Month to date, these indexes have rallied 4.6%, 6.3% and 9.1%, respectively.
Technology is the Best Bet for Recovery
The technology sector witnessed a meteoric rise in the last two coronavirus-ridden years. Therefore, Wall Street started 2022 with a highly overvalued technology sector. Therefore, investors started profit booking in these stocks. Moreover, a higher interest rate is detrimental to growth sectors like technology. Consequently, the technology sector has suffered significantly year to date.
However, the recent meltdown of the technology sector is a temporary phenomenon. The fundamentals of this sector are rock solid. We must not forget that the growing demand for hi-tech superior products has been a catalyst for the sector in an otherwise tough environment. At present, this sector is highly lucrative as a long list of tech behemoths are available at attractive valuations.
A series of breakthroughs in 5G wireless network, cloud computing, predictive analysis, AI, self-driving vehicles, digital personal assistants and IoT, has given a boost to the overall space. Consequently, the technology sector has vast potential.
Our Top Picks
We have narrowed our search to five technology bigwigs that have strong potential for the rest of 2022. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our five picks in the past month.
Image Source: Zacks Investment Research
CrowdStrike Holdings is benefiting from the rising demand for cyber-security solutions owing to a slew of data breaches and the increasing necessity for security and networking products amid the COVID-19 pandemic-led remote working trend.
Continued digital transformation and cloud-migration strategies adopted by organizations are the key growth drivers. CRWD’s portfolio strength, mainly the Falcon platform’s 10 cloud modules, boosts its competitive edge and helps add users. Strategic acquisitions, like that of Humio and Preempt, are expected to drive growth for CrowdStrike Holdings.
CRWD has an expected earnings growth rate of 83.6% for the current fiscal-year (ending January 2023). The Zacks Consensus Estimate for current fiscal-year earnings has improved 9.8% over the last 60 days.
Palo Alto Networks has been benefiting from continuous deal wins and the increasing adoption of its 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 are acting as a tailwind. PANW continues to acquire new customers and increase wallet share with existing customers. Palo Alto Networks’ higher sales incentives related to next-generation Security products are likely to continue to negatively impact its bottom line.
PANW has an expected earnings growth rate of 24.3% for the current fiscal-year (ending July 2023). The Zacks Consensus Estimate for current fiscal-year earnings has improved 0.2% over the last 60 days.
Synopsys is benefiting from strong design wins owing to a robust product portfolio. Growth in the work-and-learn-from-home trend is driving demand for bandwidth. Moreover, strong traction for SNPS’ Fusion Compiler product boosted the top line.
Growing demand for advanced technology, design, IP and security solutions is also creating solid prospects for Synopsys. Moreover, the rising impact of artificial intelligence, 5G, Internet of Things and big data are driving investments in new compute and machine learning architectures.
Synopsys has an expected earnings growth rate of 26.8% for the current year (October 2022). The Zacks Consensus Estimate for its current-year earnings has improved 9.7% over the last 60 days.
Intuit is benefiting from strong momentum in online ecosystem revenues and solid professional tax revenues. The TurboTax Live offering is also driving growth in the Consumer tax business. Solid momentum in INTU’s lending product, QuickBooks Capital, remains a positive. Moreover, Intuit’s strategy of shifting its business to cloud-based subscription model will help generate stable revenues over the long run.
Intuit has an expected earnings growth rate of 16.3% for the current year (ending July 2023). The Zacks Consensus Estimate for its current-year earnings has improved 0.3% over the last 60 days.
Motorola is witnessing healthy demand trends in video security, command center software and land mobile radio services, while the demand for professional and commercial radio is rising. MSI is well poised to benefit from holistic growth initiatives, disciplined capital distribution and a favorable macroeconomic environment.
The acquisition of 911 Datamaster will facilitate Motorola to boost its organizational workflows as it aims to migrate to NG9-1-1 technologies. MSI reiterated its earlier bullish guidance for 2022.
Motorola has an expected earnings growth rate of 7.8% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 0.1% over the last 30 days.