Easing inflation and hopes of the Fed’s slower rate hike course have rekindled a broad-based rally, with the tech-heavy Nasdaq composite index gaining 7.2% over the past three months. In addition, the latest job data indicates a deceleration in wage growth, uplifting investors’ optimism that the Fed could ease off on its rate hikes going forward.
Additionally, the Consumer Price Index rose 6.5% year-over-year in December, down from a 7.1% year-over-year increase in November and its peak of 9.1% in June. Driven by this data, 80% of forecasters in the latest Reuters poll predicted that the Fed would likely hike the interest rates by 25 basis points at its next meeting, slowing its pace of tightening.
Federal Reserve Vice Chair Lael Brainard remarked that the recent economic situation favors a 'soft landing' scenario. However, she added, “Even with the recent moderation, inflation remains high, and policy will need to be sufficiently restrictive for some time to make sure inflation returns to 2 percent on a sustained basis.”
However, cooling inflation has boosted investor sentiment and reduced the odds of a recession. Market experts are now becoming increasingly confident that the economy might succeed in avoiding a recession.
Given improving market sentiments, last year’s underperformer, Nasdaq, looks all set for a rebound. Therefore, it could be ideal to buy and hold fundamentally strong Nasdaq stocks Cisco Systems, Inc. (CSCO) and Gilead Sciences, Inc. (GILD), which seem well-positioned to drive their growth this year.
Cisco Systems, Inc. (CSCO)
CSCO designs, manufactures, and sells Internet Protocol-based networking and other communications and information technology products. In addition, it provides infrastructure platforms, including networking technologies of switching, routing, wireless, and data center products.
On December 7, 2022, the company declared a quarterly dividend of $0.38 per common share, payable on January 25, 2023. Its annual dividend of $1.52 yields 3.27% at the current price level. Its dividend payouts have increased at a 2.8% CAGR over the past three years and a 5.6% CAGR over the past five years. CSCO has a record of 11 years of consecutive dividend growth.
On November 29, the company launched new AppDynamics Cloud capabilities that allow organizations to achieve observability over cloud-native applications correlated to business context across the entire IT estate. The new capabilities will initially support cloud-native applications and digital services running on AWS as both companies continue to empower organizations on their journey to full-stack observability.
CSCO’s total revenue increased 5.7% year-over-year to $13.63 billion for the fiscal first quarter (ended October 29, 2022). The company’s operating income grew 3% year-over-year to $3.54 billion, while its non-GAAP net income came in at $3.55 billion, representing a 2.1% year-over-year increase. Also, its non-GAAP EPS came in at $0.86, up 4.9% year-over-year.
The consensus EPS estimate of $0.86 for the second quarter ending January 31, 2023, represents a 1.8% improvement year-over-year. The consensus revenue estimate of $13.41 billion for the current quarter indicates a 5.4% increase from the prior-year period. The company has an excellent earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters.
It has gained 10.9% over the past three months to close the last trading session at $46.46.
CSCO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Quality and a B for Stability. Within the B-rated Technology - Communication/Networking industry, it is ranked #4 out of 48 stocks. Click here to see the other ratings of CSCO for Growth, Value, Momentum, and Sentiment.
Gilead Sciences, Inc. (GILD)
GILD is a biopharmaceutical company focusing on developing and commercializing medicine for treating life-threatening diseases, including HIV, viral hepatitis, and cancer.
On January 3, 2022, GILD announced that the European Medicines Agency (EMA) had validated the Marketing Authorization Application (MAA) for Trodelvy to treat adult patients with pre-treated HR+/HER2- metastatic breast cancer. Given the limited treatment options, this plays a significant role in making Trodelvy accessible to more patients across the EU.
On the same day, GILD and EVOQ Therapeutics, Inc. announced a collaboration and licensing agreement to advance EVOQ’s proprietary technology for treating rheumatoid arthritis (RA) and lupus. Under the agreement, GILD would receive the rights to exclusively license EVOQ’s NanoDisc technology to develop and commercialize immunotherapy products clinically.
The company’s annual dividend of $2.92 yields 3.49% at the current price level. Its dividend payouts have increased at a 5% CAGR over the past three years and a 7% CAGR over the past five years. GILD has a record of seven years of consecutive dividend growth.
Excluding Veklury, GILD’s total product sales increased 11% year-over-year to $6.05 billion for the fiscal third quarter that ended on September 30, 2022. The company’s non-GAAP attributable net income and non-GAAP EPS amounted to $2.39 billion and $1.90 for the same period.
Its current liabilities declined 7.9% to $62.56 billion for the period that ended September 30, 2022, compared to $67.95 billion for the fiscal year that ended December 31, 2022.
For the quarter that ended on December 31, 2022, GILD’s EPS is expected to increase 115.8% year-over-year to $1.49. It surpassed the consensus EPS estimates in three of the trailing four quarters, which is impressive. Over the past six months, the stock has gained 34.6% to close the last trading session at $83.62.
GILD’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It also has an A grade for Value and a B for Sentiment and Quality. Out of the 398 stocks in the Biotech industry, it is ranked #4. To see the other ratings of GILD for Growth, Momentum, and Stability, click here.
CSCO shares were trading at $46.40 per share on Friday afternoon, down $0.06 (-0.13%). Year-to-date, CSCO has declined -1.82%, versus a 2.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
2 Nasdaq Stocks to Buy Now and Hold All of 2023 StockNews.com
