The end of 2021 and the initial trading days of 2022 have been rough for tech stocks. The prospect of multiple interest rate hikes has investors fleeing to risk-off assets, including stocks. And that means some of the biggest tech stocks may have further to fall.
But for growth investors, tech remains the sector to be in. Some appealing stocks have dropped 50% or more from their 2021 highs. That means it’s inevitable that some savvy buyers will be moving in to buy their favorite names at a discounted price.
However, price doesn’t always equal value. Some stocks have sold off and may never recover their previous level. Those are tough lessons for investors to learn.
However, in this presentation, we’re looking at seven tech stocks that have a strong business case to support a recovery even as other tech stocks may struggle. We think all these stocks are strong buying candidates. However, we encourage you to do your due diligence to decide when the price is right for you.
Quick Links
- Microsoft
- Electronic Arts
- Asana
- Shopify
- Airbnb
- PayPal
- Fiverr
#1 - Microsoft (NASDAQ:MSFT)
Kicking off our list of tech stocks likely to flourish in 2022 is Microsoft (NASDAQ:MSFT). The company proved itself essential during the pandemic with its Teams productivity software that kept offices connected. The work-from-anywhere movement is also causing many companies to migrate their operations to the cloud. And Microsoft is only too happy to oblige with its Microsoft Azure business.
However, Microsoft isn’t limiting its opportunities for growth. In mid-January the company announced plans to acquire Activision Blizzard (NASDAQ:ATVI) in a $70 billion all-cash transaction. An immediate benefit of the merger would be that Activision’s mega-hit “Call of Duty” franchise would become exclusive to Microsoft’s Xbox platform.
Industry insiders give the deal a 60% chance of going through. The sheer size of the deal and possible regulatory hurdles are given as reasons the deal could fall through. That may be holding both stocks back at the moment.
But this is also a strategic opportunity for Microsoft to get its foot in the door of the emerging metaverse. With that likely being the case, you can bet that Microsoft won’t be deterred from looking for other targets if the deal falls through.
About Microsoft
Microsoft Corporation develops and supports software, services, devices and solutions worldwide. The Productivity and Business Processes segment offers office, exchange, SharePoint, Microsoft Teams, office 365 Security and Compliance, Microsoft viva, and Microsoft 365 copilot; and office consumer services, such as Microsoft 365 consumer subscriptions, Office licensed on-premises, and other office services.
Read More - Current Price
- $415.49
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 27 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $503.03 (21.1% Upside)
#2 - Electronic Arts (NASDAQ:EA)
If Microsoft is successful in acquiring Activision Blizzard, it might be bad news for Electronic Arts (NASDAQ:EA) , Activision’s largest rival. But don’t tell that to the company’s COO Laura Miele. In an interview with Yahoo, Miele remarked that the company has a long runway ahead of it.
Miele believes the global gaming marketplace is a $180 billion business. And the company was already making plans to address competition from companies like Microsoft as well as streaming services such as Netflix (NASDAQ:NFLX). And with a stable of franchises that include household names like FIFA, Madden and Formula One, Electronic Arts is ready to deliver.
Supply chain difficulties that limited the availability of new gaming consoles was a headwind for EA stock in 2021. However, with those concerns beginning to ease, the stock looks like an attractive buy. Investors will want to pay attention to the company’s next earnings in February for confirmation. The company has beat top and bottom line expectations in each of the last four quarters.
About Electronic Arts
Electronic Arts Inc develops, markets, publishes, and distributes games, content, and services for game consoles, PCs, mobile phones, and tablets worldwide. It develops and publishes games and services across various genres, such as sports, racing, first-person shooter, action, role-playing, and simulation primarily under the Battlefield, The Sims, Apex Legends, Need for Speed, and license games from others, including FIFA, Madden NFL, UFC, and Star Wars brands.
