JTech stocks have been bruised and battered in 2022 amid the stock market selloff and factors such as soaring inflation, rising interest rates and weak consumer spending. The technology managers Nasdaq-100 Technology Sector the index has lost more than 32% of its value so far this year.
But investors should not forget that technology stocks have been winners, in the long term, thanks to the presence of disruptive and innovative companies in this sector. This is evident from the Nasdaq-100’s impressive gains over the past decade versus the S&P500 index.
That’s why investors looking to add long-term growth stocks to their portfolios have a great opportunity to buy some of the best tech companies on the cheap after they drop in 2022. Here are two tech stocks that could help you prepare you for a long run. term gains.
1. Semiconductor manufacturing in Taiwan
Semiconductor manufacturing in Taiwan (NYSE:TSM)known as TSMC, is a Taiwanese foundry that manufactures chips used in a wide range of industries, including smartphones, data centers, the Internet of Things (IoT), and the automotive market.
Booming demand for semiconductors thanks to the growth of the aforementioned markets has resulted in tremendous growth at TSMC. The company’s first-quarter 2022 revenue grew 36% year-over-year to $17.6 billion, driven by demand for chips used in high-performance computing (HPC), smartphones and automobiles. The company’s earnings jumped 45% year over year to $1.40 per share in the quarter.
Additionally, TSMC’s June earnings report indicates that demand for its chipmaking services remains healthy. The company’s revenue in the month increased 18.5% year-over-year. Its turnover increased by nearly 40% in the first half. TSMC management is confident that it can sustain its impressive growth for a long time to come.
In its 2021 shareholder letter, TSMC management noted that the company “is entering a period of higher structural growth as multi-year megatrends in 5G and high-performance computing (HPC)-related applications are expected to fuel a massive demand for computing power”. , which expand the use of cutting-edge technologies.”
More importantly, TSMC is striving to improve its manufacturing capacity to take advantage of the secular growth opportunity and is aggressively increasing its capital investments. TSMC is the leading semiconductor foundry in terms of market share, occupying 53.6% of this market according to a third-party report. He enjoys a large lead over the second Samsung which holds a market share of only 16.3%. Aggressive capital spending is the reason TSMC’s foundry market share is expected to reach 56% this year, according to market research firm TrendForce.
And that’s a good thing because the semiconductor foundry market is expected to add $60 billion in annual revenue over the next six years. TSMC’s strong market share puts it in a strong position to capitalize on this incremental growth. Even better, TSMC could continue to grow at a healthy pace well beyond the next five years, as the semiconductor industry is expected to generate $1 trillion in annual revenue by 2030, up from $600 billion in last year.
Add to that a good dividend yield of 2.4%, a low payout ratio of 30% and a low earnings multiple of 19, investors have more reason to buy this semiconductor stock which has generated annual returns of nearly 23% over the past decade, assuming dividends were reinvested.
2. Palo Alto Networks
Palo Alto Networks (NASDAQ: PANW) is one of the leading players in the cybersecurity market with a market share of almost 19%. This puts the company in a prime position to take advantage of a huge opportunity in the end market.
Cybersecurity spending is expected to reach $1 trillion by 2035, up from spending estimated at $145 billion last year. Unsurprisingly, analysts expect Palo Alto’s earnings to grow at a compound annual rate of 27% over the next five years, a pace it could easily sustain beyond thanks to its market share and to the expansion of spending.
More importantly, Palo Alto is taking steps to increase its share of the booming cybersecurity market. This is evident from the fact that it launched 29 new products in fiscal 2021 compared to 13 new products in fiscal 2019. The company’s initiatives are paying off as customers spend more money on Palo Alto offers.
Palo Alto anticipates rapid growth in the coming years. The company expects revenue to grow at a 23% annual rate through fiscal 2024. Palo Alto also expects a 50 basis point to 100 basis point expansion in its adjusted operating margin through fiscal 2024, while the adjusted free cash flow margin is expected to grow between 100 and 150 basis points over the same period.
However, investors should keep in mind that Palo Alto is an expensive stock trading at almost 10x the sells. That’s pretty rich compared to the S&P 500’s 2.49 sales multiple. But then, Palo Alto’s valuation looks reasonable compared to its cybersecurity peers.
It should also be noted that Palo Alto is growing at a faster rate than its long-time rivals.
All of this indicates that Palo Alto Networks is a top cybersecurity player that could continue to outpace the growth of its peers thanks to a combination of its healthy market share and opportunity in the market it operates in and the building investor portfolios for strong long-term gains.
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Harsh Chauhan has no position in the stocks mentioned. The Motley Fool holds positions and recommends Check Point Software Technologies, Fortinet, Palo Alto Networks and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.