Did the market falter? Consider investing in these three stocks
Amid the massive decline in technology stocks, investor sentiment may be at its lowest since the financial crisis. The Nasdaq Composite It’s down more than 25%, and many tech stocks with outstanding growth have fallen more than 75% during this downturn.
However, these bear markets can actually benefit Long-term investors can now buy shares at lower prices. This includes technical stocks such as Adobe (ADBE -1.71%)And the Zoom video communication (ZM -3.88%)And the the alphabet (Google -5.63%) (The Google -5.81%)which now offers more compelling opportunities and possibly even greater rewards.
I regret not buying Adobe in a decade. I don’t make the same mistake twice.
Jake Lerch (Adobe): Everyone loves the deal. Whether it’s a few dollars or thousands of dollars, we all love the feeling that we’re saving money. This is especially true for investment. I am always looking for stocks for sale. I’ll be watching some companies for months – even years – waiting for the right time to pull the trigger.
Finally, last month, I got my chance with Adobe. It’s one of those companies I wish I had bought a decade ago. If I invested $10,000 in 2012, $118,000 would be richer today. UnfortunatelyAll I can do now is live and learn. And buy some Adobe stock.
What I really love about Adobe is that it is at the heart of the digital economy. Businesses large and small rely on the company’s tools for content creation, marketing, and sales.
Adobe works across three divisions:
- digital media
- digital experience
- Publishing and advertising
All over the world, content creators, marketers, educators, and enthusiasts use various Adobe tools and platforms to produce the digital media we consume every day.
Despite its importance to the overall digital economy, Adobe stock has had a rough time this year. It’s down 29% so far and 42% from its all-time high. The latest blow came last month, when Adobe reported better-than-expected results but cut full-year guidance due to – wait for – negative foreign exchange impacts from a stronger US dollar.
I’m not worried about the strong dollar when it comes to Adobe. The company’s fundamentals remain strong. Operating margin is 36%. It boasts a 35% return on equity. Furthermore, free cash flow hit a record high of $6.9 billion.
In fact, with the company trading at a near-record low price-to-earnings (P/E) of 39.3, I’m hoping Adobe will return some of its recent gains – so I can get a better deal.
From epidemic beloved to neglected, this stock is a bargain
Justin Pope (Zoom Video Communications): COVID-19 turned the stock market into a roller coaster, with stocks plummeting and then rising to highs just months later. Zoom was a poster child for pandemic stocks; The shutdowns prompted people to connect digitally, and Zoom’s growth and stock price exploded.
Below you can see that what happened has been reversed. Now, with Zoom projecting revenue growth of just 12% year-over-year for the quarter ending April 30, 2022, is the goose cooked?
There is plenty of evidence that Zoom has left a lot in the tank. First, don’t get too caught up in Zoom’s slow revenue growth. That’s on an annual basis, and the company grew 191% in the same quarter last year. It is doubtful that the company will see a significant uptick in its growth and continue with the same momentum a year later.
Zoom is still able to grow on top of that stellar period rather than return revenue. This may be a sign that Zoom’s success resulted from actual market demand driving long-term growth into the short term, versus Zoom being a pesky fad that dies once the pandemic passes.
Zoom is very profitable, unlike many developing stocks that have seen 50% or more haircuts in this bear market. The company is stacking free cash flow and net income, bolstering a balance sheet that holds $5.7 billion in cash, 18% of its market value, against zero debt.
I wouldn’t be surprised to see growth pick up again once Zoom surpasses comparable massive growth numbers, but it doesn’t have to do much going forward. The stock is now trading at a price-to-earnings (P/E) ratio of just 26, which seems very reasonable for a growth stock with years of potential growth ahead and the option to increase its share buybacks if desired.
Add it all together, and Zoom looks like a basically healthy business trading at a great price today. Investors can look to this bear market as an opportunity to acquire shares.
Google investment opportunity in this search company
Will Healy (the alphabet): Now that Google’s Alphabet has completed its long-awaited 20-for-1 stock split, it might be a good time to look at the search engine and advertising giant. Although it doesn’t pay a dividend, Alphabet offers just about everything investors interested in value in stocks look for.
The first is her work. The dominant search engine and popular YouTube platform paved the way for her to become an advertising giant and a profitable cow. It has used these resources to improve its capabilities in artificial intelligence, machine learning, and many other applications that it shares in multiple sub-sectors of the technology industry.
However, if the last few earnings reports show any indications, it looks like Google Cloud will become the next major cash cow. In the first quarter of 2022, Google Cloud recorded revenue growth of 44% versus Alphabet’s 23% as a whole.
Alphabet also has about $140 billion in liquidity, a factor that gives it an option backed by one of the strongest balance sheets in the industry. Also, since it generated $15 billion in free cash flow in the first quarter alone, that cash stock may grow even more.
Admittedly, Alphabet is not immune to a bear market. Since November, its stock has fallen about 25%, a performance roughly equal to Standard & Poor’s 500.
But as its revenue has grown, it may have become undervalued. Alphabet sells at 21 P/E, its lowest valuation since 2014. It also trades at significantly lower multiples than its competitors in the cloud. Amazon And the Microsoftwhich sell 59 times and 27 times earnings, respectively.
While some investors may be frustrated with tech stocks now, Alphabet has given them little reason to doubt its prominence in the tech industry or its future. At 21 times earnings, buying this stock is likely to raise investor returns – as well as investor mood – over time.