Here are 10 of the top tech stocks to invest in now.
It’s no secret that Wall Street has had a rough go of it this year, as a confluence of ugly catalysts has caused a drove of selling. The Russian invasion of Ukraine, soaring energy prices, inflation not seen in 40 years and surging interest rates made for a tough environment for equities. That last factor — soaring interest rates — has helped to disproportionately drag down the tech sector, as a surging risk-free rate quickly devalues the growing profits analysts expect to see years into the future. The tech-heavy Nasdaq fell about 26% in 2022 through Sept. 13, which means many high-quality Silicon Valley names are trading at fire-sale prices. Here are 10 of the best tech stocks to buy now.
Alphabet Inc. (ticker: GOOG, GOOGL)
After sell-offs, it’s hard to go wrong with snapping up quality companies at fair prices. Google parent Alphabet, one of the trillion-dollar Big Tech behemoths, is just such a company, with shares now down about 27% in 2022 through Sept. 13. Now trading for less than 21 times earnings, GOOGL shares are being valued more cheaply than the S&P 500, which goes for about 22 times earnings. This is despite a long track record of growth — earnings have compounded at 32% annually over the last five years — and a near-monopoly in the highly lucrative search market. Google Cloud is an exciting area of growth for the company, with second-quarter revenue jumping more than 35% in that division. Shockingly, that segment is still unprofitable as it pours money into expansion, so there’s longer-term opportunity for aggressive margin expansion as it crosses the break-even barrier.
Microsoft Corp. (MSFT)
Microsoft’s most recent earnings report was an impressive surprise for shareholders, as shares rallied from the $250s to the $290s following the late July report. However, shares are now flirting with pre-earnings levels as a certain amount of inflation-based fear returns to markets. RBC Capital Markets analyst Rishi Jaluria maintained an “outperform” rating and $380 price target for Microsoft stock following its most recent quarterly results, implying strong upside for the roughly $2 trillion software giant. As with Google, Microsoft’s cloud business is a big part of its appeal, with Microsoft Azure revenue soaring 46% last quarter in constant currency. MSFT management still expects double-digit revenue and operating income growth in the fiscal 2023 year, despite concerns over a recessionary macroeconomic environment.
Adobe Inc. (ADBE)
Another software giant, Adobe may not be a trillion-dollar company, but the $175 billion business is nothing to scoff at. Its software products are increasingly relevant to a digital economy, with its Creative Cloud subscription bundle bringing together such popular tools as Illustrator, Photoshop, InDesign, Premiere and Acrobat. The software-as-a-service model the company relies on is famously desirable due to extremely high gross margins — 88% in Adobe’s case — and recurring revenue that tends to grow over time. That’s why Adobe fetches about 36 times earnings at current levels, which may seem high until you consider the roughly 65 times earnings that ADBE has averaged over the last 10 years.
Apple Inc. (AAPL)
Next up is Apple, the largest publicly traded company in the U.S. at a valuation of $2.5 trillion or so. The iPhone remains the name of the game for the dominant smartphone maker, accounting for 49% of revenue in the most recent quarter. That said, the high-margin services segment is where much of the earnings growth lies, as digital sales from services like Apple Music, Apple TV+, iCloud and the App Store all have much less cost associated with them than, say, a state-of-the-art smartphone. That said, investors should cheer the most recent iPhone release; shares jumped nearly 4% on positive analyst research reports touting pre-sale data showing that the $1,099 iPhone 14 Pro Max was the best-selling model and that it was selling better than its predecessor did last year. A robust cash cow, Apple returned $28 billion to shareholders last quarter alone through stock buybacks and dividends.
Cisco Systems Inc. (CSCO)
No one would accuse Cisco of being the most exciting business in the world, but sometimes there’s opportunity in the mundane. In a brutal environment for tech companies, the $181 billion internet infrastructure and communications equipment company is a tried-and-true blue-chip dividend stock. Selling at about a 29% haircut to its Jan. 1 level as of Sept. 13, Cisco trades for just 12 times forward earnings and pays a 3.3% dividend that’s eminently sustainable, using just 52% of profits to finance the payout. Cisco won’t set any growth records, but its increased focus on shifting to recurring revenue and software should help make revenue growth even more predictable and smooth, while boosting margins longer term.
