The U.S. inflation hit a new 40-year high of 8.6% in May 2022, making the Fed increase interest rates by 0.75% yesterday after two hikes earlier this year. Investors’ concerns over the economy slipping into a recession have led to massive tech sell-offs lately.
Though Fed Chairman Powell assured that the central bank would consider hiking interest rates less aggressively in its next meeting, the interest-rate-sensitive tech industry is expected to remain under pressure. The tech-heavy Nasdaq Composite has declined 7.6% over the past week. However, given the surging demand for tech products and solutions and consistent breakthroughs, the industry should rebound soon.
Prominent tech stocks Microsoft Corporation (MSFT), Oracle Corporation (ORCL), Autodesk, Inc. (ADSK), Broadcom Inc. (AVGO), and Infosys Limited (INFY), which are currently trading at attractive price levels, are well-positioned to witness a big rebound because of their fundamental strength. So, it could be wise to invest in these stocks now.
Microsoft Corporation (MSFT)
MSFT develops, supports, licenses, and sells software products, services, and solutions worldwide. The company also manufactures and sells PCs, tablets, gaming and entertainment consoles, other intelligent devices, and related accessories through OEMs, distributors, resellers, digital marketplaces, and retail stores.
On June 16, 2022, MSFT launched Microsoft Viva Sales, a new seller experience application that enriches any CRM system and delivers AI-powered intelligence to sellers in Microsoft 365 and Microsoft Teams. By providing sellers with AI-driven recommendations and insights, Viva Sales helps sellers more seamlessly personalize their customer engagements toward faster deal closure. This should gain broad reach among salespeople amid the growing demand for hybrid working structures.
For its fiscal year 2022 third quarter ended March 31, 2022, MSFT’s total revenue increased 18.4% year-over-year to $49.36 billion. The company’s gross profit came in at $33.75 billion, representing a 17.7% rise from the prior-year period. MSFT’s operating income was $20.36 billion, up 19.4% from the year-ago period. While its net income increased 8.2% year-over-year to $16.73 billion, its EPS increased 9.4% to $2.22. As of March 31, 2022, the company had $12.50 billion in cash and cash equivalents.
The consensus EPS estimate of $9.30 for its fiscal 2022 ending June 30, 2022, represents a 15.5% year-over-year improvement. It surpassed the consensus EPS estimates in each of the four trailing quarters, which is impressive. Analysts expect the company’s revenue to reach $199.04 billion for the same fiscal year, indicating an 18.4% rise from the prior-year period. MSFT’s EPS is expected to grow at a 16.1% rate per annum over the next five years. Over the past week, the stock has gained 2.3% and closed yesterday’s trading session at $251.76.
MSFT’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has a B grade for Stability and Quality. Click here to see the additional ratings for MSFT’s Growth, Sentiment, Value, and Momentum. MSFT is ranked #14 of 56 stocks in the C-rated Software - Business industry.
Oracle Corporation (ORCL)
ORCL provides products and services that address all aspects of corporate IT environments, including application, platform, and infrastructure worldwide. The company operates through four segments — cloud services and license support; cloud license and on-premises license; hardware; and services. It markets and sells its solutions directly to businesses in various industries, government agencies, educational institutions, and indirect channels.
On June 8, 2022, ORCL completed the acquisition of Cerner Corporation (CERN), a supplier of health information technology services, devices, and hardware, for approximately $28.3 billion in equity value. This will help ORCL offer medical professionals a new generation of easier-to-use digital tools designed to lower the administrative workload while improving patient privacy and lowering overall healthcare costs. Moreover, this acquisition is expected to be immediately accretive to ORCL’s earnings on a non-GAAP basis in the first full fiscal year after closing and contribute substantially more to earnings in the second fiscal year and thereafter.
ORCL’s non-GAAP total revenues for its fiscal 2022 fourth quarter ended May 31, 2022, increased 5.5% year-over-year to $11.84 billion. The company’s non-GAAP operating income came in at $5.59 billion, indicating a 2.6% rise from the prior-year period. Its non-GAAP EPS remains unchanged at $1.54. As of May 31, 2022, the company had $21.38 billion in cash and cash equivalents.
Analysts expect the company’s EPS to hit $5.27 for its fiscal 2023 ending May 31, 2023, representing a 7.6% rise from the prior-year period. It surpassed Street EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $48.36 billion for the same fiscal year represents a 14% year-over-year improvement. Its EPS is expected to grow at a 10.2% rate per annum over the next five years. The company’s EPS is expected to grow at a rate of 12.1% per annum over the next five years. Over the past week, the stock has gained 5.9% to close yesterday’s trading session at $69.70.
ORCL’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Strong Buy in our proprietary rating system.
It has a B grade for Sentiment and Quality. Click here for the additional ratings for ORCL’s Stability, Value, Growth, and Momentum. ORCL is ranked #17 of 155 stocks in the Software - Application industry.
Autodesk, Inc. (ADSK)
ADSK is a three-dimensional (3D) design, engineering, and entertainment software and services provider focused on architecture, engineering, and construction (AEC); AutoCAD and AutoCAD LT; manufacturing (MFG); and media and entertainment (M&E) product families. The company serves automotive, transportation, industrial machinery, consumer products, and building product industries. It sells its products and services to customers directly and through a network of resellers and distributors.
