Chicago, IL – February 12, 2024 – Today, Zacks Investment Ideas feature highlights Arista Networks ANET, Cadence Design Systems CDNS, Shopify SHOP and Nvidia NVDA.
3 Top Tech Stocks to Buy Outside the Magnificent 7
Today’s episode of Full Court Finance at Zacks breaks down where the stock market stands as the S&P 500 hits the 5,000 level for the first time following a largely bullish earnings season thus far. Many of the Magnificent 7 tech stocks have posted strong results. There are also plenty of big tech names outside of this exclusive group for investors to consider buying this earnings season, including the three highly-ranked tech stocks we explore today: Arista Networks, Cadence Design Systems and Shopify.
The S&P 500 touched 5,000 for the first time on Thursday with quarterly results and guidance already out from six of the Magnificent 7 tech stocks. The market has remained mostly bullish as the overall Q4 earnings picture for the S&P 500 has improved significantly over the last month. Better yet, the outlook for 2024 has remained robust and hardly signals a recession is on the horizon.
There are still tons of earnings reports to come, including from Nvidia and the three big tech names we dive into today. But Wall Street is now likely more concerned about upcoming guidance from Walmart, Target, and other retailers, as well as January inflation data due out on February 13 since enough large-cap tech names have already provided their all-clear signal.
That said, stocks and indexes never go straight up and there will almost certainly be a pullback to key shorter-term and longer-term moving averages in the coming weeks since things are looking a bit frothy.
Investors with long-term outlooks should take advantage of any downturns and dips to scoop up their favorite stocks at slightly better prices, while also not being afraid to buy at near-term highs—because strong stocks keep breaking records over the long haul.
Arista Networks – Q4 Financial Results on Monday, February 12
Arista Networks is a networking infrastructure provider and a leader in data-driven, client-to-cloud networking for large data centers, campus and routing environments. ANET has accumulated over 8,000+ cloud customers worldwide, including Microsoft, Meta, and other giants.
ANET is projected to grow its sales by 34% in FY23 and 12% next year to climb from $4.4 billion in FY22 to $6.5 billion in FY24. This expected top-line growth follows 23% average revenue expansion over the past five years. Arista’s adjusted EPS are projected to soar 43% in FY23 and 10% higher in FY24. ANET’s upbeat revisions help it grab a Zacks Rank #1 (Strong Buy) right now and it has topped our estimates by an average of 12% in the last four quarters.
ANET stock has skyrocketed 1,900% during the last 10 years to blow away the Zacks Tech sector’s 275%. This outperformance includes a 100% surge over the past 12 months and it hit new highs on Thursday. Arista Networks might be a bit overheated right now. But Arista Networks has a sturdy balance sheet and Wall Street is high on the stock.
Cadence Design Systems – Q4 Financial Results on Monday, February 12
Cadence Design Systems is a titan of the electronic systems design space. The company’s modeling and computational software helps design semiconductors and other vital technologies, helping “turn design concepts into reality.” Cadence boasts Nvidia as a key customer because the GPU and AI chip powerhouse loves its simulation capabilities.
Cadence is one of two major players in this key industry that might grow in importance as chips get smaller. Investors can therefore view Cadence as both a chip and an AI investment. Cadence is projected to post 15% revenue growth in FY23 and 11% higher sales in FY24, following 15% averages sales growth in the past three years. CDNS is expected to post 20% adjusted earnings growth in FY23 and 14% higher in FY24, and its positive EPS revisions help it land a Zacks Rank #2 (Buy) heading into its Q4 release.
Candence stock is up nearly 2,000% in the last 10 years vs tech’s 275% and 500% in the last five years. CDNS is up 13% YTD and trading at new records. The stock is far from a value play, but its valuation levels are improving and Wall Street has been paying up for the stock for years.
Shopify – Q4 Financial Results on Tuesday, February 13
Shopify has been at the cutting edge of e-commerce for nearly two decades, helping companies, small businesses, entrepreneurs, and others with everything from site design and sales to marketing, payments, shipping, and more. Shopify makes money from recurring subscription fees and various add-ons.
Shopify’s days of 60% growth are over, but it started to make up for slowing expansion by raising its prices in 2023 for the first time in over a decade. Shopify’s sales climbed 21% in FY22 and its revenue is projected to jump 25% higher in FY23 and another 19% in 2024 to hit $8.32 billion vs. $5.60 billion in FY22.
Shopify, like all of the former growth at-all-cost tech firms, is now committed to profits. Its adjusted earnings are projected to climb from $0.04 a share last year to $0.70 in 2023 and then surge another 50% in FY24 to $1.04 a share. Shopify’s upward earnings revisions help it capture that Zacks Rank #1 (Strong Buy).
SHOP shares have skyrocketed 230% off their October 2022 lows, including a 75% run during the past year. Despite the comeback, Shopify still trades roughly 50% below its all-time highs and its 2022 stock split has it at around $88 per share. Plus, SHOP’s balance sheet is stellar.
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TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
