The tech industry is one of the worst-performing sectors so far in 2022, with the benchmark Nasdaq 100 index down 12.3% year-to-date. As the Fed gears up to hike the benchmark interest rates in March, the sector is expected to retreat further. However, certain fundamentally strong companies are expected to withstand the turbulence. Furthermore, with the rising demand for tech-related products in an increasingly remote life culture, demand will inexorably become inelastic due to the sector’s sheer necessity.
Several experts believe the sector's slump to be temporary. With global digitization and multiple innovations, strong tech stocks with promising outlooks are on board for the long haul. According to ReportLinker, the global information technology market is set to grow at a 4.3% CAGR through 2026.
So, it could be wise to bet on quality tech stocks Microsoft Corporation (MSFT), Onto Innovation Inc. (ONTO), and Rambus Inc. (RMBS) to cash in on the industry’s long-term growth.
Microsoft Corporation (MSFT)
Technology giant MSFT’s broad product portfolio includes personal computers, tablets, gaming and entertainment consoles, and related accessories. In addition, the Redmond, Wash.-based company is making several advances in the cloud space with the help of Microsoft Azure.
On Jan. 25, 2022, Satya Nadella, chairman and CEO, MSFT, said, “As tech as a percentage of global GDP continues to increase, we are innovating and investing across diverse and growing markets, with a common underlying technology stack and an operating model that reinforces a common strategy, culture, and sense of purpose.”
MSFT’s total revenue came in at $51.73 billion for its fiscal 2022 second quarter, ended Dec. 31, 2021, up 20.1% year-over-year. The company’s net income came in at $18.77 billion, up 21.4% year-over-year. Also, its EPS increased 22.2% year-over-year to $2.48. Furthermore, its cash and cash equivalents were $20.60 billion for the period ended Dec. 31, 2021, compared to $14.22 billion for the period ended June 30, 2021.
For its fiscal 2022, analysts expect MSFT’s revenue to be $198.31 billion, representing an 18% year-over-year rise. In addition, the company’s EPS is expected to increase 15.8% year-over-year to $9.32 for fiscal 2022. Also, it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 27.7% in price to close yesterday’s trading session at $296.71.
MSFT’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has an A grade for Sentiment and a B grade for Stability and Quality. Within the Software-Application industry, it is ranked #16 of 165 stocks. Click here to see the additional POWR Ratings for Growth, Value, and Momentum for MSFT.
Onto Innovation Inc. (ONTO)
ONTO designs, develops, manufactures, and supports process control tools that perform macro defect inspection and metrology, lithography systems, and process control analytical software worldwide.
On Nov. 4, 2021, Michael Plisinski, CEO, ONTO, said, “With several of our advanced nodes and specialty customers announcing expansions for next year and a record backlog that is more than twice the backlog at this time last year, we are optimistic that demand for Onto Innovation’s solutions will remain strong going into 2022.”
ONTO’s revenue increased 58.6% year-over-year to $200.59 million for its fiscal third quarter, ended Sept. 25, 2021. While its non-GAAP net income came in at $48.73 million, up 148.6% year-over-year, its non-GAAP EPS came in at $0.98, up 145% year-over-year.
Analysts expect ONTO’s revenue to increase 14.9% year-over-year to $894.34 million for its fiscal 2022. In addition, its EPS is also expected to grow 22.5% year-over-year to $4.58 for its fiscal 2022. Over the past year, the stock has gained 56.4% in price to close yesterday’s trading session at $88.91.
ONTO has an overall B rating, which indicates a Buy in our proprietary rating system. It has a B grade for Growth, Momentum, Sentiment, and Quality. Within the A-Rated Semiconductor & Wireless Chip industry, it is ranked #37 of 100 stocks. Click here to see the additional POWR Ratings for Value and Stability for ONTO.
Click here to checkout our Semiconductor Industry Report for 2022
Rambus Inc. (RMBS)
Operating for more than three decades, RMBS in Sunnyvale, Calif., provides chips and intellectual property (IP) that enable performance improvements for data centers and other markets. The company’s offerings include DDR5, DDR4, and DDR3 memory interface chips. Also, it offers a portfolio of physical interface and companion digital controllers through Northwest Logic, Inc.
On Sept. 21, RMBS announced that it is extending a patent license agreement with Kioxia Corporation. Kit Rodgers, the company’s senior vice president of technology partnerships and corporate development, said, “The Rambus patent portfolio covers foundational technologies for the semiconductor industry, including the flash memory segment, that help improve the performance of the most advanced systems.”
RMBS’ total revenue for its fiscal third quarter, ended Sept. 30, 2021, was $81.28 million, up 42.8% year-over-year. Its gross profit increased 50.9% year-over-year to $62.86 million. Also, its net income came in at $3.68 million compared to a$12.74 million loss in the year-ago period.
Analysts expect RMBS’ revenue to increase 12.6% year-over-year to $505.48 million in fiscal 2022. Its EPS is expected to be $1.48 for fiscal 2022, up 9.6% year-over-year. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 21.9% in price to close yesterday’s trading session at $24.53.
It is no surprise that RMBS has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has an A grade for Growth and a B grade for Value and Quality.
RMBS is ranked #41 of 100 stocks in the Semiconductor & Wireless Chip industry. In addition to the POWR Ratings I have just highlighted, we have also rated the stock for Momentum, Stability, and Sentiment. Click here to get all the RMBS ratings.
MSFT shares were trading at $301.68 per share on Thursday afternoon, up $4.97 (+1.68%). Year-to-date, MSFT has declined -10.30%, versus a -8.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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