On April 12, 2022, Evans General Contractors, an international design-build contracting firm, announced to adopt ADSK’s Autodesk Construction Cloud and incorporate it into its standard operating procedures (SOP), which includes enhancing project management, team collaboration and quality of service, all while rapidly onboarding new team members. This should enable ADSK to help Evans expand its market reach and nurture their relationship in the future.
For its fiscal 2023 first quarter ended April 30, 2022, ADSK’s revenues increased 18.3% year-over-year to $1.17 billion. The company’s gross profit came in at $1.05 billion, representing a 17.4% year-over-year improvement. Its non-GAAP income from operations came in at $397 million, up 41.8% from the prior-year period. ADSK’s non-GAAP EPS increased 38.8% year-over-year to $1.43. The company had cash and cash equivalents of $1.52 billion as of April 30, 2022.
Analysts expect ADSK’s EPS to improve 29.2% year-over-year to $6.55 for its fiscal year 2023, ending January 31, 2024. It surpassed the consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $5.01 billion for the same fiscal year represents a 14.3% rise from the prior-year period. The company’s EPS is expected to grow at a 25.8% rate per annum over the next five years. Over the past week, the stock has lost 5.5% to close yesterday’s trading session at $176.71.
ADSK’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system.
It has an A grade for Quality and a B grade for Growth. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for ADSK’s Momentum, Stability, Sentiment, and Value here. ADSK is ranked #31 in the Software - Application industry.
Broadcom Inc. (AVGO)
AVGO designs, develops, and supplies a range of analog and digital semiconductor connectivity solutions and infrastructure software solutions. The company develops semiconductor devices, focusing on complex digital and mixed-signal complementary metal-oxide-semiconductor-based devices and analog III-V-based products. Its products include data center networking, home connectivity, broadband access, telecommunications equipment, smartphones, and base stations.
On May 26, 2022, AVGO announced to acquire VMware, Inc. (VMW), a cloud computing and virtualization technology company that virtualizes the x86 architecture, in a cash-and-stock transaction of approximately $61 billion and will assume $8 billion of VMW’s net debt. AVGO’s Broadcom Software Group will rebrand and operate as VMware, incorporating its existing infrastructure and security software solutions and helping accelerate the company’s growth opportunities. This should add approximately $8.5 billion of pro forma EBITDA from the acquisition within three years post-closing.
For its fiscal 2022 second quarter ended May 1, 2022, AVGO’s net revenue increased 22.6% year-over-year to $8.10 billion. The company’s non-GAAP gross profit came in at $6.19 billion for the quarter, up 24.9% from the prior-year period. Its non-GAAP operating income came in at $4.94 billion, representing a 29.9% rise from the prior-year period. While its non-GAAP net income increased 34.2% year-over-year to $4 billion, its non-GAAP EPS increased 37% to $9.07. As of May 1, 2022, the company had $9.01 billion in cash and cash equivalents.
Analysts expect the company’s EPS to improve 31.9% year-over-year to $36.95 for fiscal 2022 ending October 31, 2022. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive. The consensus revenue estimate of $32.88 billion for the quarter, representing a 19.8% rise from the prior-year period. AVGO’s EPS is expected to grow at a 14.7% rate per annum over the next five years. Over the past week, the stock has lost 2.7% to close yesterday’s session at $526.71.
AVGO’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, equating to Strong Buy in our proprietary rating system.
The stock has an A grade for Growth and Quality and a B for Sentiment. Click here to see the additional ratings for AVGO (Momentum, Value, and Stability). The stock is ranked #9 of 96 in the B-rated Semiconductor & Wireless Chip industry.
Infosys Limited (INFY)
Headquartered in Bengaluru, India, INFY provides consulting, technology, application development and management, outsourcing, product engineering and management, and next-generation digital services. The company serves financial services, life sciences, healthcare, manufacturing, retail, logistics, communications, telecom OEM, media, energy, and utility industries.
On June 9, 2022, German-based ThyssenKrupp AG’s (TKAMY) TK Elevator business announced a global strategic collaboration with INFY to access AI-powered IT helpdesk services, digital workplace management, cybersecurity as well as network services powered by INFY’s Infosys Cobalt-driven automation framework. INFY will reduce overall IT operational costs and build a long-standing relationship with TK Elevator.
INFY’s fiscal 2022 fourth-quarter revenues increased 18.5% year-over-year to $4.28 billion. The company’s gross profit came in at $1.33 billion, indicating a 5.5% year-over-year improvement. Its operating income came in at $920 million for the quarter, representing a 4.1% rise from the year-ago period. While its net profit increased 8% year-over-year to $753 million, its EPS grew 12.5% to $0.18. As of March 31, 2022, the company had $2.31 billion in cash and cash equivalents.
Analysts expect INFY’s EPS to be $0.77 for fiscal 2023 ending March 31, 2023, representing a 10% year-over-year improvement. It surpassed Street EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $18.47 billion in the same fiscal year represents a 13.2% year-over-year improvement. The company’s EPS is expected to grow at a rate of 14.8% per annum over the next five years. Over the past week, the stock has lost marginally to close yesterday’s trading session at $18.29.
INFY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system.
It has an A grade for Quality and a B grade for Stability. Click here to see the additional ratings for INFY’s Value, Growth, Sentiment, and Momentum. INFY is ranked #6 of 10 stocks in the A-rated Outsourcing - Tech Services industry.
MSFT shares were trading at $243.74 per share on Thursday afternoon, down $8.02 (-3.19%). Year-to-date, MSFT has declined -27.21%, versus a -22.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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