The Nasdaq composite lost 0.56% to close at 15,781 on Dec 28. The tech-heavy index is up 22.45% year to date, per data from CNN. This is, however, much lower than 2020’s return of 43.6% and 2019’s return of 35.2%.
Nasdaq’s relatively muted returns this year can be attributed to the availability of vaccines that put a brake on prospects of remote work technology providers, raging inflation and the Federal Reserve’s tighter monetary policy. The Federal Reserve is now expected to raise interest rates three times in 2022 to combat inflation.
Nasdaq is now set to underperform S&P 500 for the first time since 2016. The S&P 500, as of Dec 28, is up 27.43% on a year-to-date basis.
Nevertheless, tech stocks are expected to maintain their momentum, benefiting from changing consumer preferences and behavior. The stay-at-home trend has driven demand for web-based services like e-commerce, contactless payment and delivery. Growing cases of Omicron in the United States are likely to boost prospects.
Companies offering remote-working tech, cloud services and cybersecurity solutions, which support work-from-home, online learning and remote health diagnosis, are expected to continue to benefit over the long haul.
Further, improving global semiconductor sales have been a major positive. Per the latest data from The World Semiconductor Trade Statistics (WSTS), the world semiconductor market is expected to increase 25.6% over 2020, driven by strong demand for chips. For 2022, growth is currently projected at 8.8%.
The rapid adoption of cloud computing along with the ongoing infusion of AI and machine learning as well as the accelerated deployment of 5G technology, autonomous vehicles, AR/VR and wearables are major positives.
Here we pick five tech stocks that are well-poised to outperform Nasdaq in 2022, driven by their strong fundamentals. These stocks carry a favorable combination of Zacks Rank #1 (Strong Buy) or Rank 2 (Buy) and a VGM Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.
Per the Zacks’ proprietary methodology, stocks with such a perfect mix of elements offer solid investment opportunities.
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Photronics PLAB is riding on robust performances from Integrated Circuit (IC) as well as Flat Panel Display (FPD) segments. Both IC and FPD segments are benefiting from strong demand across mainstream and high-end products.
Photronics sports a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for this $1.18-billion company’s fiscal 2022 earnings stands at $1.30 per share, up 26.2% in the past 90 days. The consensus estimate for revenues is pinned at $753 million, suggesting 13.4% year-over-year growth.
Alpha & Omega Semiconductor AOSL is benefiting from strong demand for power semiconductor ICs. Alpha & Omega’s ICs target high-volume end-market applications, such as notebooks, netbooks, flat panel displays, mobile phone battery packs, set-top boxes, portable media players and power supplies.
Alpha & Omega currently flaunts a Zacks Rank of 1 and a VGM Score of B. The Zacks Consensus Estimate for this $1.62-billion company’s fiscal 2022 earnings is pegged at $4.08 per share, having been revised 19.6% upward in 90 days’ time. The consensus estimate for revenues stands at $745.25 million, suggesting 13.8% year-over-year growth.
Alphabet GOOGL is riding on the robust performance of the cloud division. Expanding data centers will continue to bolster presence in the cloud space. Major updates in its search segment are enhancing the search results. Moreover, Google’s mobile search is gaining solid momentum.
Alphabet’s strong focus on innovative AI techniques and the home automation space should aid business growth. Alphabet’s deepening focus on the wearables category remains a tailwind. Alphabet’s expanding presence in the autonomous driving space is expected to enhance prospects in 2022.
Alphabet has a Zacks Rank #2 (Buy) and a VGM Score of B. The Zacks Consensus Estimate for this $1.96-trillion company’s 2022 earnings has moved up 5% to $113.47 per share in the past 90 days. The consensus estimate for revenues is pinned at $209.34 billion, indicating 39.8% growth from the figure reported in fiscal 2021.
Synaptics SYNA is benefiting from its leadership position in designing and marketing human interface solutions such as touchpads for notebook computers, capacitive touch screen controllers for handsets and biometric fingerprint sensors for mobile devices. Continued strong demand for notebooks due to work-from-home and online learning is a major tailwind.
Synaptics has a Zacks Rank #2 and a VGM Score of B. The consensus mark for $11.49-billion company’s fiscal 2022 bottom line is pegged at $11.21 per share, up 13.5% in the past 90 days. The consensus estimate for revenues is pegged at $1.59 billion, indicating 18.61% growth from the figure reported in fiscal 2021.
Microsoft MSFT is benefiting from strength in its Azure cloud platform amid the accelerated global digital transformation. Teams’ user growth is gaining from the continuation of remote work and mainstream adoption of hybrid/flexible work models. Recovery in advertising and job market boosted LinkedIn and Search revenues.
Solid uptake of new Xbox consoles is aiding the gaming segment performance. Microsoft is also witnessing growth in the user base of its different applications, including Microsoft 365 suite, Dynamics and Power Platform.
This $2.57-trillion company currently carries a Zacks Rank #2 and a VGM Score of B. For fiscal 2022, the consensus mark for earnings has moved 5.1% north to $9.13 per share over the past 90 days. The consensus estimate for revenues is pegged at $194.98 billion, indicating 16% growth from the figure reported in fiscal 2021.
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