Tech stocks have been hammered since the beginning of the year due to the Fed’s aggressive interest rate hikes to tackle the high inflation. The tech-heavy Nasdaq Composite is in the bear market, having fallen 32.6% year-to-date.
Many experts believe that tech stocks will likely tumble further as the Fed continues its aggressive rate hikes. Fed officials have now raised the key rate prediction for this year to 4.25% to 4.5% from the previously projected 3.25% to 3.5%.
Despite the current headwinds, the tech industry is expected to grow significantly in the long run due to the growing reliance of businesses on tech solutions, consistent innovations, and rising corporate and government investments.
Demand for tech goods and services is expected to keep rising amid the fast-growing adoption of cloud, artificial intelligence (AI), virtual reality (VR), the internet of things (IoT), data analytics, blockchain, and increasing automation of business processes. The global information technology market is expected to grow at a CAGR of 10.3% to reach $13.81 trillion by 2026.
Amid this backdrop, we think it could be wise to invest in fundamentally strong tech stocks Cisco Systems, Inc. (CSCO), Nokia Oyj (NOK), and AudioCodes Ltd. (AUDC) to capitalize on the industry’s long-term growth prospects.
Cisco Systems, Inc. (CSCO)
CSCO designs, manufactures, and sells internet protocol-based networking and other products across networking, security, collaboration, applications, and the cloud. The company operates through three geographic segments: the Americas; Europe, the Middle East, and Africa (EMEA); and Asia Pacific, Japan, and China (APJC).
On October 5, 2022, CSCO announced an expansion of its existing SD-WAN partnership with Microsoft (MSFT) to allow customers to sidestep the public internet and MPLS to send their Cisco SD-WAN traffic over the latter’s Azure cloud backbone. This is expected to add value by providing speed and cost benefits.
For the fiscal year ended July 31, 2022, CSCO’s revenue increased 3.5% year-over-year to $51.55 billion. The company’s non-GAAP net income increased 3.3% year-over-year to $14.09 billion. Also, its non-GAAP EPS came in at $3.36, representing an increase of 4.3% year-over-year.
Analysts expect CSCO’s EPS and revenue for the quarter ending October 31, 2022, to increase 1.9% and 2.9% year-over-year to $0.84 and $13.28 billion, respectively. It surpassed Street EPS estimates in each of the trailing four quarters. Over the past three months, the stock has declined 7.5% to close the last trading session at $39.89.
CSCO’s overall B rating equates to a Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Quality. It is ranked #5 out of 49 stocks in the B-rated Technology – Communication/Networking industry. Click here to see the other ratings of CSCO for Growth, Value, Momentum, Stability, and Sentiment.
Nokia Oyj (NOK)
Headquartered in Espoo, Finland, NOK provides mobile, fixed, and cloud network solutions worldwide. The company operates through four segments Mobile Network, Network Infrastructure, Cloud and Network Services, and Nokia Technologies.
On July 28, 2022, NOK announced the signing of a five-year 5G deal with AST SpaceMobile, Inc. (ASTS). Through this deal, NOK and ASTS should achieve their joint ambition of expanding universal coverage and connecting underserved communities worldwide. This is expected to be strategically beneficial for NOK.
NOK’s net sales increased 10.5% year-over-year to €5.87 billion ($5.70 billion) for the second quarter ended June 30, 2022. The company’s operating profit increased 16.5% year-over-year to €564 million ($547.80 million). Also, its net profit increased 31.1% year-over-year to €460 million ($446.78 million). In addition, its EPS rose 33.3% year-over-year to €0.08.
For the quarter that ended September 30, 2022, NOK’s EPS is expected to increase 7.4% year-over-year to $0.10. Its revenue for the quarter ending March 31, 2022, is expected to increase 3.1% year-over-year to $5.79 billion. It surpassed consensus EPS estimates in each of the trailing four quarters. Over the past three months, the stock has declined 6.4% to close the last trading session at $4.35.
NOK’s strong fundamentals are reflected in its POWR Ratings. The stock's overall B rating indicates a Buy in our proprietary rating system.
It has an A grade for Value. It is ranked #9 in the same industry. To see the other ratings of NOK for Growth, Momentum, Stability, Sentiment, and Quality, click here.
AudioCodes Ltd. (AUDC)
Headquartered in Lod, Israel, AUDC is a leading vendor of advanced voice networking and media processing solutions for the digital workplace. It offers solutions, products, and services for unified communications, contact centers, VoiceAI business lines, and service provider businesses.
On April 25, 2022, the company announced that it had been approved as a partner for Microsoft’s Operator Connect Accelerator. “AudioCodes Live Cloud is the ideal SaaS solution for assisting service providers in accelerating Operator Connect customer onboarding and operations, all on a per-user per-month plan,” said Lior Aldema, Chief Business Officer at AudioCodes.
AUDC’s total revenues increased 12.8% year-over-year to $68.36 million for the second quarter ended June 30, 2022. Its services revenue increased 21.9% year-over-year to $27.77 million. The company’s gross profit grew 5.8% year-over-year to $44.51 million.
Analysts expect AUDC’s revenue for the fiscal third quarter ended September 2022 to increase 11.1% to $70.41 million. Its EPS for fiscal 2023 is expected to increase 19.9% year-over-year to $1.67. Over the past month, the stock has lost 12.2% to close the last trading session at $20.02.
AUDC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Quality and a B for Value, Stability, and Sentiment. Again, it is ranked first in the same industry. Click here to see the other ratings of AUDC for Growth, Momentum, and Sentiment.
CSCO shares were trading at $39.82 per share on Tuesday morning, down $0.07 (-0.18%). Year-to-date, CSCO has declined -35.19%, versus a -23.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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