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 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.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
