Periods of market turmoil are often retrospectively excellent times to buy high-quality stocks for the long term.
In times of uncertainty, many investors in retirement or retirement may be panicked by short-term stressors, selling their stocks at the first downturn. But this gives many patient investors a window to pick up stocks of top companies that have high potential for long-term gains.
After the tech sector fell sharply from the market in 2022 and pulled back as recently as this February, the following three star tech names look ripe for the picking.
Amazon (AMZN -1.65%) Shares are close to levels reached four years ago — 50% below all-time highs. This is despite the e-commerce and cloud giant having more. It has doubled. The income during that period.
With interest rates rising, investors are ditching “worthless” tech stocks in favor of recent gains and cash flows. It may be that most tech companies are less mature and different than Amazon, but Amazon is a special beast.
Since Amazon’s inception as an online bookseller, it has plowed all excess profits into new businesses, abandoning current profits. Check out this long-term chart:
While Amazon’s revenue has grown from nothing to $500 billion, its operating income has remained flat for most of its corporate history. If Amazon was “structurally unprofitable” as the skeptics say, it would be hard to come up with year in and year out for nearly 30 years, right?
That means the break-in target may be intentional, and Amazon is structurally profitable. And by spending everything the company does, management can see new areas of growth. Today, these may include healthcare, satellite broadband and self-driving cars.
While the cost of an unproven management team should be filled with skepticism, Amazon’s track record of innovation — from cloud computing concepts to third-party e-commerce marketplaces, Prime subscriptions and more — should reassure shareholders that CEO Andy Jassy and his team know what they’re doing. .
In the year Revenue growth was slower in 2022, but that was coming from near-impossible pandemic sales. In fact, North American retail sales are expected to grow by 13 percent by 2022. While global sales were down 8%, that was entirely due to changes in currency rates. Without that, global retail sales would have risen 4 percent last year.
Although Amazon Web Services is currently experiencing a slowdown, this may not be surprising; Customers are now taking time to improve their cloud spending after years of rapid adoption, especially with economic uncertainty in the air.
Still, the cloud computing opportunity is huge, and Amazon may be doing better than the headlines suggest. While AWS revenue will only grow 29% in 2022, down from 37% in 2021, remaining performance obligations (RPO), or long-term contracts signed with customers, will rise from $80.4 billion to $110.4 billion by the end of 2021. 2022 – 37.3% growth.
The difference between contracted space and revenue is based on recent cloud usage, and customers are now in cost-saving mode. However, once the cost-optimization process ends and the economy improves, AWS’s growth rate will likely increase to the RPO growth rate again.
In short, Amazon’s rough year isn’t as bad as the headline numbers suggest, and its growth prospects seem uneven, making the stock look like a bargain at just 1.8 times sales.
Parts of the semiconductor sector are in serious decline. But when everything seems to be falling apart in the chip world, it’s the best time to buy. And on this platform, investors should take a closer look at semiconductor equipment stocks – companies that sell machines that help. to do Semiconductors. This is because these companies operate in tight margin oligopolies and do not require as much capital expenditure as foundations. Equipment inventories are associated with recurring service revenue and profit on a loaded basis.
Cow research (LRCX -2.34%) It is one of the three largest companies to dominate the simulation and positioning in the chip manufacturing landscape, a new story of innovation at the leading edge.
Shares currently trade at just 13 times earnings, as earnings may fall this year as note clients return to spending. For Lam, which makes vertical stack devices critical to NAND flash modules, about half of its sales come from the memory sector — a larger share than the industry as a whole.
However, there will come a day when the demand for memory will grow back, especially as new applications such as artificial intelligence require large amounts of memory and storage.
Meanwhile, Lam continues to gain market share among its core founder and Logic customers. In a recent conference call with analysts, CEO Tim Archer said Lam recently doubled its market share in its core foundation and logic customer, as well as won a colorful customer for gate-all-round transistors, the upcoming 3-nanometer and the new type of transistor. 2 nanometer nodes. These steering knuckles generally require 25% to 30% more strength of the axles, which is superior.
What’s more, at a recent conference, CFO Doug Bettinger noted that etch machines require more replacement parts and maintenance than other types of semiconductor equipment, so etch equipment is particularly good for Lam’s services and replacement businesses. That’s why Lam had the highest percentage of support services revenue (compared to total revenue) at 33 percent of sales last quarter.
Recurring services should stabilize results during the downturn and allow the company to continue growing dividends and making healthy share buybacks.
Super micro computer
Unlike the above two shares Super micro computer (SMCI -5.88%)The server maker actually doubled in size by 2022. It now sits at the top of all time. But it only trades at 9 times earnings, and the company should continue to benefit from the advancement of artificial intelligence (AI).
Supermicro is in a traditionally low-margin business: server assembly. However, the company has been able to differentiate its offerings in some important ways. First of all, it has long focused on heat-efficient designs and liquid cooling systems, which greatly increase the efficiency of data centers that do not need much cooling. Leading-edge AI graphics processing units (GPUs) and central processing units (CPUs) pack more transistors into a smaller space, but this creates more and more thermal problems at each node. Being able to remove heat is a big advantage.
Additionally, CFO David Weigand said at a recent conference that SuperMicro has no “standard” server models, but rather mass-customizes to customers’ specifications. And with its base in Silicon Valley, Supermicro has close ties to major chipmakers, allowing it to market servers that often include the latest chips.
Energy efficiency, customization and shorter time-to-market (TTM) have led to SuperMicro’s sales rise, up 53.8 percent last quarter, and revenue up 320 percent.
What can keep up the momentum? Well, founder Charles Liang is leading the company after 30 years, and he owns a whopping 13.9% stake. In the year In March 2021, the board changed Liang’s compensation to a salary of $1. The rest of the compensation consists of performance awards based on revenue growth and SuperMicro’s stock price, with various targets ranging up to $120 per share.
A highly motivated founder-CEO is often a recipe for market-shocking returns, making the supermicrocomputer a bargain even after its strong run.