It's been a brutal third-quarter earnings season for most big Nasdaq stocks — with disappointments all around. But some of the stocks are still likely to redeem themselves soon, analysts say.
Nine stocks in the Nasdaq 100, including Zscaler, Splunk and Marvell Technology, are expected to jump 30% or more in the next 12 months, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. And it's not just a price-target pipe dream. They are all also seen delivering fourth-quarter profit growth of 20% or more.
"This week will go down in the history books of earnings season as one of Big Tech's worst and ultimately could be a 'fork in the road moment' for the stalwarts looking ahead," said Dan Ives, analyst at Wedbush. "While Alphabet and Microsoft saw weakness with lower guidance that spooked the Street, Meta's results ... (were) an absolute train wreck that speaks to pervasive digital advertising doldrums ahead for Zuckerberg & Co. as they make the risky and head scratching bet on the metaverse."
Looking For Brighter Days For Big Nasdaq Stocks
It's been a rough year to invest in big Nasdaq stocks, such as the 100 largest non-financials. The tech-heavy Nasdaq 100 index is down 31% amid declining earnings, a glut in many types of semiconductors, inflation and rising interest rates.
And that's why finding Nasdaq 100 and S&P 500 stocks still putting up big growth is so valued. The third quarter has been a bust for many. Analysts think profit of information tech firms in the S&P 500 will fall nearly 5% in the third quarter, says John Butters of FactSet. Analysts are hoping the sector's profit only falls 1.8% in the fourth quarter.
"U.S. stocks are struggling for direction after a mixed bag of earnings was accompanied with economic data that supports the idea that the economy is weakening," said Edward Moya of Oanda.
Where Nasdaq Hopes Are Highest
Zscaler, a well-run cloud security company, is an example of a beat-up tech stock analysts still stand behind. Shares are down by more than 50% this year to 152.82. But analysts think the stock will trade for nearly 39% more in 12 months.
And it's not just wild speculation. Analysts also think strong demand for the company's products will push the company's adjusted profit per share up 101% in the fourth quarter to 26 cents a share. If that actually happens, it would mark the highest growth of any Nasdaq 100 stock analysts think will rally over the upcoming 12 months.
Splunk, another cloud software company, is an additional example of where hopes are high. Analysts think the stock will rise 1,300% in the next 12 months, helping to make up for the 43% drop this year so far. And analysts see a 70% jump in profit in the fourth quarter backing it up. And analysts, too, are hopeful for some chip companies. Marvell Technology, a maker of specialized computer chips, is expected to show a stock gain of 77% in the next year. That's based in part on the company's expected fourth-quarter profit growth of 26.4%.
It's been a difficult third quarter for many big Nasdaq stocks. But analysts at least see a way out. It may just not be in the metaverse.
Nasdaq Stocks With A Future?
| Company | Symbol | Stock implied upside | Expected Q4 EPS growth | Sector |
|---|---|---|---|---|
| Zscaler | 38.6% | 101.4% | Information Technology | |
| JD.com | 1,313.5 | 70.0 | Consumer Discretionary | |
| Splunk | 54.1 | 54.6 | Information Technology | |
| Baidu | 1,466.3 | 37.3 | Communication Services | |
| Marvell Technology | 77.0 | 26.4 | Information Technology | |
| Analog Devices | 33.3 | 24.1 | Information Technology | |
| Palo Alto Networks | 31.7 | 21.4 | Information Technology | |
| Broadcom | 41.4 | 21.4 | Information Technology | |
| Microchip Technology | 34.3 | 20.8 | Information Technology |
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
