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3 Tech Stocks That Could Soar from Cooler Inflation
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Optimistically, the Consumer Price Index (CPI) has cooled for two consecutive months with June’s data being very encouraging on Thursday.
CPI climbed 3% compared to the same period last year, a nice decrease from May’s 3.3% rate. Monthly, CPI decreased 0.1% after being unchanged in May.
Plus, Core CPI which excludes volatile food and energy costs, was up 3.3% annually compared to 3.4% in May. Core CPI also rose more moderately monthly, up 0.1% in June after rising 0.2% in May.
This is favorable news for the broader market with the tech sector being one area of the economy that can benefit immensely from cooler inflation. Furthermore, there is a stronger argument that the proponents for a rate cut are upon us as Fed officials are starting to get proof that inflation is slowing at an ideal pace and it’s no longer too soon to do so.
With that being said, here are three tech stocks that could keep soaring from a cooler inflationary environment.
Consumer Price Index, All Items
Image Source: U.S. Bureau of Labor Statistics
Strong Buy Stocks – RNG & TWLO
We’ll start with two new additions to the Zacks Rank #1 (Strong Buy) list in RingCentral (RNG - Free Report) and Twilio (TWLO - Free Report) which were added today.
RingCentral's stock spiked +6% on Friday and the rally could certainly continue as RNG looks undervalued at 7.9X forward earnings.
Easing inflation is what investors have been wanting to see in regard to choosing RingCentral’s stock despite the company having lofty growth projections as a leading provider of contact center software-as-a-service (SaaS) solutions. To that point, RNG is still down -8% this year but looks poised for an extended rebound as RingCentral is projected to post double-digit percentage growth on its top and bottom lines in fiscal 2024 and FY25.
Image Source: Zacks Investment Research
The same scenario largely applies to Twilio which has seen its stock plummet -23% YTD as the cloud communication provider has often underwhelmed in its ability to offer positive guidance. Caution has also consumed Twilio regarding high interest rates affecting the company’s profitability.
However, the likelihood of a more favorable operating environment spurred by easing inflation should start to peak investor and consumer interest in Twilio with its services allowing developers to build, scale, and operate real-time communications within software applications.
TWLO was up over +1% on Friday and a rally from here looks plausible as high double-digit EPS growth is in the forecast based on Zacks estimates. Plus, total sales are projected to be up 4% this year and are expected to expand another 8% in FY25 to $4.71 billion.
Following the pandemic, a higher inflationary environment had deterred the IPO market but Arm Holdings is one of the notable companies to take the leap of faith in 2023.
Arm Holding’s expansion has been compelling with the UK-based company providing processor designs and tools for software platforms, having several noteworthy customers in the US including Amazon (AMZN - Free Report) , Alphabet (GOOGL - Free Report) ), and Nvidia (NVDA - Free Report) among others.
With high excitment for its A-list customers, investors in Arm Holdings have been heavily monitoring the global economic environment, particularly in the US. Notably, ARM spiked +4% in today’s trading session and had recently hit 52-week highs on Tuesday.
ARM currently lands a Zacks Rank #3 (Hold) after soaring over +150% since its IPO last September.
Image Source: Zacks Investment Research
Takeaway
The anticipated expansion of RingCentral, Twilio, and Arm Holdings may start to come to fruition amid cooler inflation with all three stocks checking an “A” Zacks Style Scores grade for Growth. Correlating with such it would be no surprise if their stocks continued to rise with June’s CPI data elevating market sentiment.
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3 Tech Stocks That Could Soar from Cooler Inflation
Optimistically, the Consumer Price Index (CPI) has cooled for two consecutive months with June’s data being very encouraging on Thursday.
CPI climbed 3% compared to the same period last year, a nice decrease from May’s 3.3% rate. Monthly, CPI decreased 0.1% after being unchanged in May.
Plus, Core CPI which excludes volatile food and energy costs, was up 3.3% annually compared to 3.4% in May. Core CPI also rose more moderately monthly, up 0.1% in June after rising 0.2% in May.
This is favorable news for the broader market with the tech sector being one area of the economy that can benefit immensely from cooler inflation. Furthermore, there is a stronger argument that the proponents for a rate cut are upon us as Fed officials are starting to get proof that inflation is slowing at an ideal pace and it’s no longer too soon to do so.
With that being said, here are three tech stocks that could keep soaring from a cooler inflationary environment.
Consumer Price Index, All Items
Image Source: U.S. Bureau of Labor Statistics
Strong Buy Stocks – RNG & TWLO
We’ll start with two new additions to the Zacks Rank #1 (Strong Buy) list in RingCentral (RNG - Free Report) and Twilio (TWLO - Free Report) which were added today.
RingCentral's stock spiked +6% on Friday and the rally could certainly continue as RNG looks undervalued at 7.9X forward earnings.
Easing inflation is what investors have been wanting to see in regard to choosing RingCentral’s stock despite the company having lofty growth projections as a leading provider of contact center software-as-a-service (SaaS) solutions. To that point, RNG is still down -8% this year but looks poised for an extended rebound as RingCentral is projected to post double-digit percentage growth on its top and bottom lines in fiscal 2024 and FY25.
Image Source: Zacks Investment Research
The same scenario largely applies to Twilio which has seen its stock plummet -23% YTD as the cloud communication provider has often underwhelmed in its ability to offer positive guidance. Caution has also consumed Twilio regarding high interest rates affecting the company’s profitability.
However, the likelihood of a more favorable operating environment spurred by easing inflation should start to peak investor and consumer interest in Twilio with its services allowing developers to build, scale, and operate real-time communications within software applications.
TWLO was up over +1% on Friday and a rally from here looks plausible as high double-digit EPS growth is in the forecast based on Zacks estimates. Plus, total sales are projected to be up 4% this year and are expected to expand another 8% in FY25 to $4.71 billion.
Image Source: Zacks Investment Research
Arm Holdings (ARM - Free Report)
Following the pandemic, a higher inflationary environment had deterred the IPO market but Arm Holdings is one of the notable companies to take the leap of faith in 2023.
Arm Holding’s expansion has been compelling with the UK-based company providing processor designs and tools for software platforms, having several noteworthy customers in the US including Amazon (AMZN - Free Report) , Alphabet (GOOGL - Free Report) ), and Nvidia (NVDA - Free Report) among others.
With high excitment for its A-list customers, investors in Arm Holdings have been heavily monitoring the global economic environment, particularly in the US. Notably, ARM spiked +4% in today’s trading session and had recently hit 52-week highs on Tuesday.
ARM currently lands a Zacks Rank #3 (Hold) after soaring over +150% since its IPO last September.
Image Source: Zacks Investment Research
Takeaway
The anticipated expansion of RingCentral, Twilio, and Arm Holdings may start to come to fruition amid cooler inflation with all three stocks checking an “A” Zacks Style Scores grade for Growth. Correlating with such it would be no surprise if their stocks continued to rise with June’s CPI data elevating market sentiment.