So far, 2022 is a huge bummer for technology stocks. But that won’t last forever.
Technology stocks are taking an oversized beating to start the year. While the Dow Jones Industrial Average is down 7.5% year-to-date (YTD), the more tech-heavy Nasdaq composite is down 14.3% YTD.
Exchange-traded funds like the Technology Select Sector SPDR Fund (NYSEARCA:XLK) are suffering, as well. The XLK is down more than 9% since Jan. 1.
Tech stocks are the worst-performing sector in the S&P 500, according to the Wall Street Journal. Tech stocks in particular are being pressured as investors are turning instead to rising yields offered by government-backed bonds. Deutsche Bank analyst Jim Reid says so far, 2022 has been “a perfect negative storm for tech.”
But here’s the thing about storms — the clouds eventually part and the sun comes out again. And for technology stocks, that means a return to growth and profits.
When that happens, you’ll want to own these seven technology stocks:
- Microsoft (NASDAQ:MSFT)
- Nvidia (NASDAQ:NVDA)
- Visa (NYSE:V)
- Adobe (NASDAQ:ADBE)
- Broadcom (NASDAQ:AVGO)
- Salesforce (NYSE:CRM)
- PayPal (NASDAQ:PYPL)
Best Technology Stocks to Buy: Microsoft (MSFT)
But that’s par for the course. Microsoft never does anything small. With its fingers in cloud, gaming and consumer businesses, MSFT has a market cap of $2.16 trillion these days. The stock rose more than 50% in 2021. Revenue jumped by 18% for the year, and earnings per share rose by 40%.
But 2022 has been rough so far. MSFT stock is down 15.8% since Jan. 1 and Wall Street will eagerly be watching the company’s earnings report on Jan. 25. Analysts are calling for Microsoft to report revenues of $50.88 billion and earnings per share of $2.31.
That would be a great way for Microsoft to start the year. The average price estimate for MSFT stock is $373.24, which represents a more than 25% upside from current levels.
Nvidia was another high-flyer in 2021 that has come down to earth. At one point last year, NVDA stock was up by more than 125% on a year-to-date basis. And even after it started falling in November, Nvidia still managed a 2021 gain of more than 70%.
Over the last five years, Nvidia is up nearly 900%. You can’t ask for anything more from a stock.
But 2022 has been a different story so far. Nvidia dropped 24% since the calendar turned in January.
With a market cap of $555.86 billion, Nvidia is too much of a powerhouse and growth engine to falter for much longer. It remains a huge player in the PC and gaming industries. Its semiconductor chips are used for machine learnings, artificial intelligence (AI) and data centers.
Analysts have an average price target of $357.17 for NVDA stock. If it hits that, you would score a return of around 60%.
Best Technology Stocks to Buy: Visa (V)
Unlike some other companies on this list, Visa really didn’t have a great 2021. It only rose 1.2% in 2021 and now is starting 2022 down 8%.
So, what’s up with V stock?
Visa is the world’s biggest credit card processing company. With nearly $25 billion in annual revenues, Visa and other credit card companies do well when the economy is perceived to be doing well.
As my colleague Joel Baglole writes, Visa suffered last year over concerns of the Covid-19 delta variant and the threats of new lockdowns. So, when omicron became an even bigger threat this winter, it’s no surprise that V stock was one of the names that dropped.
But there’s reason to be bullish about V stock when it reports fourth-quarter earnings on Jan. 27. The National Retail Federation expects holiday spending would hit a record $859 billion. And the Global Business Travel Association says spending on business travel will rise 38% this year to more than $1 trillion. Both of these are strong catalysts for V stock.
With a market capitalization of $432.15 billion, Visa has an average price target of $265.80. That’s projected upside of 33.54% for V stock.
Cloud solutions provider Adobe was one of the biggest losers in the S&P 500 over the last month. And it’s dropped 10.62% so far in 2022.
If you have ever used a PDF file on your computer, chances are good you used an Adobe product to either read it or edit it. Adobe makes products that help you create, edit and sign PDF files and share them securely. The company says last year, more than 300 billion PDFs were opened with its products.
In its fiscal fourth quarter, Adobe reported revenue of $4.11 billion. That’s a 20% increase from the previous year. For the full year, ADBE had $15.79 billion in revenue, which was year-over-year growth of 23%.
And analysts are expecting better growth in 2022. They project revenue growth to increase from 13.7% in 2021 to 15% in 2022. Earnings growth is projected to increase from 10% to 17.5%.
Analysts have an average price target of $667.40 for ADBE stock, representing an upside of 31.38%.
Best Technology Stocks to Buy: Broadcom (AVGO)
Broadcom is another one of those semiconductor stocks that profited greatly in 2021 from the global shortage of semiconductor chips. AVGO stock jumped more than 50% last year.
But this year, Broadcom is starting off slow, down 20% and wallowing in the mud with other technology stocks. And that’s even after posting a strong earnings report last month and announcing a $10 billion share buyback program.
For the fiscal first quarter, Broadcom is projecting revenue of $7.6 billion, which is better than the previous guidance of $7.2 billion. The earnings before interest, taxes, depreciation, and amortization (EBITDA) margin is expected to be a whopping 61.5%.
Salesforce makes its money in the cloud. It is a cloud-based software company that offers customer relationship management services. In short, its software helps clients keep track of customer data, including names, emails, telephone calls and meeting notes.
The company’s AI service, Salesforce Einstein, provides deeper insights about customers that help sales teams target clients and make more sales.
Third-quarter earnings released in December were also solid, with revenue of $6.86 billion beating analysts’ estimates of $6.8 billion. Earnings of $1.27 per share also beat expectations of 92 cents per share.
Even so, CRM stock is down about 13% so far in 2022.
But analysts still see plenty of upside for Salesforce, with the stock’s average price target at $337.87. That’s 54% better than today’s prices.
Best Technology Stocks to Buy: Paypal (PYPL)
PayPal is another one of those fintech stocks that is battered so far in 2022. Its YTD performance is -16.37%. And over the last six months, PayPal is down more than 48%. Ouch!
Part of PayPal’s problem as of late can be traced to a Consumer Financial Protection Bureau announcement. The agency says it’s investigating PayPal and other buy now, pay later companies about how they harvest consumer data. It is also investigating if any of the companies are bypassing consumer protection laws.
But PayPal is still one of the best digital payments companies you can buy, with market penetration of 75%. It had $20 billion of cash or cash equivalents at the end of the last quarter. And despite faltering as of late, PayPal still recorded 13% revenue growth on a year-over-year basis in its last earnings report.
Best of all, PayPal’s recent weakness gives it oversized upside. The average price target for PYPL stock at this writing is $253.77, which is over 61% higher than its current price.
On the date of publication, Patrick Sanders 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.
Patrick Sanders is a freelance writer and editor in Maryland, and from 2015 to 2019 was head of the investment advice section at U.S. News & World Report. Follow him on Twitter at @1patricksanders.