Read More - Current Price
- $166.71
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 13 Buy Ratings, 8 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $165.37 (0.8% Downside)
#3 - Asana (NYSE:ASAN)
If you believe that Microsoft still doesn’t offer enough value, then you should consider Asana (NYSE:ASAN). The software-as-a-service (SaaS) company and its subsidiaries operate a work management platform for individuals, team leads, and executives.
If that sounds like something that might compete with Microsoft Teams, you’d be right. But the two companies have decided they’re better together and have co-created a suite of offerings for Teams that allow customers to “communicate, coordinate, and collaborate more effectively.”
ASAN stock has only been publicly trading since October 2020. However the company has beat analysts expectations for EPS in every quarter. And the company has posted sequentially higher revenue in each of its five quarters, topping the $100 million mark for the first time in the quarter ending in October 2021.
With that said, the company is still not profitable, and three analysts have lowered their price targets for ASAN stock. That being said, all three analysts continue to have price targets that are above the consensus target which suggests that overall sentiment remains bullish.
About Asana
Asana, Inc, together with its subsidiaries, operates a work management platform for individuals, team leads, and executives in the United States and internationally. Its platform helps organizations to orchestrate work from daily tasks to cross-functional strategic initiatives; manage work across a portfolio of projects or workflows, see progress against goals, identify bottlenecks, resource constraints, and milestones; and communicate company-wide goals, monitor status, and oversee work across projects and portfolios to gain real-time insights.
Read More - Current Price
- $13.94
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 9 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $14.27 (2.4% Upside)
#4 - Shopify (NYSE:SHOP)
At one point in 2021, Shopify (NYSE:SHOP) stock was changing hands at over $1,700 a share. But if I were to tell you that as of September 30, 2021 only 13% of U.S. retail sales were handled online, you might become more interested. And if I followed that up by pointing out that SHOP stock is now trading at 41% below its 52-week high, it becomes a very attractive proposition.
The company’s business model is ideal for many of the small- and mid-sized businesses that have expanded as many individuals embraced entrepreneurship during the pandemic. As evidence of this, the company reports that cumulative gross merchandise value for Shopify merchants doubled from $200 billion to $400 billion in just 16 months from the start of the pandemic. Prior to that it had taken the company 15 years to get to $200 billion.
From a technical standpoint, SHOP stock is looking oversold. And according to information gathered by MarketBeat, analysts expect the stock to climb over 57% to a price of $1617.75 in the next 12 months.
About Shopify
Shopify Inc, a commerce company, provides a commerce platform and services in Canada, the United States, Europe, the Middle East, Africa, the Asia Pacific, Australia, China, and Latin America. The company's platform enables merchants to displays, manages, markets, and sells its products through various sales channels, including web and mobile storefronts, physical retail locations, pop-up shops, social media storefronts, native mobile apps, buy buttons, and marketplaces; and enables to manage products and inventory, process orders and payments, fulfill and ship orders, new buyers and build customer relationships, source products, leverage analytics and reporting, manage cash, payments and transactions, and access financing.
Read More - Current Price
- $103.97
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 24 Buy Ratings, 16 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $94.95 (8.7% Downside)
#5 - Airbnb (NASDAQ:ABNB)
2021 was the year when the disruptor got disrupted. Airbnb (NASDAQ:ABNB) went public in December 2020 as one of the next big stocks in the tech sector. However, after crossing the $200 mark on two separate occasions, ABNB stock was knocked back. The culprit was the Covid-19 pandemic and specifically the Delta and Omicron variants.
In the case of Omicron, Airbnb stock is down 21% since the middle of the year. But the stock appears to be finding support as public health officials are not mandating travel restrictions related to the Omicron variant.
This should give investors the opportunity to look at the company’s asset-light business model. The company is likely to thrive as millions of Americans are now untethered to an office. This is redefining the “where” of work/life balance and is likely to create earnings and revenue growth for the company in 2022.
Still, some analysts believed the stock was overpriced prior to the recent sell-off. And after a strong third quarter, Airbnb will face the privilege of elevated expectations. Nevertheless, the consensus price target among the analysts surveyed by MarketBeat is $192.70, an 18% increase from the current ABNB share price.
