Growing inflationary woes, resulting in continuous interest rate hikes and heightened fears of a recession, have been hurting investor sentiments. This has been taking a toll on the U.S. equity market, which is plummeting as depicted by the 19.82%, 30.78% and 23.48% year-to-date declines in the Dow Jones Industrial Average, Nasdaq Composite and S&P 500 indexes, respectively.
The Federal Reserve recently passed another 0.75% hike in its benchmark interest rates. The Fed has further vowed to hike interest rates to drag down inflation to its target of 2% at best by 2025.
Fed’s aggressive stance on inflation control is responsible for the huge sell-off in the broader equity market. Soaring interest rates will continue to increase the cost of borrowing, which, in turn, will consistently affect consumer spending.
From an investment perspective, investors should not completely shun equities. We advise investors looking for good investment opportunities to park their money in tech high fliers.
The widely-diversified tech sector holds the potential to defy recessionary woes and minimize the anticipated contraction of the world economy despite rising interest rates, supply-chain constraints and geopolitical tensions.
The technology sector holds plenty of growth opportunities with the ongoing worldwide digitization. Growing 5G deployments, the rising proliferation of cloud services, cybersecurity solutions, IoT, AI, Machine Learning, Blockchain, autonomous driving technology, and the increasing trend of hybrid work are likely to be the major tailwinds for tech companies.
We recommend four blue-chip stocks from the Zacks Computer and Technology sector, namely Fortinet FTNT, Zscaler ZS, Synopsys SNPS and STMicroelectronics STM.
Why Should You Invest in These Stocks?
With the help of the Zacks Stock Screener, we have selected the above-mentioned four blue-chip stocks (market cap greater than $20 billion) that are well-poised to grow through the rest of 2022, as these are highly reputed, fundamentally strong and financially resilient.
Apart from having solid fundamentals, the aforementioned stocks have a favorable combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Per Zacks’ proprietary methodology, stocks with such a favorable combination offer solid investment opportunities.
Fortinet has been benefiting from the rising demand for security and networking products amid the growing hybrid working trend. It has also been gaining from robust growth in Fortinet Security Fabric, cloud and Software-defined Wide Area Network offerings.
Increasing IT spending on cybersecurity is expected to aid Fortinet in growing faster than the security market. Its focus on enhancing the UTM portfolio through product development and acquisitions remains another tailwind. Strong deal wins remain the company’s key growth drivers.
FTNT currently has a Zacks Rank #2 and a Growth Score of A. It has a market capitalization of $38.08 billion. The Zacks Consensus Estimate for Fortinet’s 2022 earnings has improved 2.9% to $1.05 per share over the past 60 days. The long-term earnings growth rate for the stock is pegged at 18%. The stock has a trailing four-quarter earnings surprise of 10.3%, on average.
Fortinet, Inc. Price and Consensus
Fortinet, Inc. price-consensus-chart | Fortinet, Inc. Quote
Zscaler has been gaining from the rising demand for cyber-security solutions due to the increasing number of data breaches across the world. The growing requirement for privileged access security on digital transformation and cloud-migration strategies remains another key growth driver.
The company’s rising efforts to strengthen its portfolio offerings, including a full range of enterprise network security services such as web security, Internet security, antivirus, vulnerability management and firewalls, are likely to continue aiding its competitive edge. In this regard, its recent acquisitions of Smokescreen and Trustdome remain noteworthy.
ZS currently has a Zacks Rank #2 and a Growth Score of A. The company has a market capitalization of $22.85 billion. The Zacks Consensus Estimate for Zscaler’s fiscal 2023 earnings has improved 13.6% to $1.17 per share over the past 60 days. The long-term earnings growth rate for the stock is pegged at 45.1%. The stock has a trailing four-quarter earnings surprise of 28.6%, on average.
Zscaler, Inc. Price and Consensus
Zscaler, Inc. price-consensus-chart | Zscaler, Inc. Quote
Synopsys is benefiting from strong design wins, owing to a robust product portfolio. The growing adoption of the company’s Verification Continuum platform is contributing well. The rising demand for ZeBu Server 4 products among customers for designing storage, networking and AI chips is another major positive.
The growing hybrid working trend remains a tailwind for Synopsys, as it is driving bandwidth demand. Strong traction for the company’s Fusion Compiler product is another positive. Solid demand for advanced technology, design, IP and security solutions is likely to continue boosting prospects for the company.
SNPS currently has a Zacks Rank #2 and a Growth Score of B. It has a market capitalization of $48.38 billion. The Zacks Consensus Estimate for Synopsis’ fiscal 2022 earnings has improved 4.4% to $8.84 per share over the past 60 days. The long-term earnings growth rate for the stock is pegged at 16.2%. The stock has a trailing four-quarter earnings surprise of 2.9%, on average.
Synopsys, Inc. Price and Consensus
Synopsys, Inc. price-consensus-chart | Synopsys, Inc. Quote
STMicroelectronics is gaining from the solid demand for its robust microcontrollers, sensors, power, analog and other connectivity products. Growing electrification and digitalization in the automotive industry are expected to remain tailwinds. Strong design wins, with ST power modules in electronic vehicle applications, are likely to drive its growth in the automotive market in the near term.
Solid uptake of motion and environmental sensors, time-of-flight ranging sensors, wireless charging products, touch display controllers, and secure solutions in smartphones is anticipated to aid its performance in the personal electronics market in the near term. Growing customer engagement in cellular and satellite communication infrastructure is likely to continue driving STM’s performance in the communications equipment, computer and peripherals market.
STM currently has a Zacks Rank #2 and a Growth Score of B. The company has a market capitalization of $29.7 billion. The Zacks Consensus Estimate for STMicroelectronics’ 2022 earnings has improved 16.5% to $3.88 per share over the past 60 days. The long-term earnings growth rate for the stock is pegged at 5%. The stock has a trailing four-quarter earnings surprise of 9.6%, on average.
STMicroelectronics N.V. Price and Consensus
STMicroelectronics N.V. price-consensus-chart | STMicroelectronics N.V. Quote
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STMicroelectronics N.V. (STM) : Free Stock Analysis Report
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