The Fed’s persistent monetary policy tightening has led to the tech-heavy Nasdaq composite losing 32.6% year-to-date. The potential impact of rising borrowing costs on tech companies' financials has been making investors dump tech stocks this year.
Tech giant Apple Inc. (AAPL) has lost 18.5% over the past nine months to close the last trading session at $140.42. The company’s net income came in at $19.44 billion for the third quarter that ended June 25, 2022, down 10.6% year-over-year. Its EPS declined 7.7% year-over-year to $1.20.
However, the demand for tech solutions is expected to remain robust in the coming years. Also, the industry is witnessing rising investments from governments and corporates. For example, International Business Machines Corporation (IBM) is expected to invest $20 billion in the American tech industry to boost research and development in artificial intelligence, quantum computing, and others.
Therefore, investors looking to capitalize on the tech industry’s long-term growth prospects could consider buying Microsoft Corporation (MSFT), Cisco Systems, Inc.(CSCO), and Canon Inc. (CAJ) instead of AAPL.
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 September 26, 2022, MSFT and Ontario Power Generation announced a Canada-first strategic partnership to manage climate change and drive sustainable growth. With this agreement, MSFT aims to achieve 100/100/0 by 2030 by powering its data centers worldwide with carbon-free energy.
MSFT’s total revenues came in at $51.87 billion for the fourth quarter that ended June 30, 2022, up 12.4% year-over-year. Moreover, its net income came in at $16.74 billion, up marginally year-over-year. Also, its EPS came in at $2.23, up 2.8% year-over-year.
Analysts expect MSFT’s revenue to increase 11.2% year-over-year to $220.43 billion in 2023. Its EPS is expected to increase 9.7% year-over-year to $10.1 in 2022. It surpassed EPS estimates in all four trailing quarters. MSFT’s shares have lost 2.1% intraday to close the last trading session at $229.25.
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 #9 out of 51 stocks. Click here for MSFT’s additional POWR Ratings for Value, Growth, Momentum, and Sentiment.
Cisco Systems, Inc. (CSCO)
CSCO designs, manufactures, and sells Internet Protocol-based networking and other products related to the communications and information technology industry in the Americas, Europe, the Middle East, Africa, the Asia Pacific, Japan, and China.
On September 27, 2022, CSCO and tech company Accedian joined hands to assist Zain Kuwait, a leading digital service provider, in automating its network for improved network visibility and service assurance. This should prove strategically beneficial for CSCO.
CSCO’s service revenue increased marginally year-over-year to $3.41 billion for the fourth quarter that ended July 30, 2022. Revenue from its EMEA segment came in at $3.58 billion, up 8% year-over-year. Moreover, revenue from end-to-end security products came in at $984 million, up 20% year-over-year.
Street expects CSCO’s revenue to increase 5% year-over-year to $54.13 billion in 2023. Its EPS is estimated to grow 5.1% year-over-year to $3.53 in 2023. It surpassed EPS estimates in all four trailing quarters. CSCO’s shares have lost marginally intraday to close the last trading session at $39.89.
CSCO’s overall B rating is a Buy in our POWR Ratings system. It has an A grade for Quality. It is ranked #5 out of 49 stocks in the Technology - Communication/Networking industry. Click here to see the additional POWR Ratings for Growth, Momentum, Stability, Sentiment, and Value for CSCO.
Canon Inc. (CAJ)
Headquartered in Tokyo, Japan, CAJ is a manufacturer and seller of office multifunction devices, plain paper copying machines, laser and inkjet printers, cameras, diagnostic equipment, and lithography equipment. Its four segments are Office Business Unit; Imaging System Business Unit; Medical System Business Unit; Industry, and Other Business Unit.
On October 4, 2022, CAJ U.S.A. launched the new MAXIFY GX7020X inkjet printer, which will reduce ink costs by utilizing high-volume ink bottles. This product is expected to be immensely helpful amid hybrid work and is a solid diversification of the company’s existing product portfolio.
CAJ’s net sales came in at ¥998.80 billion ($6.85 billion) in the second quarter ended June 30, up 13.3% year-over-year. Its gross profit came in at ¥464.04 billion ($3.18 billion), up 11.1% from the prior-year quarter. CAJ’s operating profit increased 27.4% year-over-year to ¥98.48 billion ($680 million).
CAJ’s EPS is expected to grow 2.1% year-over-year to $1.91 in 2022. CAJ’s shares have lost marginally intraday to close its last trading session at $22.55.
CAJ’s overall B rating equates to a Buy in our POWR Ratings system. It has a B grade for Stability and Quality. It is ranked #4 out of 42 stocks in the Technology – Hardware industry. Click here for the additional POWR Ratings for Growth, Momentum, Sentiment, and Value for CAJ.
MSFT shares were trading at $224.97 per share on Tuesday afternoon, down $4.28 (-1.87%). Year-to-date, MSFT has declined -32.67%, versus a -23.96% 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.
3 Tech Stocks to Buy Instead of Apple StockNews.com
