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This story originally appeared on StockNews
As investors have rotated away from expensive tech stocks amid a reopening economy, some fundamentally strong tech stocks have lost value too. The prices of Salesforce (CRM), Qualcomm (QCOM), and Synopsys (SNPS) stocks are currently down more than 20% from their recent highs. But, given their sound fundamentals, we think these price levels could be great investment entry points. Let’s discuss.
The tone of last year’s stock market was set by high-growth tech companies as the world adjusted to a ‘new-normal’. Investors’ interest in the tech sector is evident in Technology Select Sector SPDR Fund’s (XLK) 61.3% gains since its pandemic low in March 2020. However, investors have this year been rotating away from expensive tech stocks to cyclical stocks to capitalize on the recovering economy. The tech-heavy Nasdaq dipped 2.6% on May 10 in its worst session since March 2021.
While the Nasdaq Composite gained 2.3% on May 14, it posted a weekly loss. The decline in tech stocks, irrespective of individual companies’ growth prospects, creates an opportunity to buy the shares of fundamentally strong tech companies that are expected to continue benefiting from consumers’ increasing dependency on advanced technologies.
Salesforce.com, Inc. (CRM), QUALCOMM Incorporated (QCOM) and Synopsys, Inc. (SNPS) are the top players in their respective segments and their shares are currently trading more than 20% lower than their recent highs. So, we think it could be wise to bet on them now.
Salesforce.com, Inc. (CRM)
CRM develops enterprise cloud computing solutions that are focused on customer relationship management. The company offers Sales Cloud to store data, monitor leads and progress, and forecast opportunities. It also provides Service Cloud, which enables companies to deliver personalized customer service and support.
On May 5, CRM and the Walt Disney Company’s (DIS) Disney Studios Content announced a five-year innovation partnership to help support DIS’ filmmakers and marketers using CRM’s platform. This is an example of an increasing demand for the company’s solutions.
The company announced on April 21, 2021 that Sonos, Inc. (SONO), which is the world’s leading sound experience company, is using CRM’s solutions to transform its digital shopping capabilities and deliver more personalized customer experiences from anywhere. This is further expected to expand CRM’s consumer base.
CRM is scheduled to release results for its fiscal first quarter, ended April 30. on May 27,after the market closes. CRM’s net revenue increased 20% year-over-year to $5.82 billion for the fourth quarter, ended January 31.Its operating income came in at $193 versus a $36 million operating loss. Its net income was $267 million compared to a net loss of $248 million in the prior-year period. The company’s EPS was $0.28 in the fourth quarter compared to a $0.28 loss per share in the year-ago quarter.
For the current quarter, ending June 30, analysts expect CRM’s EPS and revenue to increase 25.7% and 21.5%, respectively, year-over-year to $0.88 and $5.89 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 30.3% over the past year and closed Friday’s trading session at $217.66. It is currently trading 23.5% below its $284.50 52-week high, which it hit on September 2, 2020.
CRM’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has a B grade for Growth, Quality and Sentiment. Within the Software – Application industry, CRM is ranked #17 of 125 stocks. To see the additional POWR Ratings for CRM (Stability, Value and Momentum), click here.
QUALCOMM Incorporated (QCOM)
Established wireless technology company QCOM develops and sells expansion technologies like fifth generation (5G). It is also engaged in the development and commercialization of foundational technologies and products that are used in mobile devices and other wireless products, including network and broadband gateway equipment, consumer electronic devices, and other connected devices worldwide.
QCOM, along with United States Cellular Corporation (USM), Telefonaktiebolaget LM Ericsson (ERIC) and Inseego Corp. (INSG) announced on May 6 that it has successfully achieved a 5G extended-range milestone over millimeter Wave (mmWave) on a commercial network. Since 5G mmWave is a robust and crucial solution to the increasing traffic demand and to expanding broadband services, this is expected to lead to increasing demand for QCOM’s products and services.
In March, its subsidiary, Qualcomm Technologies, Inc., completed the acquisition of the world-class CPU and technology design company , NUVIA. This move is expected to help QCOM create a new class of high-performance computing platforms that might set it apart from its peers.
QCOM’s revenue surged 52% year-over-year to $7.93 billion in the second quarter, ended March 28. Its earnings before taxes grew 256% year-over-year to $2.13 billion. Its net income came in at $1.76 billion, which represents a 276% year-over-year increase. The company’s EPS came in at $1.53, up 273% year-over-year.
Analysts expect its EPS to increase 94.2% year-over-year to $1.67 for the current quarter, ending June 30, 2021. It surpassed consensus EPS estimates in each of the trailing four quarters. Its revenue is expected to increase 48.6% year-over-year to $32.19 billion in fiscal 2021. The stock has soared nearly 63% over the past year. It is currently trading 22.5% below its 52-week high of $167.94,which it hit on January 20, 2021.
QCOM’s strong fundamentals are reflected in its POWR Ratings. The company has an overall rating of B, which equates to Buy in our proprietary ratings system. The stock has a B grade for Growth, Value, Sentiment and Quality.
Synopsys, Inc. (SNPS)
SNPS provides electronic design automation software products that are used to design and test integrated circuits (ICs). Its offerings include Fusion Design Platform, which is a digital design implementation solution, Verification Continuum Platform, and FPGA design products that are programmed to perform specific functions.
The company launched its new ZeBu EP1 emulation system on May 13, 2021. The system leverages its proven direct-connect architecture to optimize design communication and delivers unprecedented emulation performance. This is expected to provide it an edge over its competitors and help drive up its revenue.
SNPS completed the acquisition of MorethanIP on May 4, 2021. The acquisition expands its DesignWare Ethernet Controller IP portfolio with the addition of MAC and PCS for 200G/400G and 800G Ethernet. This provides consumers with a complete low-latency, high-performance Ethernet IP solution for networking, AI, and cloud computing SoCs. This is further expected to boost its revenue in the near-term.
The company is scheduled to report its financial results for the fiscal second quarter ended April 30, 2021 on May 19, 2021. Its revenue increased 16.3% year-over-year to $970.30 million for its fiscal first quarter, ended January 31, 2021. Its revenue from the IP & System Integration segment increased 8.9% year-over-year to $536.20 million. SNPS’ non-GAAP net income increased 52.8% year-over-year to $239.47 million and its non-GAAP EPS grew 50.5% year-over-year to $1.52.
Analysts expect SNPS’ EPS to increase 24.6% year-over-year to $1.52 for the about-to-be-reported quarter, ended April 30. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Its revenue is expected to be $988.70 million in the about-to-be-reported quarter, which represents a 18.2% year-over-year rise. The stock has soared 51.9% over the past year to close Friday’s trading session at $239.70. It is currently trading 20.3% below its 52-week high of $300.91, which it hit on February 16, 2021.
It’s no surprise that SNPS has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Growth and Quality.
CRM shares were trading at $213.71 per share on Monday afternoon, down $3.95 (-1.81%). Year-to-date, CRM has declined -3.96%, versus a 11.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal’s fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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