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Buy These 4 Tech Stocks That Can Carry the Momentum Further
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Tech stocks have made a remarkable comeback in 2023 after a massive sell-off in 2022 on recession concerns, inflationary pressure, increased oil prices and higher interest rates. With a year-to-date (YTD) rise of 36.5%, the tech-laden Nasdaq Composite has outperformed The Dow Jones Industrial Average and the S&P 500 index’s increase of 6.1% and 18.4%, respectively.
Technology stocks have more than 50% of weightage in the Nasdaq Composite index. Technology Select Sector SPDR, the most important component of the broad market index, has returned 49% YTD.
With persistent inflationary pressure and weak demand, the fears of recession have not subsided yet. Therefore, investors should look for fundamentally strong technology stocks that have sustained the market jitters so far and have the potential to carry the momentum further.
Here, the Zacks Stock Screener comes in handy. With the help of this Zacks tool, we have narrowed our search to four tech companies — NVIDIA Corporation (NVDA - Free Report) , Meta Platforms, Inc. (META - Free Report) , Cloudflare, Inc. (NET - Free Report) and Workday, Inc. (WDAY - Free Report) — that have outpaced the gains of broader market indexes. Year to date, NVDA, META, NET and WDAY stocks have surged 245.6%, 182.5%, 61% and 41.6%, respectively.
Moreover, these stocks have a favorable combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or #2 (Buy). The Growth Style Score condenses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of its growth. Additionally, per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 or #2 and a Growth Score of A or B offer solid investment opportunities.
Our Picks
NVIDIA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit or GPU. Over the years, the company’s focus has evolved from PC graphics to AI-based solutions that now support high-performance computing (HPC), gaming and virtual reality (VR) platforms. The stock currently sports a Zacks Rank #1 and has a Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company is gaining from the strong growth of AI, HPC and accelerated computing, which is boosting its Compute & Networking revenues. Its data center end-market business is benefiting from the growing demand for generative AI and large language models using GPUs based on NVIDIA Hopper and Ampere architectures.
A surge in Hyperscale demand and a solid uptake of AI-based smart cockpit infotainment solutions are acting as tailwinds for NVDA. The collaboration with Mercedes-Benz and Audi is likely to advance NVIDIA’s presence in the autonomous vehicle and other automotive electronic space.
The Zacks Consensus Estimate for fiscal 2024 earnings has been revised upward by 7 cents in the past seven days to $10.89 per share, which calls for an increase of 226.1% on a year-over-year basis. The long-term expected earnings growth rate for the stock is pegged at 13.5%.
Meta Platforms is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like the photo and video sharing app Instagram and the WhatsApp messaging app due to acquisitions. Along with in-house developed Messenger, these apps now form Meta’s family of products used by almost 3.96 billion people on a monthly basis as of Sep 30, 2023.
Meta Platforms is benefiting from steady user growth across all regions, particularly the Asia Pacific. Increased engagement for its offerings like Instagram, WhatsApp, Messenger and Facebook has been a major growth driver. The company is leveraging AI to recommend Reel content, which is driving traffic on Instagram and Facebook. Its innovative portfolio, which includes Threads, Reels and Llama 2, is likely to aid prospects.
The company carries a Zacks Rank #2 and has a Growth Score of A. The Zacks Consensus Estimate for 2023 earnings has been revised upward by 4.3% to $14.18 per share in the past 30 days, suggesting a 44.3% year-over-year increase. The long-term earnings growth expectation for the company is 21.3%.
Cloudflare is a global cloud services provider that delivers a suite of deeply integrated products, including website and application services solutions, Cloudflare One, developer-based solutions and consumer offerings. Its products and services network spans over 275 cities in more than 100 countries globally. The company’s network includes more than 11,500 major Internet Service Providers, cloud service providers and enterprises.
Cloudflare is benefiting from an increasing customer base due to a robust portfolio of security solutions. Growing momentum among large customers remains a major tailwind. Aggravated cyberattacks, hybrid working trends and a zero-trust approach are aiding it in winning multiple clients and boosting revenues.
A continuous focus on client retention based on high client satisfaction is driving the dollar-based net retention rate. In the third quarter of 2023, the company’s dollar-based net retention rate was 116%.
Currently, Cloudflare carries a Zacks Rank #2 and has a Growth Score of A. The Zacks Consensus Estimate for 2023 earnings has moved 9 cents north in 30 days to 46 cents per share, indicating a whopping 253.9% increase on a year-over-year basis. The long-term earnings growth rate is pegged at 53.5%.
Workday is a provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system that makes it easier for organizations to provide analytical insights and decision support.
Solid momentum in the human capital and financial management portfolio is driving Workday’s top line. In addition, the company’s cloud-based business model is increasingly gaining traction. A strong emphasis on the integration of generative AI into Workday products and the development of various AI-driven applications to drive more value is a positive factor. The partnership with Accenture to expedite the development of financial management solutions is likely to improve commercial prospects.
The Zacks Consensus Estimate for fiscal 2024 earnings has remained unchanged at $5.58 per share in the past 60 days, suggesting year-over-year growth of 53.3%. This Zacks Rank #2 stock has a Growth Score of B and has an estimated long-term earnings growth rate of 26.8%.
Image: Bigstock
Buy These 4 Tech Stocks That Can Carry the Momentum Further
Tech stocks have made a remarkable comeback in 2023 after a massive sell-off in 2022 on recession concerns, inflationary pressure, increased oil prices and higher interest rates. With a year-to-date (YTD) rise of 36.5%, the tech-laden Nasdaq Composite has outperformed The Dow Jones Industrial Average and the S&P 500 index’s increase of 6.1% and 18.4%, respectively.
