The Zacks Analyst Blog highlights Airbnb, Salesforce, Meta Platforms, Palo Alto Networks and Cadence Design Systems
For Immediate Release
Chicago, IL – March 10, 2023 – Zacks.com announces the list of stocks featured in the analyst blog. Every day, Zacks Equity Research analysts discuss the latest news and events affecting stocks and the financial markets. Stocks recently featured on the blog include: Airbnb Inc. ABNB, salesforce.com inc. CRM, Meta Platforms Inc. META, Palo Alto Networks Inc. PANW and Cadence Design Systems Inc. CDNS.
Here are the highlights from Thursday’s analyst blog:
Forget a Hawkish Fed: 5 Must-Buy Tech Stocks Flying High YTD
US equity investors are likely to face volatility for longer than expected as the Fed looks set to tighten its interest rate hikes. On March 7-8, Fed Chair Jerome Powell’s testimony before the US Congress confirmed that any sort of easing of the recent monetary tightening is still a long way off.
The Fed has been forced to adopt an extremely hawkish stance as inflation remains in the 5.5% to 6% range. Despite falling from its peak of 9.1% reported in June 2022, inflation is still miles above the central bank’s target level of 2%.
CME FedWatch shows that market participants now expect the final interest rate to hit the 5.5% to 5.75% range instead of the 5.1% forecast in December. A group of economists and financial experts have warned that the United States is heading towards a 6% interest rate benchmark, with a high probability of a recession in 2023.
The technology sector has been thriving since the beginning of the year
Growth-oriented sectors such as technology, communications services and consumer discretionary are very sensitive to interest rate movements. A high interest rate hurts growth stocks. This is evident in the recent pandemic-related turmoil.
During pandemic-stricken 2020 and 2021, the Fed kept interest rates as low as 0-0.25%. As a result, the technology sector experienced an unprecedented rally that allowed Wall Street to exit a brief coronavirus-induced bear market and form a new bull market.
However, when the Fed raised interest rates by 4.5% in 2022 to combat 40 years of high inflation, growth sectors, particularly technology stocks, suffered the most. Surprisingly, however, the technology sector is holding up to its bottom year to date, defying the threat of a higher rate hike for an extended period and the impact of a potential recession.
Of the three major stock indexes, the tech-heavy Nasdaq Composite is up 10.6% year-to-date, while the S&P 500 is up 4% and the Dow is down 1.1%. Technology Select Sector SPDR (XLK) — one of the 11 broad sectors of the S&P 500 Index — has gained 11.8% in 2023, second only to Communication Services Select Sector SPDR (XLC), which is up 12.9% has increased.
Our top picks
Several tech stocks have thrived year to date. We’ve narrowed our search to five tech giants (market cap >$50bn) with year-to-date returns of close to 25% or more. These stocks have strong growth potential going into 2023 and have revised positive earnings estimates in the last 60 days. Finally, each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the full list of today’s Zacks #1 Rank stocks can be found here.
Airbnb Inc. is riding on an improvement in the travel industry. The continued recovery in both long-distance and cross-border travel due to a reduction in travel restrictions is benefiting ABNB’s Nights & Experience bookings. In addition, the growth in average daily rates and in the gross booking value is providing momentum.
Growing active listings in Latin America, North America and EMEA are contributing well to sales. Growing sales and marketing initiatives, along with ongoing efforts to improve various aspects of Airbnb’s service, are helping the company gain momentum with hosts and guests.
Zack’s #1 ranked Airbnb has year-to-date revenue and earnings growth rates of 14.9% and 21.2%, respectively. The Zacks consensus estimate for the year to date is up 18.2% over the past 30 days. ABNB’s share price is up 46.5% year-to-date.
Foreclosure Benefiting from a robust demand environment as customers undergo an extensive digital transformation. Rapid adoption of its cloud-based solutions is driving demand for CRM products. CRM’s continued focus on launching better-aligned products according to customer needs drives its top-line.
Continuous deal wins in the international market are further growth drivers. The acquisition of Slack would position salesforce.com as a leader in enterprise team collaboration solutions and help it better compete with Microsoft’s Team product. We expect CRM revenues to show a CAGR of 12.5% in fiscal 2023-2025.
Zacks Rank #1 salesforce.com has a year-to-date (January 2024) expected revenue and earnings growth rate of 10.5% and 32.8%, respectively. The Zacks consensus estimate for the year to date is up 19.4% over the past 30 days. CRM’s stock price is up 38% year-to-date.
Metaplatforms Inc. benefits from steady user growth in all regions, especially Asia-Pacific. Increased engagement with its products such as Instagram, WhatsApp, Messenger and Facebook has been a key growth driver. META is considered a pioneer of the concept of social networks.
Zacks Rank #2 Meta Platforms has an expected revenue growth rate of 4.6% for the year to date. The company has an earnings growth rate of 19% for the next year. The Zacks consensus estimate for the year to date is up 1.5% over the past 30 days. META’s share price is up 53.6% year-to-date.
Palo Alto Networks Inc. has benefited from continued business wins and increased adoption of PANW’s next-generation security platforms driven by the increase in remote work environments and the need for stronger security.
The growing traction of the Prisma and Cortex offerings is acting as a tailwind. PANW continues to acquire new customers and increase wallet share with existing customers. Our estimates assume that Palo Alto’s revenue will be at a CAGR of 21.1% in fiscal 2023-2025.
Zacks Rank #1 Palo Alto Networks has a year-to-date (ending July 2023) expected revenue and earnings growth rate of 25.2% and 57.1%, respectively. The Zacks consensus estimate for the year to date is up 15.8% over the past 30 days. PANW’s share price is up 34.6% year-to-date.
Cadence Design Systems Inc. offers products and tools to help customers develop electronic products. Through the System Design Enablement strategy, CDNS provides software, hardware, services and reusable IC design blocks to electronic systems and semiconductor customers.
Cadence’s performance is driven by strength in all segments such as digital and signoff solutions and functional verification suite. CDNS is also benefiting from higher investments in emerging trends such as IoT and autonomous vehicle subsystems, as well as strength in the semiconductor end market. Frequent product launches are expected to help CDNS sustain revenue growth.
Zack’s #1 ranked Cadence Design Systems has year-to-date sales and earnings growth rates of 13.4% and 16.4%, respectively. The Zacks consensus estimate for the year to date is up 10% over the past 30 days. CDNS’ stock price is up 24.1% year-to-date.
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Past performance is no guarantee of future results. The potential for loss is inherent in every investment. This material is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice or a recommendation to buy, sell or hold any security. No recommendation or advice is given as to whether an investment is suitable for a is suitable for certain investors. It should not be assumed that investments in any security, company, sector or market identified and described have been or will be profitable. All information is current at the time of publication and is subject to change without notice. Any views or opinions expressed may not reflect those of the company as a whole. Zacks Investment Research does not engage in investment banking, market making or investment management activities for securities. These returns are from hypothetical portfolios composed of Zacks rank = 1 stocks rebalanced monthly excluding transaction costs. These are not actual stock portfolio returns. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information on the performance figures presented in this press release.
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