December has been a choppy month for even the best tech stocks. Yet, the tech-heavy Nasdaq-100 index has returned about 20% so far in 2021. Now investors wonder what might be in store for these high-growth shares in the new year.
In the past 12 months, gains have not been evenly distributed. While mega-tech stocks have dominated the index’s performance, many widely-followed technology names have seen their share prices decline.
In particular, consumer electronics, cybersecurity and cleantech shares have had wild swings. Profit-taking, surging inflation, supply chain issues, and the emergence of the omicron variant have been reasons behind the recent volatility.
Nevertheless, these declines also offer better entry points to many growth names that are likely to announce solid financials in the quarters ahead. Such stocks represent great buying opportunities, particularly if investors can identify those with solid fundamentals, reasonable valuations, and profit from their momentum and growth.
With that information, here are seven of the best tech stocks that are likely to create shareholder value for many quarters to come:
- Ambarella (NASDAQ:AMBA)
- Ciena (NYSE:CIEN)
- Dell Technologies (NYSE:DELL)
- iShares Cybersecurity and Tech ETF (NYSEARCA:IHAK)
- Marvell Technology (NASDAQ:MRVL)
- Synaptics (NASDAQ:SYNA)
- Upstart (NASDAQ:UPST)
Best Tech Stocks: Ambarella (AMBA)
52-week range: $82.59 – $227.59
Ambarella designs semiconductor processing solutions, mainly for high-definition (HD) video capture, sharing, and display. Ambarella’s products are found in segments ranging from artificial intelligence (AI) to computer vision, security and driver-assistance cameras.
Ambarella reported Q3 FY22 results in late November. Revenue increased 64% year-over-year (YOY) to $92.2 million. Non-GAAP net income came in at $22.2 million, or 57 cents per diluted share, up from $3.3 million, or 9 cents per diluted share, in the prior-year quarter.
Total cash and equivalents ended the quarter at $458 million. Meanwhile, management increased Q4 revenue guidance 45% YOY to $90 million.
“Our operational execution remains strong, yet supply dynamics remain difficult to predict, as shortages of other companies’ components has become a more significant and gating factor to our results and outlook,” CEO Fermi Wang remarked following the announcement.
The company has seen rising demand for chips used in cameras utilized in the automotive market as well as security applications. AMBA stock hovers at $195 per share, up nearly 115% year-to-date (YTD).
Shares are trading at 119 times forward earnings and 21.4 times trailing sales. Interested readers could find better value around $170, but the 12-month median price forecast for Ambarella stock stands at $227.
52-week range: $47.52 – $75.45
Ciena provides network hardware and software that facilitate the delivery of video, voice and data traffic over communications networks.
Analysts note that 5G networks and data centers have been driving robust demand for Ciena’s products and solutions.
Management issued solid Q4 results on Dec. 9. Revenue increased 26% YOY to $1.04 billion. Adjusted net income soared to $132.7 million, or 85 cents per diluted share, up 42% YOY from $94.5 million, or 60 cents per diluted share, in the prior-year quarter. Cash and equivalents ended the quarter at $1.4 billion.
“Orders in the quarter were once again significantly higher than revenue,” CEO Gary Smith remarked on the metrics. “And with our third consecutive quarter of orders outpacing revenue, we have substantial momentum and increased confidence in the demand environment.”
Ciena has recently partnered with Samsung Electronics (OTCMKTS:SSNLF) to support its 5G deployment. Through this collaboration, telecom operators should be able to better manage the increase in their 5G data volumes.
The stock is moderately valued, making CIEN stock an attractive bet for investors looking to buy a 5G stock. CIEN stock hovers around $75 territory, up 47% YTD. Shares are trading at only 21.7 times forward earnings and 3.2 times trailing sales. The 12-month median price forecast for Ciena stock is $83.
Dell Technologies (DELL)
52-week range: $35.56 – $59.49
Dell Technologies is a well-known information technology (IT) name that operates mainly through two segments. The Client Solutions Group provides IT solutions such as hardware and peripherals. And the Infrastructure Solutions Group offers software, storage and server solutions.
The company announced strong Q3 FY22 results in late November. It generated record revenue of $28.4 billion, up 21% YOY. Non-GAAP net income stood at $2 billion, or $2.37 per diluted share, up from $1.7 billion, or $2.03 per diluted share, in the prior-year quarter. Cash and equivalents ended the quarter at $23.4 billion.
“We continue to deliver strong results, with more than $13 billion in cash flow from operations on a trailing-twelve-month basis, the digital trends are tailwinds for our business, and along with our strategy and financial flexibility, lead us to be optimistic about our long-term growth prospects,” CFO Tom Sweet remarked on the results.
Despite delivering its best third-quarter results in history, DELL is still trading at a reasonable valuation relative to its peers. The stock hovers at $55 territory, up about 96% YTD.
Shares look more like a value stock trading at just 6.6 forward earnings and 0.4 times trailing sales. The 12-month median price forecast for Dell stock stands at $65.
iShares Cybersecurity and Tech ETF (IHAK)
52-Week Range: $36.35 – $49.09
Dividend Yield: 0.52%
Expense Ratio: 0.47% per year
In 2020, the global cybersecurity market was valued at more than $150 billion and is expected to exceed $350 billion by 2026. Such growth would mean a compound annual growth rate (CAGR) of about 14.5%.
Therefore, we next look at an exchange-traded fund (ETF), namely the iShares Cybersecurity and Tech ETF that invests in…
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