Tech stocks are off to a rough start in 2022.
Tech stocks had been on an incredible streak entering 2022. The tech-heavy Nasdaq finished positive in 11 of the 13 calendar years from 2009 to 2021, with the only two down years logging mere 1.8% (2011) and 3.9% (2018) losses. That remarkable streak is now in serious danger of being broken, with the Nasdaq down 14.9% barely two months into the year. A combination of high valuations, higher interest rate expectations and the eruption of war in Europe as Russia invaded Ukraine sent markets crashing down, disproportionately affecting risky assets like growth stocks and technology companies. With that in mind, here’s a look at U.S. News’ picks for the best tech stocks to buy for 2022. Spoiler alert: It’s been tough sledding, but there are some attractive buy-the-dip opportunities following the sell-off.
ASML Holding NV (ticker: ASML)
ASML is one of those top 2022 tech stocks that seems like a great buy on the dip. That’s because the Dutch-based company is essentially a bet on the continued growth in demand for high-powered semiconductors — the chips that essentially drive global innovation forward. ASML doesn’t sell chips, though. It actually sells the wildly expensive industrial machinery required to make the world’s smallest and most advanced semiconductors. It does this by controlling a monopoly on extreme ultraviolet, or EUV, lithography machines. With literally no competitors to speak of, each piece of bus-size machinery can cost as much as $150 million. CFRA analyst Jun Zhang Tan maintained a “strong buy” rating on AML following its latest quarterly earnings, assigning a target price of $892 to shares, representing upside of 50% from its $594.32 close March 4.
Year-to-date return through March 4: -25.3%
Sensata Technologies Holding PLC (ST)
A lot of the best tech stocks to buy for 2022 are large- or mega-cap stocks with nearly unrivaled scale and enviable brand recognition. But it’s important to have exposure to smaller players as well, and the $9 billion Attleboro, Massachusetts-based Sensata Technologies fits that bill. Around since 1916, the time-tested Sensata is a conservatively run company specializing in sensors, with heavy concentration on the automotive and aerospace markets. One of its recent contract wins was a multi-year deal to supply Jeff Bezos’ space company, Blue Origin, with lithium-ion batteries. A far less expensive way to play the secular trend of electrification in the auto industry, management sees revenue from electrification rising 50% in 2022. “We believe management is being overly conservative on their automotive production build” guidance, says RBC Capital Markets analyst Joseph Spak. RBC has an “outperform” rating and $68 price target on ST stock, which closed at $55.50 on March 4.
YTD return: -10%
Asana Inc. (ASAN)
Asana is a workplace collaboration software company run by Dustin Moskovitz, co-founder of Facebook. An unapologetic growth stock, Asana’s revenue jumped 70% last quarter as the company remained unprofitable, and analysts don’t expect profitability for the next few fiscal years. It’s true that Asana is richly valued by traditional metrics, trading at 27 times sales, but gross margins of nearly 90% leave plenty of room for profits for patient growth investors. Moskovitz has been aggressively buying shares over the last year, growing his position from 1.7 million shares in June 2021 to more than 19.8 million shares. RBC has a “sector perform” rating and a $75 price target on ASAN stock, which closed at $45.44 on March 4. When markets get more comfortable with risk, ASAN is primed for a rebound.
YTD return: -39%
Unlike the previous tech stocks on this list, Google parent Alphabet has actually given investors every reason under the sun to bid shares higher, but GOOGL has been dragged down by the ebbing tide of markets and negative tech sentiment. Strong search performance helped lead to easy fourth-quarter beats on the top and bottom lines, while YouTube continues to quietly dominate, posting $8.63 billion in revenue last quarter alone. That’s nearly $1 billion more than the $7.7 billion that dominant streaming video giant Netflix Inc. (NFLX) took in during the same period. Alphabet also took the opportunity to announce a 20-for-1 stock split alongside its stellar results. The split, which will take effect in July, will make Alphabet shares, which closed March 4 at $2,638.13, more affordable on a per-share basis for retail investors, perhaps prompting more individuals to buy GOOGL stock.
YTD return: -8.9%
Electronic Arts Inc. (EA)
One of the few dominant publicly traded video game companies, EA has handily outperformed the Nasdaq year to date, but shares are still down slightly due to the lousy environment for tech stocks. EA’s Feb. 1 earnings release impressed Wall Street, beating on revenue and earnings per share. In a Credit Suisse research report in the wake of earnings, analysts cited EA’s expansion into mobile games as a strong catalyst for the stock going forward, with Apex Legends Mobile, the mobile version of one of its biggest moneymakers, expected to launch in the coming quarters. Another “buy the dip” candidate among the best tech stocks to buy for 2022, Credit Suisse has an “outperform” rating and $170 price target for EA stock, which closed at $126.49 on March 4.
