- Nasdaq up 23% from June 16 low, fueling hopes of a new bull market
- Several tech titans have staged impressive recoveries in recent weeks
- Consider Zoom, Snowflake, and Crowdstrike as solid long-term growth potential
After a rough start to the year, the tech-heavy Nasdaq Composite is up more than 23% from its mid-June lows, increasing investor confidence that a new bull market could be under way.
The rebound has been fueled by the view that U.S. inflation may have peaked, raising hopes the Federal Reserve will become less aggressive on interest rate hikes.
So here are three tech stocks whose sizable declines have created compelling buying opportunities as all their respective businesses make them solid long-term investments.
Zoom Video Communications
- Year-To-Date Performance: -40.6%
- Market Cap: $32.6 billion
Shares of Zoom Video (NASDAQ:ZM) have fallen 41% in 2022. After rallying to a record high of $588.84 in October 2021, ZM, which is nearly 82% below its all-time peak, tumbled to a low of $79.03 on May 12. The stock has since rebounded 38% in the last few months.
In my opinion, Zoom is poised to extend its recovery as the work-from-home and hybrid-work environment as well as ongoing digital transformation continues to drive businesses to use its video-conferencing technology.
Zoom had 198,900 enterprise customers as of the end of Q1, up 24% from a year ago. Even more impressive, it had 2,916 customers with trailing 12 months revenue of $100,000 or more, up 46% year-over-year (yoy).
According to valuation models on InvestingPro, ZM could potentially see 50% upside from its current market value.
The next major catalyst is Zoom's second-quarter results after the U.S. market closes on Monday, Aug. 22.
Consensus calls for a 9.8% yoy increase in revenue to $1.12 billion and EPS to slide 31.6% yoy to $0.93. The videoconferencing company has topped profit forecasts in every quarter since going public in Q2 2019, highlighting the strength of its business.
Snowflake
- Year-To-Date Performance: -50.6%
- Market Cap: $53.1 billion
Snowflake (NYSE:SNOW) has seen its valuation crumble in the last several months, with shares dropping nearly 51% year-to-date amid the broad-based selloff in many top-rated software companies.
SNOW, which made its trading debut in September 2020, hit an all-time low of $110.26 on June 14 but it has since rebounded by approximately 52%. At current levels, the San Mateo, California-based cloud database vendor is still about 61% away from its record peak of $428.68 in December 2020.
Despite recent volatility, I expect shares of the data warehousing specialist to bounce back given the robust demand for its data analytics and management tools amid the current remote work environment.
It counts nearly half of the Fortune 500 companies as clients and its number of customers increased 39.5% yoy in Q1 to 6,322. Furthermore, it had 206 customers with annual recurring revenue (ARR) of $1 million or more, up roughly 100% yoy from 104 customers.
In addition, most analysts remain generally bullish on Snowflake’s stock, according to an Investing.com survey.
Snowflake is forecast to report double-digit growth in Q2 after the closing bell on Wednesday, Aug. 24.
Consensus calls for the cloud-based data storage and analytics provider to post a loss per share of $0.01, narrowing from $0.12 in the year-ago period.
Revenue is forecast to soar 71.8% yoy to $467.6 million—its highest ever quarterly sales—due to an increase in sales to large enterprises.
CrowdStrike
- Year-To-Date Performance: -2.1%
- Market Cap: $46.5 billion
Crowdstrike (NASDAQ:CRWD) shares have held up over the past several months, dipping just 2.1% ytd. However, the shares fell to $130 on May 9 and have since recovered 54%. Despite this bounce, CRWD is still around 33% away from its record peak of $298.48 in November 2021.
Investors that missed the sharp moves higher last year should consider buying CrowdStrike’s at these prices, given its status as one of the premier companies in the cloud-based cybersecurity industry. As such, I expect CrowdStrike to be one of the main beneficiaries of any increase in cyber spending.
The security software provider added 1,620 net new subscription customers in the last quarter, an increase of 57% yoy to 17,945.
Of the 32 analysts covering CrowdStrike’s stock in an Investing.com survey, the consensus recommendation is ‘outperform’ with extremely high conviction and the price target offers 18% upside potential.
CrowdStrike should deliver explosive growth when it reports second quarter financial results after the closing bell on Tuesday, Aug. 30. Consensus calls for EPS growth of 145% yoy to $0.27 and revenue is forecast to surge 52.8% yoy to a record $516.2 million.
CrowdStrike has topped Wall Street’s earnings and revenue expectations in every quarter since going public in June 2019 despite a challenging macroeconomic backdrop.
Disclaimer: At the time of writing, Jesse owns shares of the Nasdaq QQQ ETF and CrowdStrike. The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.