Amid the Fed’s consecutive rate hikes, tech stocks have witnessed a freefall in 2022. The interest rate-sensitive and tech-heavy NASDAQ Composite has lost 30% year-to-date. However, Philadelphia Federal Reserve President Patrick Harker expects the Fed will stop hiking rates by 2023.
Moreover, the demand for tech goods and services is expected to intensify in the coming years. Rapid digitization across industries is expected to keep the tech industry buoyed. According to Gartner, IT demand is expected to be strong in the coming year as enterprises push forward with digital business initiatives in response to economic turmoil.
Furthermore, the growing adoption of advanced technologies like Artificial Intelligence (AI), cloud-based solutions, and the Internet of Things (IoT) should help the tech industry thrive in the coming decades. According to Fortune Business Insights, the global AI market size is expected grow at a CAGR of 20.1% until 2029.
Given the backdrop, fundamentally sound tech stocks Microsoft Corporation (MSFT) and Commvault Systems, Inc. (CVLT) could be ideal buys to cash in on the solid long-term prospects of the industry.
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 20, 2022, MSFT and UBS Group AG (UBS) announced a landmark expansion of their partnership. Scott Guthrie, executive vice president of Cloud + AI, MSFT, said, “Our expanded partnership will continue to accelerate the organization’s ambitious digital transformation plans, applying the power of the Microsoft Cloud to equip UBS with the agility and reliability to deliver for their clients.”
Also, on October 12, 2022, MSFT and Cisco Systems, Inc. (CSCO) announced their new partnership at Microsoft’s annual Ignite conference. Under the partnership, MSFT Teams will be able to run natively on CSCO Room and Desk devices Certified for MSFT Teams, with the option of Teams as the default experience.
MSFT’s total revenues came in at $50.12 billion for the first quarter ended September 30, 2022, up 10.6% year-over-year. Moreover, its gross margin came in at $34.67 billion, up 9.5% year-over-year. Also, its operating income came in at $21.52 billion, up 6.3% year-over-year.
Analysts expect MSFT’s revenue to increase 8.4% year-over-year to $214.90 billion in 2023. Its EPS is expected to increase 5.1% year-over-year to $9.68 in 2023. It surpassed EPS estimates in three of four trailing quarters. MSFT’s shares have gained 4% intraday to close the last trading session at $235.87.
MSFT’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall B rating indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
MSFT has a B grade for Stability and Quality. In the Software – Business industry, it is ranked #10 out of 52 stocks. Click here for MSFT's additional POWR Ratings for Value, Growth, Momentum, and Sentiment.
Commvault Systems, Inc. (CVLT)
CVLT provides data protection and information management software applications and related services in the United States and internationally. The company offers Commvault Backup and Recovery, a backup and recovery solution; Commvault Disaster Recovery, a replication and disaster recovery solution; and Commvault Complete Data Protection, a data protection solution.
On July 26, 2022, Sanjay Mirchandani, President, and CEO, said, “We believe customers will continue to prioritize our best-in-class data protection and management solutions as they embrace the cloud and hybrid IT. We are confident in our strategy.”
CVLT’s total revenue came in at $197.98 million for the first quarter that ended June 30, 2022, up 7.9% year-over-year. Moreover, its gross margin came in at $164.22 million, up 3.8% year-over-year. Its software and products revenue came in at $92.44 million, up 12.5% year-over-year.
CVLT’s revenue is expected to increase by 5% year-over-year to $807.87 million in 2023. Its EPS is expected to grow 3.2% year-over-year to $2.59 in 2023. It surpassed EPS estimates in three of four trailing quarters. Over the past month, the stock has gained 15.8% to close the last trading session at $61.67.
CVLT has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It also has an A grade for Quality and a B for Value, Growth, and Sentiment. It is ranked first among 146 stocks in the Software – Application industry.
Beyond what is stated above, we’ve also rated CVLT for Stability and Momentum. Get all CVLT ratings here.
MSFT shares were trading at $233.53 per share on Monday afternoon, down $2.34 (-0.99%). Year-to-date, MSFT has declined -30.11%, versus a -17.47% rise in the benchmark S&P 500 index during the same period.
About the Author: RashmiKumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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