Markets have been correcting since the start of the year, aggravated by the Fed’s interest rate hikes. However, Federal Reserve Chairman Jerome Powell’s optimism is expected to revive investor sentiment. Powell has emphasized that he believes “the economy is strong and is well-positioned to handle tighter monetary policy.”
Undervalued tech stocks with robust financials are expected to withstand initial losses and offer solid returns in the forthcoming quarters, thanks to soaring demand and rapid technological advancements. According to Frank Gretz, a technical analyst at Wellington Shields, “Regardless of whether the market is sold out, you can argue tech, especially, is due for a bounce.”
Given the backdrop, we think it would be wise to scoop up fundamentally strong tech stocks Playtika Holding Corp. (PLTK), Genpact Limited (G), and VMware, Inc. (VMW), which are rated Strong Buys in our POWR Ratings system.
Playtika Holding Corp. (PLTK)
Headquartered in Herzliya Pituarch, Israel, PLTK develops mobile games in the United States, Europe, the Middle East, Africa, the Asia Pacific, and internationally. The company owns a portfolio of casual and casino-themed games.
For the fourth quarter, ended Dec. 31, 2021, PLTK’s revenues increased 13.2% year-over-year to $649 million. Its net income came in at $102.30 million, up 34.6% year-over-year. Furthermore, the company’s adjusted EBITDA came in at $212.50 million, compared to $210.40 million in the previous period.
PLTK’s forward non-GAAP P/E of 16.01x is 8.4% lower than the 17.47x industry average.
PLTK’s revenue is expected to increase 9.3% to $2.82 billion in 2022. Its EPS is estimated to increase 22.9% per annum for the next five years. The stock closed yesterday’s session at $16.57.
It is no surprise that PLTK has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting. In addition, it has a B grade for Value and Quality.
Genpact Limited (G)
Based in Hamilton, Bermuda, G provides business process outsourcing and information technology (IT) services in India, the rest of Asia, North and Latin America, and Europe. It operates through three segments: Banking, Capital Markets, and Insurance; Consumer Goods, Retail, Life Sciences, and Healthcare; and High Tech, Manufacturing, and Services.
On May 5, 2022, ‘Tiger’ Tyagarajan, G’s president and CEO, said, “Our investments in our strategic choices have positioned us well to help clients navigate the many challenges in this macro environment. We saw another quarter of strong demand for our analytics, digital, and consulting businesses that make up Transformation Services, as well as continued strength in our Intelligent Operations business.”
G’s net revenues increased 12.9% year-over-year to $1.07 billion for the first quarter, ended March 31, 2022. Its net income came in at $96.18 million, up 5.4% year-over-year, while its EPS came in at $0.51, up 8.5% year-over-year.
G’s 15.43x forward non-GAAP P/E is 16.3% lower than the 18.43x industry average.
Analysts expect G’s revenue to increase 11.4% year-over-year to $4.11 billion in 2022. Its EPS is estimated to grow 14.2% to $2.82 in 2023. It surpassed EPS estimates in three of the four trailing quarters. The stock closed yesterday’s session at $38.43.
G has an overall A rating, which indicates a Strong Buy in our proprietary rating system. It has a B grade for Stability, Sentiment, and Quality.
VMware, Inc. (VMW)
VMW in Palo Alto, Calif., provides software solutions in modern applications, cloud management and infrastructure, networking, security, and digital workspaces in the U.S. and internationally. It offers VMware multi-cloud solutions; vSAN and VxRail; vRealize Cloud Management solutions; and VMware Cloud Foundation.
On May 4, 2022, Atos and VMW announced an extension of their strategic partnership to speed up the development of “Data Spaces.” Laurent Allard, VMW’s Head of Sovereign Cloud EMEA, said, “With a comprehensive set of data space capabilities from VMware and Atos, organizations will gain access to a viable and rapid way to more securely share, manage and monetize their data.”
VMW’s total revenue for the quarter ended Jan. 28, 2022, came in at $3.53 billion, up 7.2% year-over-year. Its subscription and SaaS revenue came in at $868 million, up 22.8% year-over-year. Moreover, its other current assets were $598 million for the period ended Jan. 28, 2022, compared to $530 million for the period ended Jan. 29, 2021.
VMW’s 14.89x forward non-GAAP P/E is 19.2% lower than the 18.43x industry average.
For its fiscal year 2024, analysts expect VMW’s revenue to increase 7.7% year-over-year to $14.84 billion. Its EPS is estimated to increase 11% to $7.79 in 2024. In addition, it has surpassed the consensus EPS estimates in three of the trailing four quarters. The stock closed yesterday’s session at $104.52.
VMW’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system.
It has a B grade for Value, Stability, Sentiment, and Quality. Within the Software – Business industry, it is ranked first of 59 stocks. Click here to see the additional POWR Ratings for Growth and Momentum for VMW.
Click here to check out our Software Industry Report for 2022
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PLTK shares were trading at $14.91 per share on Friday afternoon, down $1.66 (-10.02%). Year-to-date, PLTK has declined -13.77%, versus a -12.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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