For Immediate Release
Chicago, IL – March 10, 2023 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Airbnb Inc. ABNB, salesforce.com inc. CRM, Meta Platforms Inc. META, Palo Alto Networks Inc. PANW and Cadence Design Systems Inc. CDNS.
Here are highlights from Thursday’s Analyst Blog:
Forget a Hawkish Fed: 5 Must-Buy Tech Stocks Flying High YTD
US stock investors are likely to face volatility for longer than expected as the Fed is set to pursue rigorous interest rate hike policies. On Mar 7 and 8, Fed Chairman Jerome Powell’s testimony before the US Congress confirmed that any sort of relaxation in recent monetary tightness is a long way to go.
The Fed was compelled to take an extremely hawkish stance as inflation remained sticky in the 5.5% to 6% range. Although it has declined from its peak of 9.1% reported in June 2022, inflation is still miles above the central bank’s targeted 2% level.
The CME FedWatch is showing that market participants are now expecting the terminal interest rate to reach the range of 5.5% to 5.75% instead of the 5.1% projected in December. A section of economists and financial experts have warned that the United States is heading for a 6% benchmark interest rate with a strong probability of a recession in 2023.
Technology Sector Thrives Year to Date
Growth-oriented sectors such as technology, communication services and consumer discretionary are highly susceptible to interest rate movements. A high interest rate is detrimental to growth stocks. This is evident in the recent pandemic-induced turmoil.
During the pandemic-ridden 2020 and 2021, the Fed kept the benchmark interest rate as low as 0-0.25%. Consequently, the tech sector witnessed an unprecedented rally that enabled Wall Street to exit a coronavirus-induced short bear market and form a new bull market.
However, as the Fed hiked interest rate by 4.5% in 2022 to combat the 40-year high inflation, the growth sector, especially the technology stocks suffered the most. However, surprisingly, the tech sector is holding its ground year to date defying the threat of a higher rate hike for a longer time and its effect of a possible recession.
Year to date, of the three major stock indexes — the tech-heavy Nasdaq Composite has advanced 10.6% while the S&P 500 has gained 4% and the Dow has declined 1.1%. The Technology Select Sector SPDR (XLK) — one of the 11 broad sectors of the S&P 500 Index — has rallied 11.8% in 2023, second only to the Communication Services Select Sector SPDR (XLC), which has appreciated 12.9%.
Our Top Picks
Several technology stocks have flourished year to date. We have narrowed our search to five tech behemoths (market capital > $50 billion) with year-to-date returns of nearly 25% or more. These stocks have strong growth potential for 2023 and have seen positive earnings estimate revisions in the last 60 days. Finally, each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Airbnb Inc. is riding on an improvement in the travel industry. Continued recovery in both longer-distance and cross-border travel owing to a reduction in travel restrictions is benefiting ABNB’s Nights & Experience bookings. Additionally, growth in average daily rates and gross booking value is a tailwind.
Growing active listings in Latin America, North America and EMEA are contributing well to the top line. Growing sales and marketing initiatives along with continuous efforts to upgrade various aspects of the Airbnb service are helping the company gain momentum among hosts and guests.
Zacks Rank #1 Airbnb has an expected revenue and earnings growth rate of 14.9% and 21.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 18.2% over the last 30 days. The stock price of ABNB has jumped 46.5% year to date.
Salesforce is benefiting from a robust demand environment as customers are undergoing a major digital transformation. The rapid adoption of its cloud-based solutions is driving demand for CRM’s products. CRM’s sustained focus on introducing more aligned products as per customer needs is driving its top-line.
Continued deal wins in the international market are the other growth drivers. The acquisition of Slack would position salesforce.com as a leader in the enterprise team collaboration solution space and help it compete better with Microsoft’s Teams product. We expect CRM revenues to witness a CAGR of 12.5% during fiscal 2023-2025.
Zacks Rank #1 salesforce.com has an expected revenue and earnings growth rate of 10.5% and 32.8%, respectively, for the current year (January 2024). The Zacks Consensus Estimate for current-year earnings has improved 19.4% over the last 30 days. The stock price of CRM has climbed 38% year to date.
Meta Platforms Inc. is benefiting from steady user growth across all regions, particularly Asia Pacific. Increased engagement for its products like Instagram, WhatsApp, Messenger and Facebook has been a major growth driver. META is considered to have pioneered the concept of social networking.
Zacks Rank #2 Meta Platforms has an expected revenue growth rate of 4.6% for the current year. The company has an earnings growth rate of 19% for next year. The Zacks Consensus Estimate for current-year earnings has improved 1.5% over the last 30 days. The stock price of META has soared 53.6% year to date.
Palo Alto Networks Inc. has been benefiting from continuous deal wins and the increasing adoption of PANW’s next-generation security platforms, attributable to the rise in the remote work environment and the need for stronger security.
Growing traction in Prisma and Cortex offerings is acting as a tailwind. PANW continues to acquire new customers and increase wallet share with existing customers. Our estimates suggest that Palo Alto’s revenues will witness a CAGR of 21.1% through fiscal 2023-2025.
Zacks Rank #1 Palo Alto Networks has an expected revenue and earnings growth rate of 25.2% and 57.1%, respectively, for the current year (ending July 2023). The Zacks Consensus Estimate for current-year earnings has improved 15.8% over the last 30 days. The stock price of PANW has surged 34.6% year to date.
Cadence Design Systems Inc. offers products and tools that help customers design electronic products. Through the System Design Enablement strategy, CDNS offers software, hardware, services and reusable IC design blocks to electronic systems and semiconductor customers.
Cadence’s performance is being driven by strength across segments like digital & signature solutions and functional verification suite. CDNS is also gaining from higher investments in emerging trends like IoT and autonomous vehicle sub-systems along with strength in the semiconductor end-market. Frequent product launches are expected to help CDNS sustain top-line growth.
Zacks Rank #1 Cadence Design Systems has an expected revenue and earnings growth rate of 13.4% and 16.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 10% over the last 30 days. The stock price of CDNS has advanced 24.1% year to date.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets are identified and described as or will be profitable. All information is current as of the date herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Salesforce Inc. (CRM) : Free Stock Analysis Report
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