After leading the market to record highs in 2021, the technology sector is the biggest underperformer to start the new year. As investors witnessed last year, when Treasury yields surge such as they have in recent weeks, high growth companies like tech are among the hardest hit.
At the same time, however, when yields stabilize and the market reassesses the biggest growth opportunities, the tech sector often rises to the top. This could mean the early 2022 selloff will amount to another buying opportunity for some perennial market leaders.
Some of the most compelling tech names on sale are those that are not just down sharply this year but have been in a downtrend since December. Given their likelihood to turn things around, here are three of the best down but not out tech names.
Is the HubSpot Selloff a Buy Opportunity?
HubSpot’s (NYSE: HUBS) incredible run finally took a turn for the worse late last year. The customer relationship management (CRM) software upstart has failed to regain its mojo since its third-quarter earnings report got mixed reviews. After a brief post-earnings recovery, the stock fell 18% in December and is down another 20% year-to-date.
A selloff of that magnitude would suggest there has been some sort of warning about this year’s performance but that hasn’t been the case. Instead, the decline has been largely driven by profit-taking and the latest assault on high multiple tech companies. While still not cheap by any valuation measure, HubSpot is starting to stabilize and is likely a good buy opportunity here.
As businesses went digital at a neck-breaking pace during the pandemic, HubSpot became a huge beneficiary on account of its value-added CRM offerings and worldwide presence. Catering to oft-forgotten small to medium-sized businesses has allowed it to capitalize on the opportunity.
The stock got ahead of itself as can happen with fast-growing tech companies, but underlying demand remains strong. As HubSpot introduces new products and expands into the enterprise market, look for further market share gains and a rapid recovery in the share price.
Is MongoDB Stock a Buy?
MongoDB (NASDAQ: MDB) began selling off after Christmas in conjunction with the Nasdaq’s downturn and has slipped into bear market territory. The high-flying infrastructure database software player staged a nice rally on Monday that could mark the bottom of the recent swoon.
As large corporations and organizations move their IT workloads to cloud environments, MongoDB’s cloud-based Atlas software will be a force to be reckoned with. It has been the company’s major growth engine and become the biggest component of the business accounting for almost 60% of revenue last quarter. This is an attractive development from an investment standpoint because the subscription-based product presents visible recurring revenue streams.
Since MongoDB is on a mission to grab market share at the expense of profits, it is still operating at a loss. But pending next month’s fourth quarter results, the loss is expected to have improved significantly for the second straight year. This suggests that management’s strategy of going after the massive database software market is working and will eventually translate to profits. MongoDB’s disruptive Atlas software has the potential to carry the weight of the world’s IT migrations on its shoulders. The recent weakness in the stock is looking like a strong buy opportunity.
What are Advanced Micro Devices’ Growth Prospects?
The impact of the global semiconductor shortage has been widespread. Advanced Micro Devices (NASDAQ: AMD) has been one of the most resilient. Management’s stellar job of working through the challenges propelled the stock to an all-time high in November 2021 before a benign low volume selloff took hold.
The world’s second-largest microprocessor company wowed the market with its third-quarter results, a performance that has since been overshadowed by broader market dynamics. It crushed consensus earnings estimates and raised its full-year revenue growth outlook for the third time to 65%. With that kind of growth and profit margins trending higher, Advanced Micro Devices deserves a premium valuation regardless of the impact of higher interest rates.
Advanced Micro Devices has been a lucrative play on surging desktop and laptop demand during the pandemic. Its recent results would have been even more potent had global semiconductor and parts shortages not limited computer manufacturer volumes.
As businesses continue to embrace remote and hybrid work solutions in a world where plenty of pandemic uncertainty remains, AMD will continue to benefit from that growth, especially as supply chain pressures ease. Toss in the growing demand for data center solutions and gaming processors and the company has multiple long-term growth drivers at its disposal. Expect AMD to impress with its fourth-quarter report and the market to be reminded of the stock’s growth prospects.
Before you consider Advanced Micro Devices, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Advanced Micro Devices wasn't on the list.
While Advanced Micro Devices currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.
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