YTD return: -4.1%
Shopify Inc. (SHOP)
Canada-based e-commerce software company Shopify, which is still one of the most exciting companies on this list from a growth perspective, has actually been the hardest-hit stock on this list through the first two months of the year. After Shopify’s quarterly earnings call in February, Credit Suisse analysts noted its higher investments in the Shopify Fulfillment Network — a competitor to Amazon.com Inc.’s (AMZN) fulfillment centers — as one reason for reducing short-term price targets. At the same time, the analysts waxed bullish on the long-term implications of Shopify’s positioning: “We continue to view Shopify as one of the most well-positioned platforms to benefit from what we believe will be one of the most important investment themes within our coverage over the coming decade: the intersection of software and payments and the embedding of monetization- and ecosystem-enhancing financial services,” the analysts said. Credit Suisse has a “neutral” rating on Shopify and an $850 price target on the stock, which closed at $600.84 on March 4.
YTD return: -56.4%
Microsoft Corp. (MSFT)
“We reiterate our ‘buy’ rating on MSFT shares following solid (fiscal second-quarter) results and even better guidance,” said Deutsche Bank analyst Brad Zelnick in the wake of Microsoft’s late-January quarterly results. Such was the generally bullish outlook from Wall Street after Microsoft’s quarterly report in late January, in which the software giant reported 20% revenue growth — a nice feat for an average company, but a truly impressive accomplishment for a $2.2 trillion behemoth. Microsoft Azure, MSFT’s cloud computing platform and the primary competition to Amazon’s AWS cash cow, grew by 46% last quarter and is expected to reaccelerate in the fiscal third quarter. With a long-running near-monopoly on productivity software showing no signs of disappearing, MSFT’s year-to-date decline is undeserved given its performance and outlook.
YTD return: -13.8%
Uber Technologies Inc. (UBER)
“I always wanted to be a verb,” Jay-Z once said. Uber, far younger than the iconic rapper, has already achieved verb status. Uber occupies rarefied air: It’s a household name and an integral part of modern society. And today, investors have the chance to buy the ride-hailing platform’s stock for less than $30 per share, or more than a 33% discount to its 2019 initial public offering price of $45 per share. Like other businesses with dominant two-way markets like Amazon, Uber is building out an ad business that it expects to scale to $1 billion annually by 2024. RBC analyst Brad Erickson said the quiet part out loud in his February note, opining on the eventual dream to replace human drivers with self-driving technology. “Autonomous driving partnerships should become visible in ’22 – not a fundamental driver but important for dreaming the long-term dream,” Erickson wrote. RBC has a $65 price target for Uber stock, which closed at $29.83 on March 4.
YTD return: -28.9%
Meta Platforms Inc. (FB)
Meta Platforms, formerly known as Facebook, is probably the single most compelling stock to buy among this list of tech stocks after its severe decline to start the year. Rarely do FAANG stocks trade for less than 15 times earnings, but that’s where FB finds itself after its fourth-quarter report and guidance for the first quarter left much to be desired. Hit by greater competition from TikTok, a $10 billion 2021 loss from its nascent metaverse business and an expected $10 billion 2022 revenue hit from Apple Inc.’s (AAPL) new iOS privacy features, FB sold off after the February earnings report. But, as the saying goes, the time to buy is when there’s blood in the streets, and times have rarely been bloodier for FB. Bank of America Global Research analysts believe the business will re-accelerate in the second half of 2022, assigning a $323 price target to FB stock, which closed at $200.06 on March 4.
YTD return: -40.5%
Unity Software Inc. (U)
If you’ve played games on your phone, odds are you’ve played a game that was developed using Unity Software’s development platform. About 70% of top mobile games were built with Unity’s software, and about half of all PC and console games were developed on Unity’s platform. Unity’s “contextual ad-serving engine” is steadily improving, using data like how and when players play and in-game mechanics to inform the decisions about when to show mobile ads. As with Meta Platforms, shareholders of Unity Software get a built-in call option on the future of the metaverse, as U is positioning itself to be a dominant development platform in that new landscape. Another victim of the 2022 tech and growth sell-off, Credit Suisse has an “outperform” rating and $180 price target on U stock, which closed at $89.01 on March 4.
YTD return: -37.8%
The best tech stocks to invest in for 2022:
— ASML Holding NV (ASML)
— Sensata Technologies Holding PLC (ST)
— Asana Inc. (ASAN) Alphabet Inc. (GOOG, GOOGL)
— Electronic Arts Inc. (EA)
— Shopify Inc. (SHOP)
— Microsoft Corp. (MSFT)
— Uber Technologies Inc. (UBER)
— Meta Platforms Inc. (FB)
— Unity Software Inc. (U)
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Update 03/07/22: This story was originally published at an earlier date and has been updated with new information.