Advanced Micro Devices Inc. (AMD)
Semiconductor company AMD is an out-and-out growth stock — it’s just not valued like one. Although the tech onslaught has brought shares down more than 46% in 2022 as of Sept. 13, someone forgot to tell the business that it should be in shambles. In fact, second-quarter revenue surged 70% year over year, setting a quarterly record for the eighth straight quarter. To be fair, much of the jump was driven by its acquisition of chipmaker Xilinx, but all its operating segments grew and analysts expect a still-enviable 13% boost to revenue in 2023. Trading for about 16 times forward earnings, AMD has consistently nibbled away at the market share of entrenched industry leaders like Intel Corp. (INTC). AMD will release its first chips with 5-nanometer cores in late 2022, while Intel was infamously forced to delay its 7-nanometer chips until 2023.
Salesforce Inc. (CRM)
Another of the best tech stocks to buy amid 2022’s market sell-off is enterprise software giant Salesforce, whose decade-plus of consistent, strong growth vaulted it all the way to the hallowed Dow Jones Industrial Average in 2020. Over the last five years, the $160 billion company has grown sales and earnings per share at a compound annual growth rate, or CAGR, of about 26% each. Salesforce’s software is a must-have expense for many modern businesses, with its eponymous customer relationship management software used by all sorts of companies to manage their sales funnels and convert prospects to clients more effectively. Its $27.7 billion acquisition of workplace communication platform Slack in 2021 further cemented Salesforce as a vital tool for 21st-century commerce.
Dell Technologies Inc. (DELL)
While not as glitzy and glamorous as other tech stocks on this list, computer hardware company Dell Technologies makes the cut because the business is simple and profitable and the stock is dirt cheap. Dell is a big player in personal computers and network servers, with revenue topping $100 billion last year. Shares pay a solid 3.3% dividend yield, and the stock trades for just 6 times earnings. As one might expect, you won’t find blockbuster growth with a price-earnings ratio that low, but it doesn’t take much to make such a modest multiple worth the investment. Value investors might want to consider the stock.
Asana Inc. (ASAN)
Asana is a workplace collaboration software company run by Facebook co-founder Dustin Moskovitz. An unapologetic growth stock, Asana reported revenue growth of 51% last quarter even as the company remained unprofitable, and analysts don’t expect profitability for the next few years. While Asana is richly valued by some metrics, trading at 10 times sales, gross margins of nearly 90% leave plenty of room for profits for long-term growth investors. It should be noted that ASAN is one of the riskier stocks on this list, due to the far-out nature of projected future cash flows, an elevated valuation and the risk-off attitude of the current market. That said, if Asana doesn’t decelerate too quickly and shows a clear path toward profits, the upside is huge. Moskovitz is certainly a believer, announcing in Asana’s Sept. 7 earnings report that he’d be buying $350 million in ASAN shares as a demonstration of his faith.
Unity Software Inc. (U)
If you’ve played digital games, odds are you’ve played a game that was developed using Unity Software’s development platform. Ninety-four of the top 100 game development studios are customers, and Unity’s platform is used to develop 50% or more of all PC, console and mobile games. Developers use the software to design the in-game physics and movement mechanics, and Unity’s ad-serving engine uses player trends to determine the optimal time to serve mobile ads. Like Asana, Unity isn’t yet profitable and is definitely one of the more risky tech stocks to buy, so it’s not for everyone. Down about 74% in 2022 through Sept. 13, Unity shares offer explosive bounce-back upside for patient growth investors. Longer term, U stock also holds a built-in call option on the metaverse, as Unity positions itself to be a dominant development platform in that new landscape.
10 of the best tech stocks to buy for 2022:
— Alphabet Inc. (GOOG, GOOGL)
— Microsoft Corp. (MSFT)
— Adobe Inc. (ADBE)
— Apple Inc. (AAPL)
— Cisco Systems Inc. (CSCO)
— Advanced Micro Devices Inc. (AMD)
— Salesforce Inc. (CRM)
— Dell Technologies Inc. (DELL)
— Asana Inc. (ASAN)
— Unity Software Inc. (U)
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10 of the Best Tech Stocks to Buy for 2022 originally appeared on usnews.com
Update 09/14/22: This story was published at an earlier date and has been updated with new information.
