For immediate release
Chicago, IL??? May 18, 2022??? Today Zacks Investment Ideas feature highlights Microsoft MSFT, Apple AAPL and Nvidia NVDA
3 battered tech stocks are trading at attractive buy levels
It’s been a fierce market war throughout 2022, and tech stocks have seemingly been the main targets. The buyers have fully retreated and the bears continue to advance. They are completely rested from the hibernation they have been in for the past few years, and the immense amount of sales has shown their strength. ??
Following a once-in-a-lifetime pandemic, the unique economic environment we found ourselves in caused the Fed to become much more hawkish. The Fed chose to raise interest rates to fight inflation, significantly affecting high-growth and tech stocks which borrow at a higher rate to drive future growth.
Let the bears have fun??? it won’t last forever. For investors with a long-term horizon, it’s a veritable gold mine. Over the past few years, many of investors’ favorite stocks have fallen to levels we haven’t seen in some time, presenting a rich buying opportunity.
In fact, this five-year chart of the S&P 500 forward earnings multiple shows us that the current value of 17.9X is well below the 2020 highs of 28.6X and well below the median of 19.9X. .
Three ultra-popular actions ??? Microsoft, Apple, and Nvidia ??? have all fallen throughout 2022. The chart below illustrates how these companies weathered a challenging environment this year while taking the S&P 500 as their benchmark.
Amid all the unfavorable price action, long-term investors were presented with a juicy opportunity to add to their positions in these three stocks. Let’s take a look at what a stellar opportunity it is.
Nvidia, credited with being the inventor of the highly successful GPU, saw its future earnings multiples return to 36.7X, an absolute fraction of its 2021 peak of 93.5X and well below the median of 49.9X over the past five years. Additionally, the value is the lowest we’ve seen since March 2020, providing an opportunity to pick up shares at a much cheaper price compared to how stretched valuations had become.
After surpassing 2021 all-time highs of $334 per share, NVDA shares have nearly halved, trading in the $180 range to date. In fact, it’s the lowest level we’ve seen Nvidia shares trade at since June 2021.
The company acquired a four-quarter average EPS surprise of a respectable 7%, and in its latest report, the chip giant beat EPS estimates by 8.2%. Moreover, earnings growth rates also look solid; NVDA’s profit for the current year is expected to increase 25% year over year, and net income is expected to increase 17% in the long term.
NVDA is a Zacks rank #3 (maintain).
We all know Apple, the creator of the legendary iPhone, Mac and many other products. The 2022 tech rout dropped its forward earnings multiple to 23.8X, nearly half of its high of 41.5X in 2020 and just above its median of 19.5X over the past five years. . Moreover, the value is at its lowest level since April 2020.
Sliding from all-time highs of $182 per share at the start of January this year, AAPL shares are trading in the $140 range so far, the cheapest we’ve seen since October last year. Apple very rarely takes a step back in the market, marking another great buying opportunity for one of the best companies in the world.
Over the last four quarters, Apple has acquired a surprise double-digit average EPS of 12%. Faced with unfavorable business conditions in its most recent quarter, the company beat EPS estimates by 6.3%. Additionally, current year earnings are expected to increase 9% and its net income is expected to increase 13% over the next three to five years.
Apple is a Zacks Rank #3 (Hold).
Microsoft, the widely acclaimed tech giant, saw its forward earnings multiple return to 28X, a tick below its median of 28.1X over the past five years and a fraction of its peak of 37.5X in December 2021. Similar to AAPL and NVDA, the value is the lowest since the first months of 2020.
MSFT shares are well above their all-time highs of $343 per share in December 2021. As of today, the shares are trading in the range of $260 ??? the lowest level we’ve seen them trade at since late May 2021.
Over its past four quarters, the company has posted an average EPS surprise of 9%, and over the past quarter, MSFT has exceeded EPS expectations by 2%. Going forward, current-year earnings for the tech giant are expected to grow 17%, and over the next three to five years, net income is expected to grow 13%.
Microsoft is a Zacks Rank #3 (Hold).
As we can see, these three stocks have reached valuation and price levels not seen for some time. Additionally, they are all expected to have double-digit long-term EPS growth, which bodes very well for them going forward.
It’s far from over for these companies. While market conditions have been brutal to say the least, isn’t all bad??? rich buying opportunities arise day by day.
Trying to time the bottom is hardly possible. Instead, investors should slowly build a position with periodic purchases that allow flexibility to manage risk and build a strong average cost position. It’s never fun to go all-in on a buy and see the entry point turn unfavorable.
The bears had way too much fun. When reality sets in and these stocks rebound, they will undoubtedly return to hibernation.
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