The technology industry has borne the brunt of the Fed’s aggressive interest rate hikes this year. Concerns over rising borrowing costs and slowing demand have led to tech stocks witnessing a massive sell-off. The tech-heavy Nasdaq Composite has fallen 28.4% year-to-date.
Thanks to the rapid advancement of technology solutions to match the changing consumer preference in this digital era, the industry is poised for a solid recovery in demand soon. The information technology market is expected to grow at a CAGR of 8.8% to reach $13,092.49 billion in 2026.
Amid the recession concerns, corporate spending on technology and innovation prospects remains uncertain. Although tech companies continue to announce layoffs and hiring freezes, investments in tech have been resilient.
According to Gartner, overall tech spending will rise about 5.1% next year after a gain of less than 1% this year. Gartner chief forecaster John-David Lovelock said, “CEOs and CFOs have no intention of cutting tech spending.” “Chief information officers are still wearing their halo from 2020, and CEOs are going back to the people who gave them the last set of solutions,” he added.
Given the industry’s long-term growth prospects, fundamentally strong tech stocks Microsoft Corporation (MSFT), Pure Storage, Inc. (PSTG), and F5, Inc. (FFIV) could be good additions to one’s portfolio at the current depressed price levels. On the other hand, Palantir Technologies Inc. (PLTR) could be best avoided now as its weak fundamentals may continue to keep the stock under pressure.
Stocks to Buy:
Microsoft Corporation (MSFT)
MSFT develops, licenses, and supports software, services, devices, and solutions worldwide. The company operates in three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing.
On October 12, 2022, Cisco (CSCO) and MSFT announced a new partnership to provide customers with more choices. President of Collaborative Apps and Platforms at Microsoft, Jeff Teper, said, “By welcoming Cisco as our newest partner building devices Certified for Microsoft Teams, we are excited to bring leading collaboration hardware and software to market together for our joint customers.”
For the first quarter of fiscal 2023 ended September 30, 2022, MSFT’s total revenues increased 10.6% year-over-year to $50.12 billion. The company’s operating income increased 6.3% from the prior-year period to $21.52 billion. In addition, its gross margin increased 9.5% year-over-year to $34.67 billion.
MSFT’s EPS for the quarter ending March 31, 2023, is expected to increase 6.1% year-over-year to $2.36. Its revenue for the quarter ending December 31, 2022, is expected to increase 2.8% year-over-year to $53.20 billion. It has a commendable earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 5.7% over the past month to close the last trading session at $241.55.
MSFT’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR ratings assess stocks by 118 different factors, each with its own weighting.
Within the Software – Business industry, it is ranked #9 out of 53 stocks. The company has an A grade for Quality and a B for Stability.
Click here to see the additional ratings of MSFT for Growth, Value, Momentum, and Sentiment.
Pure Storage, Inc. (PSTG)
PSTG provides data storage technologies, products, and services worldwide. The company’s Purity software is shared across its products and provides enterprise-class data services. Its products include FlashArray, FlashBlade, FlashStack, and FlashRecover, among others.
On May 11, 2022, PSTG and Snowflake (SNOW) announced a partnership to develop a solution that increases data accessibility for global customers with on-premises data.
PSTG’s Chief Technology Officer, Rob Lee, believes that the partnership reaffirms the…
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