About Airbnb
Airbnb, Inc, together with its subsidiaries, operates a platform that enables hosts to offer stays and experiences to guests worldwide. The company's marketplace connects hosts and guests online or through mobile devices to book spaces and experiences. It primarily offers private rooms, primary homes, and vacation homes.
Read More - Current Price
- $135.25
- Consensus Rating
- Hold
- Ratings Breakdown
- 8 Buy Ratings, 18 Hold Ratings, 6 Sell Ratings.
- Consensus Price Target
- $138.97 (2.7% Upside)
#6 - PayPal (NASDAQ:PYPL)
PayPal (NASDAQ:PYPL) is a recognized leader in the financial technology (fintech) sector. So I suppose it stands to reason that the company would be dropping sharply with other fintech names. PYPL stock may have been overvalued at over $300 a share. However, nearing $170 as of this writing, the sell-off seems extreme for a company that is the unquestioned leader in peer-to-peer payments.
The simple reality is that PayPal, while not trying to operate like a bank, has given the unbanked an alternative to traditional banks. In addition to traditional peer-to-peer payments, the company offers debit and credit cards. It also offers small business owners the opportunity to get business loans.
But the numbers don’t lie. And investors may believe that the company’s growth rate is unsustainable. However, if we’re going to look at numbers, then I’ll point to the company’s earnings and free cash flow both of which are growing.
About PayPal
PayPal Holdings, Inc operates a technology platform that enables digital payments on behalf of merchants and consumers worldwide. It operates a two-sided network at scale that connects merchants and consumers that enables its customers to connect, transact, and send and receive payments through online and in person, as well as transfer and withdraw funds using various funding sources, such as bank accounts, PayPal or Venmo account balance, PayPal and Venmo branded credit products comprising its installment products, credit and debit cards, and cryptocurrencies, as well as other stored value products, including gift cards and eligible rewards.
Read More - Current Price
- $84.74
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 19 Buy Ratings, 15 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $83.45 (1.5% Downside)
#7 - Fiverr (NYSE:FVRR)
Fiverr (NYSE:FVRR) is another stock that is benefiting from the growth of the gig economy. The Israeli company went public in 2019 and saw explosive growth during the pandemic as many workers chose to try their hand at freelancing either by choice or necessity. And when FVRR stock was trading for over $300 a share almost 11 months ago, we would have been advising you to pump the brakes on this high flier.
However, as the saying goes, “that was then.” Today, FVRR stock is down 74% from its 52-week high and looks like a strong value among tech stocks. The company has reported sequentially higher earnings in each of its first eight quarters. And the company has beaten analysts EPS expectations in every quarter and posted positive earnings in five of its last six quarters.
The company has used its positive free cash flow position to acquire CreativeLive and Stoke Talent. Both acquisitions support the company’s business model and should provide another source of revenue for the company to continue its growth.
About Fiverr International
Fiverr International Ltd. operates an online marketplace worldwide. Its platform enables sellers to sell their services and buyers to buy them. The company's platform includes various categories in ten verticals, including graphic and design, digital marketing, writing and translation, video and animation, music and audio, programming and tech, business, data, lifestyle, and photography.
Read More - Current Price
- $30.69
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 5 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $31.60 (3.0% Upside)
Deloitte reports that in 2022, the tech sector will continue to work through pandemic-related challenges such as the ongoing disruptions to the supply chain. But they will also be helping companies manage a hybrid workforce which creates fluctuating IT needs. And the tech sector will also not be immune to the spotlight that is being put on the issue of climate change.
That means that whatever is happening in the tech sector today is likely to be transient at some point. And growth investors should continue to look for quality stocks in this sector. With that said, our omission of the FAANG stocks was intentional. Many, if not all, of these stocks are likely to bounce back in a big way.
However, the tech sector has a depth and breadth like never before. And that gives investors an opportunity to find growth in stocks that may carry a more attractive valuation. So for the purposes of this presentation we wanted to provide you with exposure to some of these compelling stocks.
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