3 Tech Stocks Part of S&P 500 Index Trading at a Massive Discount
The ongoing sell-off in growth
stocks offers investors an opportunity to increase their position
by a sizeable margin. Here, we take a look at three beaten down
tech stocks part of the
S&P 500 Index
that should on your buying list
Down 28% from record
highs, Salesforce.com (NYSE:
CRM) is now valued at a
market cap of $220 billion. But it has gained 659% in the last 10
years, despite the pullback. Salesforce enjoys a wide economic moat
and its platforms account for 20% of global CRM (customer
relationship management) spending which is more than the combined
market share of other tech heavyweights such as
SAP), Adobe (NASDAQ: ADBE) and Oracle (NYSE:
Last July, it completed the
acquisition of Slack for $28 billion allowing Salesforce to gain
rapid traction in the workforce communications solutions segment.
Analysts expect Salesforce sales to rise by 24.2% year over year to
$26.4 billion in fiscal 2022 and by 20.4% to $31.8 billion in
fiscal 2023 (ending in January). Its sales stood at “just” $10.48
billion in fiscal 2018.
In Q3 of fiscal 2022, Salesforce
reported revenue of $6.86 billion, a year over year increase of
27%. The company aims to touch $50 billion in annual sales by 2026,
which suggests it will have to grow top-line at an annual rate of
17% in the next four years.
Adobe stock has returned 1,580%
to investors since January 2012 and is currently trading 25% below
record highs. Valued at a market cap of $245 billion, Adobe is a
company that has a wide economic moat, an expanding portfolio of
products and consistent cash flows.
Similar to most tech stocks,
Adobe has an asset-light model allowing it to grow profit margins
at a higher pace compared to sales. Its creative cloud, experience
cloud and document cloud businesses derive stable revenue growth
and profitability across economic cycles.
In the last five years, Adobe
sales have risen by 116%. Comparatively its net income and free
cash flow have increased by more than 150% in this period. So,
while ADBE stock has crushed broader indices in the past decade,
its forward price to earnings and price to free cash flow ratios
are close to its 5-year median figures.
Adobe has the ability to generate
cash flows consistently as it transitioned towards a
subscription-based business model in 2013, which ensured a
predictable and recurring revenue stream.
The final stock on my list
is Broadcom (NASDAQ: AVGO),
a company valued at a market cap of $223 billion. AVGO stock is
also 20% from all-time highs. Despite recent volatility, Broadcom
has returned close to 2,000% to investors in dividend adjusted
gains. Broadcom also offers investors a tasty dividend yield of
fiscal Q4 of 2021
that ended in October, Broadcom
sales were up 15% year over year at $7.4 billion while adjusted
earnings rose by 23% to $7.81 per share. Wall Street forecast sales
of $7.35 billion and earnings of $7.74 per share for the
semiconductor heavyweight in Q4 of 2021.
Broadcom expects revenue of $7.6
billion in Q1 of fiscal 2022, an increase of 14% year over year.
Comparatively, analysts forecast revenue of $7.3 billion in the
quarter ending in January.
Its solid numbers can be
attributed to robust
chip demand from multiple
verticals that include
server storage, networking, broadband, wireless connectivity and
Broadcom also increased its
dividend by 14% to $4.10 per share while announcing a share buyback
program worth $10 billion. We can see why AVGO stock remains a top
bet for both income and growth investors.
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