On Monday, the stock market posted gains, with the tech-heavy Nasdaq Composite advancing 1.9% to 14,532.55. Investors shook off concerns about an impending recession and bought tech shares. Furthermore, the index has made a stellar recovery and is down only approximately 10% from its record.
Last month, the Federal Reserve finally raised interest rates for the first time since 2018. Wedbush analyst Dan Ives believes that this might pose an opportunity to invest in tech stocks and that large-cap tech will outperform its small-cap counterpart. The tech sector is oversold, which might be ideal for investors to start accumulating shares in high-quality areas. University of Florida finance professor Jay Ritter said, “I think some of the big tech companies are going to use the drop in valuations as a buying opportunity.”
Hence, we think this month might be the ideal time to invest in mega-cap tech stocks Microsoft Corporation (MSFT), Broadcom Inc. (AVGO), Oracle Corporation (ORCL), Accenture plc (ACN), and Intel Corporation (INTC).
Microsoft Corporation (MSFT)
MSFT is a Redmond, Wash.-based software behemoth that provides software services, solutions, and devices worldwide. The company sells its products through distributors, OEMs, resellers, or digital marketplaces. It has a $2.36 trillion market capitalization.
On March 16, MSFT and Rogers Communication, Inc. (RCI) announced a strategic alliance to enable enterprise and small- and medium-business customers to accelerate digitization and take full advantage of hybrid work and 5G-enabled solutions. This alliance might prove to be beneficial for MSFT.
On March 4, MSFT announced that it had completed the acquisition of Nuance Communications Inc. (NUAN), a company in the conversational AI and ambient intelligence field across industries that include healthcare, financial services, retail, and telecommunications. The acquisition might increase MSFT’s operational capability.
For its fiscal second quarter, ended Dec. 31, 2021, MSFT’s total revenue increased 20.1% year-over-year to $51.73 billion. Its operating income increased 24.3% from the prior-year quarter to $22.25 billion. Its net income and EPS stood at $18.77 billion and $2.48, respectively, registering increases of 21.4% and 22.2% year-over-year.
Analysts expect MSFT’s EPS to improve 8.8% year-over-year to $2.36 for its fiscal quarter ending June 30, 2022, while the Street’s $52.93 billion revenue estimate for the same period indicates a 14.7% rise from the prior-year period. In addition, MSFT has an impressive surprise earnings history, as it has topped consensus EPS estimates in each of the trailing four quarters.
MSFT’s stock has gained 30% in price over the past year and 8.7% over the past month to close yesterday’s trading session at $314.97.
MSFT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates 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.
MSFT has a Sentiment grade of A and a Stability and Quality grade of B. In the 160-stock Software – Application industry, it is ranked #21.
Click here to see the additional POWR Ratings for MSFT (Growth, Value, and Momentum).
Note that MSFT is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.
Broadcom Inc. (AVGO)
San Jose, Calif.-based AVGO operates as the designer, developer, and supplier of various semiconductor devices, focusing on complex digital, mixed-signal complementary metal oxide semiconductor-based devices and analog III-V-based products globally. The company has a $259.20 billion market capitalization.
On February 24, AVGO introduced its PCIe Gen 5.0 portfolio. The Broadcom PCIe Gen 5.0 SerDes, switches, and custom silicon products were made available to OEMs, ODMs, and cloud providers and were being tested and demonstrated for wide-scale interoperability. Earlier in February, AVGO declared the availability of its Gen 7 64G Fibre Channel switch platform—the Brocade G730 Switch, a 128-port core switching platform for the autonomous SAN and double density 64G Fibre Channel optical transceiver. This might add to the company’s revenue stream.
AVGO’s net revenue increased 15.8% year-over-year to $7.71 billion in its fiscal first quarter, ended Jan.30, 2022. Its non-GAAP net income rose 25.8% from the prior-year quarter to $3.74 billion. Its non-GAAP earnings per common share improved 26.9% from the same period the prior year to $8.39.
Analysts expect AVGO’s EPS to increase 26.5% year-over-year to $35.42 for its fiscal year 2022. The Street expects AVGO’s revenue for the same year to rise 16% from the prior year to $31.85 billion. In addition, AVGO has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 33.4% in price over the past year and 6.5% over the past month to close yesterday’s trading session at $634.85.
It is no surprise that AVGO has an overall A rating, which translates to Strong Buy in our POWR Ratings system.
AVGO has an A grade for Quality and a B grade for Growth and Sentiment. It is ranked #6 of the 96 stocks in the Semiconductor & Wireless Chip industry. The industry is rated A.
To see the additional POWR Ratings for Value, Momentum, and Stability for AVGO, click here.
Note that AVGO is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
Oracle Corporation (ORCL)
ORCL provides products and services that address enterprise information technology environments globally. The company offers the Oracle Cloud software as a service that includes various cloud software applications. It has a $224.51 billion market capitalization. ORCL is headquartered in Redwood City, Calif.
