Technology has so far been among the hardest hit sectors amid a broader market sell-off this year due to growing fears of an impending downturn in the economy. Technology Select Sector SPDR Fund, which aims to provide investment results that, before expenses, generally correspond to the price and return performance of the Technology Select Sector Index, has lost approximately 28% of its year-to-date (YTD) value .
However, this sell-off in the broader stock market has led to a massive correction in the stock prices of several tech companies. These companies were considered vastly overvalued at the industry peak in 2021. With this correction, several tech stocks are currently trading well below their 52-week high, despite their solid fundamentals.
Additionally, the long-term growth prospects of tech companies look promising due to ongoing digital transformations. The accelerated rollout of 5G technology, the next-generation wireless revolution, is likely to spur further growth. In addition to this, artificial intelligence (AI), blockchain, Internet of Things (IoT), autonomous vehicles, Augmented Reality / Virtual Reality and wearable devices offer significant growth opportunities.
In our opinion, Zscaler, Inc. (ZS – Free report), Pure Storage, Inc. (PSTG – Free report), Coupa Software Incorporated (STROKE – Free report) e RingCentral, Inc. (RNG – Free Report) are currently among the hardest hit stocks in the tech sector. Given the strength of their fundamentals and solid prospects, it seems wise to add these stocks to your portfolio.
Why should you invest in these stocks?
In the midst of financial instability, it is a prudent idea to choose solid growth companies as they are financially stable and make profits in established markets. These stocks, with their solid fundamentals, allow investors to protect their funds from any economic downturn. Furthermore, these fundamentally strong stocks are likely to eclipse again once the current macroeconomic headwinds ease and market sentiment improves.
In addition to having solid fundamentals, the long-term earnings growth rate for the aforementioned stocks is over 10%. These titles also have a favorable combination of a growth score of A or B and a Zacks Rank No. 1 (strong buy) or n. 2 (purchase).
According to Zacks’ proprietary methodology, stocks with such a favorable combination offer solid investment opportunities.
Additionally, these stocks are currently trading well below their 52-week high and are now available at attractive valuations.
4 tech stocks to bet on
Pure conservation provides software-defined all-flash solutions that are blazingly fast and cloud-compatible for customers. The company pioneers the Evergreen Storage business model of hardware and software innovation, support and maintenance. The model eliminates the 3-5 year forklift upgrade cycle of legacy storage systems.
Pure Storage benefits from the rapid adoption of flash storage, particularly among enterprises, due to the inherent advantages of speed (e.g. responsiveness), portability, efficiency and reliability over legacy storage systems. The ongoing data explosion has become an important engine for flash storage systems. The strength of the FlashArray and FlashBlade businesses and strong growth prospects in the data-driven AI and machine learning markets bode well.
The PSTG currently boasts a Zacks Rank No. 1 and has a growth score of A. The company’s stock has plummeted 17.8% year to date and is currently trading 27.8% lower than its 52-week high of $ 36.71 reached on 28. March 2022. In addition, the shares are trading at a one-year forward sale price of 2.6 times compared to its three-year high of 4.27 times. you can see The full list of Zacks # 1 Rank shares today here.
Zacks’ consensus estimate for Pure Storage’s fiscal year 2023 earnings has risen to $ 1.18 per share from 95 cents over the past 30 days, which implies a 63.9% year-over-year increase. For fiscal year 2024, the consensus score for earnings was revised up by 20.7% to $ 1.34 per share over the past 30 days, indicating year-over-year growth of 13.1%. The long-term earnings growth rate for the stock is pegged at 35.5%.
Zscaler is one of the world’s leading providers of cloud-based security solutions. It offers a full range of corporate network security services, including web security, internet security, antivirus, vulnerability management, firewalls and user activity monitoring in mobile environments, cloud computing and IoT.
Zscaler is benefiting from the growing demand for cybersecurity solutions due to the series of data breaches. The growing demand for privileged access security on digital transformation and cloud migration strategies is a key driver of growth. The strength of Zscaler’s wallet increases its competitive edge and helps add users. Additionally, the recent acquisitions of Smokescreen and Trustdome should enhance its portfolio.
ZS currently holds a Zacks Rank No. 2 and has a growth score of A. The company’s stock has plummeted 49.5% year to date and is currently trading 56.8% lower than its 52-week high of $ 376.11 reached on 19 November 2021. In addition, the shares are trading at a one-year forward sale price of 14.82 times compared to its three-year high of 51.19 times.
Zacks’ consensus estimate for Zscaler’s fiscal year 2023 earnings increased to $ 1.17 per share from $ 1.03 over the past 30 days, indicating a year-over-year increase of 69.8%. For fiscal year 2024, the consensus score for earnings was revised up by seven cents to $ 1.67 per share over the past 30 days, suggesting year-over-year growth of 43%. The long-term earnings growth rate for the stock is pegged at 45.1%.
Coupé software is a leading provider of Business Spend Management (BSM) solutions. The company is evolving its cloud-based platform based on ongoing product innovations to give customers greater visibility into spend, help them mitigate supply chain risk, and increase business agility to adapt to changes in business trends. expense.
Coupa Software is benefiting from the robust adoption of Coupa Pay offerings and cloud-based BSM solutions. The momentum in Coupa Advantage Express, Strategic Sourcing, Risk Assessment and Source Together solutions is likely to increase revenue. During the recently reported second quarter results, the company raised its revenue guidance for fiscal year 2023 on solid demand trend.
COUP currently holds a Zacks Rank No. 2 and has a growth score of B. The company’s stock has plummeted 60.7% year to date and is currently trading 76.1% lower than its 52-week high of $ 259.90 reached 20 October 2021. In addition, the stock is trading at a one-year forward sale price of 5 times compared to its three-year high of 46.82 times.
Zacks’ consensus estimate for Coupa Software’s fiscal year 2023 earnings increased 76% to 44 cents per share over the past 30 days. For fiscal year 2024, the consensus score for earnings was revised up by 14 cents to 71 cents per share over the past 30 days, indicating year-over-year growth of 62.1%. The long-term earnings growth rate for the stock is pegged at 22.6%.
RingCentral is a leading provider of Unified Communications as a Service (UCaaS) solutions, including global communication, collaboration and customer engagement solutions in the enterprise cloud that enable companies to communicate, collaborate and connect. The company’s cloud-based business communication and collaboration solutions are designed to deliver a single user identity across multiple locations and devices, including smartphones, tablets, PCs, and desk phones. This simplifies remote working and collaboration.
RingCentral benefited from strong subscription revenue growth thanks to the improved hybrid work environment due to the COVID-19 pandemic. Its growing international presence is a key catalyst. A solid partner base that includes the likes of Microsoft, AT&T, BT, Atos and Vodafone should serve as an important catalyst.
RNG currently holds a Zacks Rank No. 2 and has a growth score of A. The company’s stock has plummeted 77.8% year to date and is currently trading 86.8% lower than its 52-week high of $ 315 reached on November 10. 2021. In addition, the shares are trading at a one-year forward sale price of 1.71 times compared to its three-year high of 27.24 times.
Zacks’ consensus estimate for RingCentral’s earnings in 2022 has improved by seven cents to $ 1.93 per share over the past 60 days, implying a year-over-year increase of 44%. For 2023, the consensus score for earnings was revised up by one cent to $ 2.51 per share over the past 30 days, indicating year-over-year growth of 29.8%. The long-term earnings growth rate for the stock is pegged at 34.7%.