Equity markets have struggled in 2022, especially the technology sector, where many businesses have been forced to lay off employees to reduce expenses and maintain profits. However, the recession has left many companies at an exciting valuation that potential investors should capitalize upon.
Inflation and increasing interest rates by the Federal Reserve will continue to remain a concern. However, tech stocks have already witnessed a significant drop and a positive change in global situations such as the Russia-Ukraine war or oil prices could bring on a major rally that investors should not dream of missing.
Q3 2022 hedge fund letters, conferences and more
Only last month (November 2022), major stock indices such as Dow Jones Industrial Average and S&P 500 jumped by 3.7% and 5.7% respectively, as a weaker-than-expected inflation report fuelled investor hopes that inflation had peaked. Both indices recorded their biggest one-day gains since April 2020, highlighting the level of optimism for the economy moving forward.
Tech stocks also rallied with Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) rising by more than 8%. Amazon (NASDAQ:AMZN) shares were up by 12.2%, while Meta (NASDAQ:META) rallied by more than 10%.
Some of the tech stocks which are booming and investors should have on their watch list for 2023 are:
Taiwan Semiconductor
Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) is the world’s biggest chip manufacturer located out of Taiwan. In its latest financial results, TSMC reported net revenue of $20.23 billion with a Net Profit Margin of 45.8% and ROE of 42.9%.
The semiconductor industry continues to face headwinds with lockdowns in China and the possibility of China taking over Taiwan. However, with the development of a new $12 billion plant in Arizona that is anticipated to start operations in 2024, TSMC continues to put an emphasis on the future and lower its concentration risk from Taiwan.
TSMC has stated that it will produce 20,000 wafers per month and provide cutting-edge 4-nanometer chips at the new facility. In a video shared by Truvid, President Joe Biden declared TSMC’s Arizona plant a big win for the U.S., stating its potential to create a significant number of jobs and boost the country’s position in the global chip-making market.
A majority of the global tech giants, including Apple and Google, depend on TSMC for their chip manufacturing requirements.
IBM
Established in 1911, IBM (NYSE:IBM) was one of the first tech companies in the world and is well-known for its computer and information technology services globally. While many IT stocks have fallen during the last year, IBM's share price has increased by 10%.
IBM has already increased its revenue expectations for FY22 and is currently trading at a PE Ratio of around 16, which makes it a value proposition. The business has already indicated plans to expand its workforce and increase its tech spending.
IBM has made investments in cloud computing and artificial intelligence, which have the potential to considerably boost the company’s earnings in the years to come. The impact of disruption by Artificial Intelligence can be already seen in the CRM Sales Industry, where companies such as Salesforce (NYSE:CRM) are benefitting greatly from the use of AI.
“The sales industry has been going through a major transformation. First, with the integration of AI Guided playbooks, sales teams were able to work in a more streamlined and cost-effective way. Now, with new-generation real-time AI assistants, they will also be able to improve win rates and impact the bottom line” says Eldad Postan-Koren Co-Founder & CEO of Winn.ai, a leading Sales Tech platform.
PayPal
Since the beginning of January 2022, PayPal Holdings Inc (NASDAQ:PYPL)’s share price has dropped by more than 50%, lowering its P/E ratio to about 24. For value investors, this makes the company an attractive purchase.
Paypal is among the biggest players in the Fintech space that is forecasted to grow at a CAGR of 16.9% until 2028, making this a no-brainer investment. Based on historical performance and the company's acquisition spree, acquisitions may continue to be a significant source of revenue for Paypal.
The company is also doing well in terms of cash flow, with FCF Guidance for Q3-2022 of >$5.0 billion and generating 26 cents of FCF for every $1 of revenue. In the past, Paypal has reported consistent financial growth, with a 3-year revenue CAGR of about 20%.
Apple
The greatest investor in history, Warren Buffett, once referred to Apple Inc (NASDAQ:AAPL) as “probably the best business I know in the world.” Apple is still one of the most popular stocks in the world. The company registered a staggering share price growth of around 1370% from 2010, and this is without accounting for the dividends.
For the quarter that ended on September 2022, Apple registered a sales growth of around 8% and net profit growth of 5.5% with a basic EPS of $6.11. Based on the EPS, Apple has a P/E Ratio of around 24, which can be deemed a fair valuation considering the 22.5 forward P/E Ratio of the Nasdaq-100 Index.
The unique aspect of Apple is that it has remained a recession-proof business that is renowned for generating steady growth and compounding shareholder wealth. The company has always kept the privacy of users at the foremost, which has made its devices hugely famous among the young generation.
Inspired by the company’s focus on privacy, users who don’t use Apple products resort to third-party software that allows them to manage all their privacy and compliance needs with peace of mind. In a report published by Mine PrivacyOps, the emphasis on consent under privacy legislations (GDPR, CCPA, and CPRA) remains a vital part in managing individual data collection, making privacy apps integral to non-Apple users.
Such is the impact of the firm on the consumers’ minds that consumers have to make additional purchases to overcome the shortcomings of the competitors’ products.