On April 4, it was reported that NTT DOCOMO, INC. (DOCOMO), the largest mobile operator in Japan, adopted ORCL’s Oracle Cloud Infrastructure (OCI) to build its new development environment for ALADIN (ALl Around DoCoMo INformation Systems). Toshimitsu Misawa, a member of the board, corporate executive officer, and president of Oracle Corporation Japan, said, “Companies across the world are continuing to modernize their business processes to meet changing market and regulatory conditions and customer demands. Key to their success is the wealth of customer information that sits at their very heart, like in the case of DOCOMO’s ALADIN. Having a development environment that enables the information to be leveraged quickly, securely, and reliably, and that supports faster software development is a source of competitive advantage.”
On March 29, ORCL announced that it was offering Oracle MySQL Heatwave now supported machine learning (ML). MySQL HeatWave ML can eliminate the need to move data or a model to a machine learning tool or service. This integration might benefit the company.
For its fiscal third quarter, ended February 28, ORCL’s total revenues increased 4.2% year-over-year to $10.51 billion. For the nine months ended February 28, its net cash provided by investing activities improved substantially from its negative year-ago value to $12.38 billion. The company’s cash and cash equivalents balance came in at $22.68 billion, up 1.6% from the prior-year period.
The Street’s %4.75 EPS estimate for its fiscal year 2022 reflects a 1.7% year-over-year improvement. And the Street’s $42.28 billion revenue estimate for the same year indicates an increase of 4.4% from the prior year. In addition, ORCL has topped consensus EPS estimates in three out of the trailing four quarters.
Over the past year, ORCL’s stock has gained 17.1% in price, and 9.9% over the past month, to close yesterday’s trading session at $84.07.
This promising outlook is reflected in ORCL’s POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
ORCL has a Value, Stability, and Quality grade of B. It is ranked #24 in the Software – Application industry.
Click here to see the additional POWR Ratings for Growth, Momentum, and Sentiment for ORCL.
Accenture plc (ACN)
ACN, based in Dublin, Ireland, operates as a professional services company that provides strategy and consulting, interactive, and technology and operations services worldwide. The company has a market capitalization of $218.36 billion.
On April 4, it was announced that ACN had completed the acquisition of AFD.TECH, an independent network services company that specializes in network engineering, operations, and services. This is expected to enhance the company’s operative capability.
On March 28, ACN announced that it had agreed to acquire digital engineering and operational technology capabilities from Trancom ITS, a Japanese logistics technology services provider. The acquisition should enable ACN’s Industry X service to offer hyper-automation solutions at scale, which the Japanese manufacturing and logistics companies are increasingly demanding.
ACN’s revenues increased 24.5% year-over-year to $15.05 billion in its fiscal second quarter, ended February 28. Its net income and EPS improved 13.4% and 13.9%, respectively, from the prior-year quarter to $1.66 billion and $2.54.
The $2.39 consensus EPS estimate for the quarter ending Aug. 31, 2022, indicates a 22.6% year-over-year increase. And the $14.18 billion consensus revenue estimate for the same quarter reflects a 19.1% improvement from the prior-year period. ACN has beaten consensus EPS estimates in three out of the trailing four quarters.
ACN’s shares have gained 23.8% in price over the past year and 9.6% over the past month to close yesterday’s trading session at $344.47.
ACN has an overall B grade, which translates to Buy in our POWR Rating system.
ACN has a B grade for Stability, Sentiment, and Quality. In the 10-stock Outsourcing – Tech Services industry, it is ranked #3. The industry is rated A.
To see the additional POWR Ratings for Growth, Value, and Momentum for ACN, click here.
Intel Corporation (INTC)
INTC in Santa Clara, Calif., is a popular tech company that designs, manufactures, and sells computer products and technologies globally. The company operates through the segments of CCG; DCG; IOTG; Mobileye; NSG; PSG; and All Other. INTC has a $210.16 billion market capitalization.
On March 31, INTC announced an agreement to acquire Granulate Cloud Solutions Ltd., an Israel-based real-time continuous optimization software developer. This should improve INTC operative capacity by helping cloud and data center customers maximize compute workload performance and reduce infrastructure and cloud costs.
On February 15, INTC announced a definitive agreement to acquire Tower Semiconductor Ltd. (TSEM) for $53 per share in cash. The acquisition is expected to advance the company’s manufacturing capacity, global footprint, and technology portfolio significantly.
For its fiscal fourth quarter ended Dec. 25, 2021, INTC’s non-GAAP net revenue increased 3.5% year-over-year to $19.53 billion. For its fiscal year ended December 25, its non-GAAP net income and non-GAAP EPS came in at $22.36 billion and $5.47, respectively, up 3.5% and 7.3% from the prior year.
The $3.70 consensus EPS estimate for its fiscal year 2023 indicates a 4.5% year-over-year increase. And the $77.77 billion consensus revenue estimate for the same year reflects a 2.3% improvement of 2.3% from the prior year. Furthermore, INTC has topped consensus EPS estimates in each of the trailing four quarters.
The stock has declined 2.4% in price over the past month and 2.3% intraday to close yesterday’s trading session at $49.20.
INTC has an overall A rating, which equates to Strong Buy in our proprietary rating system.
INTC has a Value grade of A and a Sentiment and Quality grade of B. In the Semiconductor & Wireless Chip industry, it is ranked #5.
Click here to see the additional POWR Ratings for INTC (Growth, Momentum, and Stability).
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MSFT shares were trading at $312.15 per share on Tuesday morning, down $2.82 (-0.90%). Year-to-date, MSFT has declined -6.99%, versus a -4.07% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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