Tech stocks bore the brunt of the recent market correction, as lofty valuations and increasing interest rates caused investors to adopt a bearish outlook. The benchmark tech-heavy Nasdaq Comp index has been under pressure since last November and has declined 8.3% year-to-date. While the index has recovered slightly over the past two weeks, tech stocks are expected to remain under pressure due to the Fed’s aggressively hawkish tilt. Furthermore, the yield curve inverted yesterday, indicating concerns about an impending recession.
However, with the rapid digitization of virtually every industrial sector and a continuing remote working culture, fundamentally sound tech stocks have rosy long-term growth prospects. As COVID-19 cases rise across several parts of the world, the tech industry will likely regain its momentum.
Popular tech stocks Lam Research Corporation (LRCX), Infineon Technologies AG (IFNNY), and Keysight Technologies, Inc. (KEYS) have declined more than 20% in price over the past three months due to the tech rout earlier this year. But we think these fundamentally strong stocks are well-positioned to rebound soon.
Lam Research Corporation (LRCX)
LRCX in Fremont, Calif., is a supplier of wafer fabrication equipment and services to the semiconductor industry. Its products and services are designed to aid its customers in building performing devices used in various electronic products, such as mobile phones, PCs, servers, wearables, automotive vehicles, and data storage devices.
On February 9, LRCX introduced an innovative suite of selective Etch portfolios that comprise three news tools: Argos, Prevos, and Selis. These solutions are designed to support chipmakers in the development of gate-all-around (GAA) transistor structures. With such innovative advancements, LRCX is well-positioned to benefit from the current semiconductor boom.
In the second quarter, ended Dec. 26, 2021, LRCX’s revenue increased 22.3% year-over-year to $4.23 billion. Its net income increased 37.5% from its year-ago value to $1.19 billion, while its operating income grew 32.5% year-over-year to $1.34 billion. The company’s non-GAAP EPS came in at $8.44, representing a 41.6% year-over-year improvement.
The $7.56 consensus EPS estimate for the fiscal third quarter (ending March 2022) represents a marginal improvement year-over-year. The $4.28 billion consensus revenue estimate for the next quarter represents an 11.2% increase from the same period last year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has declined 22.5% in price year-to-date to close yesterday’s trading session at $557.31.
LRCX’s POWR Ratings reflect this promising outlook. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
LRCX has a B grade for Momentum and Quality. Within the A-rated Semiconductor & Wireless Chip industry, it is ranked #53 of 97 stocks.
To see additional POWR Ratings for Value, Sentiment, Growth, and Stability for LRCX, click here.
Click here to checkout our Semiconductor Industry Report for 2022
Infineon Technologies AG (IFNNY)
IFNNY is a Munich, Germany-based provider of semiconductors and related system solutions globally. The company operates through four segments: Automotive; Industrial Power Control; Power Management & Multimarket; and Chip Card & Security.
On March 10, IFNNY collaborated with Sleepiz AG to enable high-precision sleep monitoring at home based on radar technology, helping people who suffer from sleep apnea. This collaboration should expand IFNNY’s consumer base significantly.
On February 17, the company invested more than €2 billion ($2.22 billion) to build an additional manufacturing unit of wide bandgap in Kulim, Malaysia. This should boost INNFY’s production capacity significantly, thereby boosting its revenues.
During its fiscal year 2022 first quarter (ended Dec. 31, 2021), IFNNY’s revenue increased 20% year-over-year to €3.16 billion ($3.47 billion). Its operating profit rose 85.8% from its year-ago value to €617 million ($677.68 million). Its net profit grew 78.5% from the same period last year to €457 million ($501.94 million), while its EPS came in at €0.35, representing an 84.2% increase year-over-year.
Analysts expect IFNNY’s EPS and revenue to increase 39.9% and 13.8%, respectively, year-over-year to $1.94 and $14.45 billion in its fiscal 2022 (ending Sept. 30, 2022).
Shares of IFNNY have declined 25.2% in price over the past three months and 24.7% year-to-date to close the last trading session at $34.66.
IFNNY has an overall B rating, which translates to Buy in our proprietary rating system. Also, it has a B grade for Growth, Value, Momentum, and Stability. It is ranked #12 of 97 stocks in the Semiconductor & Wireless Chip industry.
In addition to the POWR Ratings grades I have just highlighted, one can see the IFNNY ratings for Sentiment and Quality here.
Keysight Technologies, Inc. (KEYS)
KEYS provides electronic design and test solutions to companies in the Americas, Europe, and the Asia Pacific. The Santa Rosa, Calif., company also offers customization, consulting, and optimization services throughout the product development lifecycle. It operates through two segments: Communications Solutions Group (CSG); and Electronics Industrial Solutions Group (EISG).
On March 17, KEYS announced the first 800G test solution for validating the 112 Gbps serial data center interface to the latest industry standards. Dr. Joachim Peerlings, Vice President of Network and Data Center Solutions at KEYS, said, "Keysight’s contributions to industry standards bodies are advancing hyperscale network measurement science and design validation solutions for 100 Gbps technology."
On March 15, KEYS introduced new 5G test cases in support of China Mobile Communication Corporation’s carrier acceptance test plan. This should allow China Mobile to accelerate its commercial deployment of 5G technology. Because China houses the largest internet user market in the world, this collaboration should boost KEY’s revenues and profit margins tremendously in the near term.
KEYS’ revenues increased 6% year-over-year to $1.25 billion in its first quarter, ended Jan. 31, 2022. The company’s net income increased 33% from its year-ago value to $229 million, while its income from operations grew 27% year-over-year to $271 million. KEYS’ EPS rose 34.8% from the prior-year quarter to $1.24.
Analysts expect KEYS’ revenues to increase 6.7% year-over-year to $1.30 billion in its fiscal second quarter (ending April 2022). Its EPS is expected to increase 16.3% to $1.67 in the current quarter. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of KEYS have declined 22.6% in price over the past three months and 22.5% year-to-date to close the last trading session at $160.04.
KEYS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. KEYS also has an A grade for Quality and a B grade for Stability and Sentiment. Among the 46 stocks in the Technology - Electronics industry, it is ranked #4.
Click here to see the additional POWR Ratings for KEYS (Growth, Value, and Momentum).
LRCX shares were trading at $562.97 per share on Tuesday morning, up $5.66 (+1.02%). Year-to-date, LRCX has declined -21.47%, versus a -3.09% 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.
3 Buy-Rated Tech Stocks Down More Than 20% to Add to Your Watchlist StockNews.com