Technology stocks have more than 50% of weightage in the Nasdaq Composite index. Technology Select Sector SPDR, the most important component of the broad market index, has returned 49% YTD.
With persistent inflationary pressure and weak demand, the fears of recession have not subsided yet. Therefore, investors should look for fundamentally strong technology stocks that have sustained the market jitters so far and have the potential to carry the momentum further.
Here, the Zacks Stock Screener comes in handy. With the help of this Zacks tool, we have narrowed our search to four tech companies — NVIDIA Corporation (NVDA - Free Report) , Meta Platforms, Inc. (META - Free Report) , Cloudflare, Inc. (NET - Free Report) and Workday, Inc. (WDAY - Free Report) — that have outpaced the gains of broader market indexes. Year to date, NVDA, META, NET and WDAY stocks have surged 245.6%, 182.5%, 61% and 41.6%, respectively.
Moreover, these stocks have a favorable combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or #2 (Buy). The Growth Style Score condenses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of its growth. Additionally, per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 or #2 and a Growth Score of A or B offer solid investment opportunities.
Our Picks
NVIDIA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit or GPU. Over the years, the company’s focus has evolved from PC graphics to AI-based solutions that now support high-performance computing (HPC), gaming and virtual reality (VR) platforms. The stock currently sports a Zacks Rank #1 and has a Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company is gaining from the strong growth of AI, HPC and accelerated computing, which is boosting its Compute & Networking revenues. Its data center end-market business is benefiting from the growing demand for generative AI and large language models using GPUs based on NVIDIA Hopper and Ampere architectures.
A surge in Hyperscale demand and a solid uptake of AI-based smart cockpit infotainment solutions are acting as tailwinds for NVDA. The collaboration with Mercedes-Benz and Audi is likely to advance NVIDIA’s presence in the autonomous vehicle and other automotive electronic space.
The Zacks Consensus Estimate for fiscal 2024 earnings has been revised upward by 7 cents in the past seven days to $10.89 per share, which calls for an increase of 226.1% on a year-over-year basis. The long-term expected earnings growth rate for the stock is pegged at 13.5%.
NVIDIA Corporation Price and Consensus
NVIDIA Corporation price-consensus-chart | NVIDIA Corporation Quote
Meta Platforms is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like the photo and video sharing app Instagram and the WhatsApp messaging app due to acquisitions. Along with in-house developed Messenger, these apps now form Meta’s family of products used by almost 3.96 billion people on a monthly basis as of Sep 30, 2023.
Meta Platforms is benefiting from steady user growth across all regions, particularly the Asia Pacific. Increased engagement for its offerings like Instagram, WhatsApp, Messenger and Facebook has been a major growth driver. The company is leveraging AI to recommend Reel content, which is driving traffic on Instagram and Facebook. Its innovative portfolio, which includes Threads, Reels and Llama 2, is likely to aid prospects.
The company carries a Zacks Rank #2 and has a Growth Score of A. The Zacks Consensus Estimate for 2023 earnings has been revised upward by 4.3% to $14.18 per share in the past 30 days, suggesting a 44.3% year-over-year increase. The long-term earnings growth expectation for the company is 21.3%.
Meta Platforms, Inc. Price and Consensus
Meta Platforms, Inc. price-consensus-chart | Meta Platforms, Inc. Quote
Cloudflare is a global cloud services provider that delivers a suite of deeply integrated products, including website and application services solutions, Cloudflare One, developer-based solutions and consumer offerings. Its products and services network spans over 275 cities in more than 100 countries globally. The company’s network includes more than 11,500 major Internet Service Providers, cloud service providers and enterprises.
Cloudflare is benefiting from an increasing customer base due to a robust portfolio of security solutions. Growing momentum among large customers remains a major tailwind. Aggravated cyberattacks, hybrid working trends and a zero-trust approach are aiding it in winning multiple clients and boosting revenues.
A continuous focus on client retention based on high client satisfaction is driving the dollar-based net retention rate. In the third quarter of 2023, the company’s dollar-based net retention rate was 116%.
Currently, Cloudflare carries a Zacks Rank #2 and has a Growth Score of A. The Zacks Consensus Estimate for 2023 earnings has moved 9 cents north in 30 days to 46 cents per share, indicating a whopping 253.9% increase on a year-over-year basis. The long-term earnings growth rate is pegged at 53.5%.
Cloudflare, Inc. Price and Consensus
Cloudflare, Inc. price-consensus-chart | Cloudflare, Inc. Quote
Workday is a provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system that makes it easier for organizations to provide analytical insights and decision support.
Solid momentum in the human capital and financial management portfolio is driving Workday’s top line. In addition, the company’s cloud-based business model is increasingly gaining traction. A strong emphasis on the integration of generative AI into Workday products and the development of various AI-driven applications to drive more value is a positive factor. The partnership with Accenture to expedite the development of financial management solutions is likely to improve commercial prospects.
The Zacks Consensus Estimate for fiscal 2024 earnings has remained unchanged at $5.58 per share in the past 60 days, suggesting year-over-year growth of 53.3%. This Zacks Rank #2 stock has a Growth Score of B and has an estimated long-term earnings growth rate of 26.8%.
Workday, Inc. Price and Consensus
Workday, Inc. price-consensus-chart | Workday, Inc. Quote