The market has been quite volatile over the past month or so, with tech stocks bearing the brunt of the selling.
The turbulence certainly didn't come out of nowhere. September has historically been tough for the markets, while October tends to be one of the most volatile months. And this year, in particular, there is plenty for investors to worry about, including a looming debt ceiling – the short-term bill making its way through Congress only goes to early December – an imminent Fed tapering and supply-chain issues.
And while the S&P 500 is down almost 4% from its early September peak, the technology sector is faring even worse, with the Nasdaq Composite off almost 5%. Exacerbating troubles for tech stocks is the recent rise in Treasury yields. Higher rates on bonds can weigh on the broader stock market, but often hit tech shares the hardest, considering costlier borrowing can eat into margins.
However, even with the market volatility, business growth is expected to accelerate next year, and the economic recovery is still moving along. As such, the recent selloff creates an opportunity to scoop up beaten down shares of some of the best tech stocks at more attractive prices.
To aide in our search for solid companies to buy on the dip, we turned to the Stock News POWR Ratings system to search for Buy- and Strong Buy-rated stocks that saw losses of more than 10% in the past month – suggesting the selling is overdone.
Based on that criteria, here are five of the best tech stocks to buy right now.
Disclaimer
Data is as of Oct. 11. POWR Ratings work on an A-B-C-D-F system. Stocks are listed in order of lowest to highest overall rating, and then alphabetically.
Adobe
- Market value: $272.7 billion
- POWR Ratings overall rating: B (Buy)
- POWR Ratings average broker rating: 1.38
Adobe (ADBE, $573.07) provides content creation, document management and digital advertising software and services to creative professionals and marketers. Its flagship products include Photoshop, Acrobat, Dreamweaver, Illustrator and InDesign.
The company reported strong fiscal third-quarter results, with both earnings and revenues rising year-over-year. Sales growth was driven by the company's Creative Cloud, Document Cloud and Experience Cloud offerings. ADBE is also benefiting from growth in emerging markets, strong online video creation demand and solid adoption of Acrobat.
In fact, Adobe continues to be a market leader in the digital media space. With advertising, entertainment and other types of content creation becoming digitalized, ADBE is poised to reap the benefits. For instance, it entered the digital marketing space with its acquisition of online marketing and web analytics firm Omniture. Digital marketing is one area when corporate spending is rising. This is due to the increased adoption of cloud computing, big data analytics and social media. These tailwinds should increase growth for ADBE over the long term.
The stock has an overall grade of B (Buy) in the POWR Ratings system. The company has a Sentiment Grade of B, which is in line with its analyst ratings. Of the 28 analysts tracking Adobe, 24 rate it a Buy or Strong Buy. And analysts peg potential upside at 25%, based on its average price target.
ADBE also has a Quality Grade of A, which isn't surprising with a low debt-to-equity ratio of 0.3, signaling very little debt leverage, and a current ratio of 1.4 that indicates Adobe is plenty capable of tackling its shorter-term liabilities. Management is also very efficient, with a return on equity of 40.5%.
Shares are down over 13% over the past month, making Adobe of the best tech stocks to buy right now. Get Adobe's (ADBE) complete POWR Ratings analysis here.
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Plantronics
- Market value: $1.0 billion
- POWR Ratings overall rating: B (Buy)
- POWR Ratings average broker rating: 1.50
Plantronics (POLY, $23.82) designs and manufactures lightweight communications headsets, telephone headset systems and other communications endpoints. Its headsets are used in contact centers, mobile devices, gaming and other applications. Products are shipped through a network of distributors, retailers, wireless carriers and original equipment manufacturers.
The company is benefiting from a shift toward high-fidelity solutions needed in hybrid work and video collaborations. These play a critical role in the work-from-home environment as the simple user interfaces allow people to navigate connectivity issues. In fact, its extensive technical knowledge and portfolio of IP rights give it a competitive advantage over its rivals.
Management is cutting costs, making smart investments in new products and balancing its supply chain exposure. Additionally, POLY announced the Poly Studio P Series. This family of prosumer video solutions addresses the growing need for tools that allow professionals to work from anywhere.
The company also announced Poly Lens Desktop App and Poly+. Poly Lens provides capabilities for voice, video and headsets under a single pane of glass, while Poly+ is a personal device service that provides troubleshooting tools. These consumer-focused products should help POLY strengthen its market position.
The POWR Ratings system pegs POLY as a B-rated Buy. The company has a Growth Grade of B, as revenue has grown an average of 15.6% per year over the past five years. Plus, analysts expect earnings to rise an average of 15% per year over the next five years.
Plantronics also has a Value Grade of A, helped in large part by an attractive price-to-sales ratio of 0.6. This is well below the industry average of 2.5 and the S&P 500's 3.1.
Over the past month, the stock is down more than 12%, making this is one of the best tech stocks to buy on the dip. Here is the complete POWR Ratings analysis for Plantronics (POLY).
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Synopsys
- Market value: $44.0 billion
- POWR Ratings overall rating: B (Buy)
- POWR Ratings average broker rating: 1.53
Synopsys (SNPS, $288.74) is a market leader in electronic design automation (EDA) software. EDA is used to automate the design and verification of integrated circuits (ICs) or larger chip systems. The company provides an end-to-end workflow of EDA products. It also offers a broad set of design intellectual property (IP) and leading software integrity tools that help customers develop secure, quality code.
The firm had a solid fiscal third quarter, as it saw strength across all its end markets and geographic areas, especially in China. Its EDA product group, which is its largest segment by revenue, was the main driver of sales growth. Revenue from China grew 31% sequentially, with broad-based adoption by companies in the mainland a massive driver of SNPS' growth.
Strong traction for the company's Fusion Compiler product also boosted its top line. Synopsys is seeing growing demand for advanced technology, design, IP and security solutions. Plus, secular tailwinds in emerging technologies such as artificial intelligence (AI), 5G, the Internet of Things and "big data" have led to investments in machine learning (ML) architectures.
Due to this, many companies have selected SNPS to be their primary EDA partner, including Advanced Micro Devices (AMD) and Juniper Networks (JNPR).
Synopsys is one of several B-rated (Buy) stocks in the POWR Ratings system. SNPS has a Sentiment Grade of B, as it is well-liked by the ''Smart Crowd," with 13 out of 14 Wall Street analysts rating it a Buy or Strong Buy. And based on the highest analyst price target of $350, the stock has a potential upside of 21%.
SNPS also has a Quality Grade of A in large part because of its rock-solid balance sheet. Not only does the company have a debt-to-equity ratio of 0.1, but both its current and quick ratios are over 1.0.
This all makes Synopsys look like one of the best tech stocks to buy on the dip following a roughly 13% decline over the past month. Read more about the full POWR Ratings for Synopsys (SNPS) here.
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Silicon Motion Technology
- