December has been a choppy month for even the best tech stocks. Yet, the tech-heavy Nasdaq-100 index has returned about 20% so far in 2021. Now investors wonder what might be in store for these high-growth shares in the new year.
In the past 12 months, gains have not been evenly distributed. While mega-tech stocks have dominated the index’s performance, many widely-followed technology names have seen their share prices decline.
In particular, consumer electronics, cybersecurity and cleantech shares have had wild swings. Profit-taking, surging inflation, supply chain issues, and the emergence of the omicron variant have been reasons behind the recent volatility.
Nevertheless, these declines also offer better entry points to many growth names that are likely to announce solid financials in the quarters ahead. Such stocks represent great buying opportunities, particularly if investors can identify those with solid fundamentals, reasonable valuations, and profit from their momentum and growth.
With that information, here are seven of the best tech stocks that are likely to create shareholder value for many quarters to come:
- Ambarella (NASDAQ:AMBA)
- Ciena (NYSE:CIEN)
- Dell Technologies (NYSE:DELL)
- iShares Cybersecurity and Tech ETF (NYSEARCA:IHAK)
- Marvell Technology (NASDAQ:MRVL)
- Synaptics (NASDAQ:SYNA)
- Upstart (NASDAQ:UPST)
Best Tech Stocks: Ambarella (AMBA)
52-week range: $82.59 – $227.59
Ambarella designs semiconductor processing solutions, mainly for high-definition (HD) video capture, sharing, and display. Ambarella’s products are found in segments ranging from artificial intelligence (AI) to computer vision, security and driver-assistance cameras.
Ambarella reported Q3 FY22 results in late November. Revenue increased 64% year-over-year (YOY) to $92.2 million. Non-GAAP net income came in at $22.2 million, or 57 cents per diluted share, up from $3.3 million, or 9 cents per diluted share, in the prior-year quarter.
Total cash and equivalents ended the quarter at $458 million. Meanwhile, management increased Q4 revenue guidance 45% YOY to $90 million.
“Our operational execution remains strong, yet supply dynamics remain difficult to predict, as shortages of other companies’ components has become a more significant and gating factor to our results and outlook,” CEO Fermi Wang remarked following the announcement.
The company has seen rising demand for chips used in cameras utilized in the automotive market as well as security applications. AMBA stock hovers at $195 per share, up nearly 115% year-to-date (YTD).
Shares are trading at 119 times forward earnings and 21.4 times trailing sales. Interested readers could find better value around $170, but the 12-month median price forecast for Ambarella stock stands at $227.
52-week range: $47.52 – $75.45
Ciena provides network hardware and software that facilitate the delivery of video, voice and data traffic over communications networks.
Analysts note that 5G networks and data centers have been driving robust demand for Ciena’s products and solutions.
Management issued solid Q4 results on Dec. 9. Revenue increased 26% YOY to $1.04 billion. Adjusted net income soared to $132.7 million, or 85 cents per diluted share, up 42% YOY from $94.5 million, or 60 cents per diluted share, in the prior-year quarter. Cash and equivalents ended the quarter at $1.4 billion.
“Orders in the quarter were once again significantly higher than revenue,” CEO Gary Smith remarked on the metrics. “And with our third consecutive quarter of orders outpacing revenue, we have substantial momentum and increased confidence in the demand environment.”
Ciena has recently partnered with Samsung Electronics (OTCMKTS:SSNLF) to support its 5G deployment. Through this collaboration, telecom operators should be able to better manage the increase in their 5G data volumes.
The stock is moderately valued, making CIEN stock an attractive bet for investors looking to buy a 5G stock. CIEN stock hovers around $75 territory, up 47% YTD. Shares are trading at only 21.7 times forward earnings and 3.2 times trailing sales. The 12-month median price forecast for Ciena stock is $83.
Best Tech Stocks: Dell Technologies (DELL)
52-week range: $35.56 – $59.49
Dell Technologies is a well-known information technology (IT) name that operates mainly through two segments. The Client Solutions Group provides IT solutions such as hardware and peripherals. And the Infrastructure Solutions Group offers software, storage and server solutions.
The company announced strong Q3 FY22 results in late November. It generated record revenue of $28.4 billion, up 21% YOY. Non-GAAP net income stood at $2 billion, or $2.37 per diluted share, up from $1.7 billion, or $2.03 per diluted share, in the prior-year quarter. Cash and equivalents ended the quarter at $23.4 billion.
“We continue to deliver strong results, with more than $13 billion in cash flow from operations on a trailing-twelve-month basis, the digital trends are tailwinds for our business, and along with our strategy and financial flexibility, lead us to be optimistic about our long-term growth prospects,” CFO Tom Sweet remarked on the results.
Despite delivering its best third-quarter results in history, DELL is still trading at a reasonable valuation relative to its peers. The stock hovers at $55 territory, up about 96% YTD.
Shares look more like a value stock trading at just 6.6 forward earnings and 0.4 times trailing sales. The 12-month median price forecast for Dell stock stands at $65.
iShares Cybersecurity and Tech ETF (IHAK)
52-Week Range: $36.35 – $49.09
Dividend Yield: 0.52%
Expense Ratio: 0.47% per year
In 2020, the global cybersecurity market was valued at more than $150 billion and is expected to exceed $350 billion by 2026. Such growth would mean a compound annual growth rate (CAGR) of about 14.5%.
Therefore, we next look at an exchange-traded fund (ETF), namely the iShares Cybersecurity and Tech ETF that invests in cybersecurity shares. The fund started trading in June 2019.
IHAK, which has 52 holdings, tracks the NYSE FactSet Global Cyber Security Index. The top 10 names make up about 43% of net assets of $640.4 million. In terms of sub-sectors, we see IT (90.18%), followed by industrials (9.47%).
Among the leading names on the roster are the electronic signature platform DocuSign (NASDAQ:DOCU); Fortinet (NASDAQ:FTNT), which provides cybersecurity services and products; Juniper Networks (NYSE:JNPR), which offers network security software and products; software-as-a-service (SaaS) provider Citrix (NASDAQ:CTXS); and CrowdStrike (NASDAQ:CRWD), which offers an endpoint security platform.
The ETF is up about 10% this year. It hit an all-time high on Nov. 9. Since then, shares in IHAK have come under pressure and lost about 14%. The fund’s P/E and P/B ratios stand at 28.36x and 6.93x. Interested readers would find better value around $40.
Best Tech Stocks: Marvell Technology (MRVL)
52-week range: $37.92 – $93.85
Dividend yield: 0.29%
Marvell Technology provides infrastructure semiconductor solutions, especially for data centers and telecom operators, as well as enterprise networking and industrial markets.
The company released solid fiscal Q3 FY22 results on Dec. 2. Total revenue came in at $1.21 billion, an increase of 61% YOY. Non-GAAP net income stood at $364 million, or 43 cents per diluted share, up from $284 million, or 34 cents per diluted share, in the prior-year quarter. Cash and equivalents ended the period at $523 million.
Wall Street points out that 5G networks, cloud computing, and consumer electronics offer further growth opportunities. As Marvell benefits from positive momentum across all these segments, we should see continued earnings growth in 2022, which is what makes this among the best tech stocks out there.
In October, Marvell announced the acquisition of Innovium, which offers networking solutions for cloud and edge data centers. The company has also acquired Inphi, a leading name in high-speed data movement, which enhances Marvell’s cloud and 5G opportunities.
Management has also raised the outlook for the rest of the year, projecting revenue to reach $1.32 billion with adjusted EPS in the range of $0.45 – $0.51.
MRVL stock hovers at $86 per share, up nearly 87% in 2021. Shares are trading at 37.5 forward earnings and 15 times trailing sales. A potential decline toward $80 or even below would increase the margin of safety. The 12-month median price forecast for MRVL stock is $100.
52-week range: $79.22 – $299.39
Synaptics offers semiconductor products for mobile devices and PCs as well as the Internet of Things (IoT) markets worldwide.
It is well-known for human interface solutions enabling touch, display, fingerprint and other connectivity functions for a range of electronics products.
Synaptics reported Q1 FY22 results in early November. Revenue increased 13% YOY to $372.7 million. The company has seen rising demand for its IoT solutions, accounting for over half of the revenue.
Non-GAAP net income came in at $109 million, or $2.68 per diluted share, up from $66.7 million, or $1.85 per diluted share, in the prior-year quarter. Cash and equivalents ended the quarter at $347 million.
“Synaptics delivered a strong start to our fiscal year 2022 with first-quarter revenue above the mid-point of our guidance, non-GAAP gross margin at the highest level in the company’s history, and non-GAAP operating margin hitting another record,”CEO Michael Hurlston remarked after the announcement.
In August, the company announced the acquisition of DSP Group, a leading global provider of voice processing and wireless chipsets. “We continue to invest in technologies that tilt our product mix toward IoT applications,” cited Michael Hurlston.
SYNA stock hovers at $260 territory, up 165% YTD. Shares are trading at 26 times forward earnings and 7.6 times trailing sales. Investors would find better value around $250 or even below. The 12-month median price forecast for MSYNA stock stands at $287.50.
Best Tech Stocks: Upstart (UPST)
52-week range: $22.61 – $401.49
Upstart is a consumer lending platform. It relies on AI and machine learning technologies to make loan approval decisions.
Wall Street regards Upstart as a significant financial technology (fintech) disruptor. Instead of a FICO credit score, the company relies on various algorithms to build a personalized consumer profile. Many banks, especially smaller financial institutions, are partnering with the platform.
Management issued Q3 financials in early November. Revenue came in at $228 million, representing a record 250% YOY increase. Adjusted net income stood at $57.4 million, or 60 cents per diluted share. Cash and equivalents ended the quarter at $111 million.
“Since Upstart’s IPO a year ago, we’ve more than tripled our revenue, tripled our profits, tripled the number of banks and credit unions on our platform, and tripled the number of auto dealerships we serve,” CEO Dave Girouard remarked. “With that many 3s, Upstart is becoming the Steph Curry of the FinTech industry.”
The level of consumer credit outstanding stateside is well over $4 trillion. Therefore, a young company like Upstart still has plenty of room for growth. UPST stock currently hovers around $133, up 240% YTD.
However, shares do not look cheap at 17.5 times trailing sales. Interested readers would find better value around $120. It trades today just shy of $150. The 12-month median price forecast for the stock is $290.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.