U.S. stock futures plunged Monday morning ahead of the Fed’s meeting this week and corporate earnings results because investors are nervous about looming interest rate hikes. The Dow Jones Industrial Average (DJIA) lost 4.6% last week, its worst weekly performance since October 2020 and its third straight weekly decline. The Nasdaq and the S&P 500 shed 7.6% and 5.7%, respectively, logging four- and three-week losing streaks.
However, with the fast-paced reopening of industrial activities, the tech industry is well-positioned for solid long-term growth as businesses aggressively adopt advanced technologies to stay competitive in the digital era.
Given this backdrop, we think it could be wise to scoop up the shares of Dow Jones tech companies Microsoft Corporation (MSFT) and Cisco Systems, Inc. (CSCO) because of their market strength and continuing innovations.
Microsoft Corporation (MSFT)
Redmond, Wash.-based tech giant MSFT develops, licenses, and supports software, services, devices, and solutions worldwide. Its offerings range from Microsoft Teams, Office 365 Security and Compliance to Xbox hardware and Xbox content and services in the gaming segment. It has strategic collaborations with several companies, including DXC Technology (DXC), Dynatrace, Inc. (DT), Morgan Stanley (MS), and Micro Focus (MFGP).
On Nov.12, 2021, MSFT and Kyndryl announced a landmark global strategic partnership that will combine their market-leading capabilities in the service of enterprise customers. The deal leverages Microsoft Cloud, and MSFT becomes Kyndryl’s only Premier Global Alliance Partner, increasing its access to the $500 billion managed services market in which Kyndryl leads.
MSFT’s total revenue increased 22% year-over-year to $45.30 billion for its fiscal first quarter, ended Sept,30, 2021. The company’s income from operations grew 27% year-over-year to $20.20 billion, while its non-GAAP net income came in at $17.20 billion, representing a 24% year-over-year increase. Also, its non-GAAP EPS was $2.27, up 25% year-over-year.
Analysts expect MSFT’s EPS and revenue to increase 14.5% and 17.2%, respectively, year-over-year to $9.22 and $196.96 billion in its fiscal year 2022. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has declined 12% in price year-to-date to close Friday’s trading session at $296.03.
MSFT’s POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting. It has a B grade for Stability, Sentiment, and Quality.
Cisco Systems, Inc. (CSCO)
CSCO designs, manufactures, and sells Internet Protocol-based networking and other communications and information technology products. In addition, the San Jose, Calif.-based company provides infrastructure platforms, including networking technologies of switching, routing, wireless, and data center products.
On Nov. 17, 2021, Chuck Robbins, Chair and CEO of CSCO, said, “Cisco’s technology sits at the heart of the accelerated digital transformation happening today. Our breakthrough innovation, strong demand, and the success of our business transformation position us well for another year of growth in fiscal 2022.”
CSCO’s net revenue increased 8% year-over-year to $12.90 billion for its fiscal first quarter, ended Oct. 30, 2021. The company’s non-GAAP operating income grew 10% year-over-year to $4.30 billion, while its non-GAAP net income came in at $3.50 billion, representing an 8% year-over-year increase. Also, its non-GAAP EPS was $0.82, up 5% year-over-year.
CSCO’s EPS is expected to increase 7.6% year-over-year to $3.68 in its fiscal year 2023. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters. Also, the company’s revenue is expected to increase 5.9% year-over-year to $52.75 billion in fiscal 2022. The stock has declined 10.6% in price year-to-date to close Friday’s trading session at $56.68.
CSCO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. It has an A grade for Quality and a B grade for Stability.
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MSFT shares were trading at $286.58 per share on Monday afternoon, down $9.45 (-3.19%). Year-to-date, MSFT has declined -14.79%, versus a -10.01% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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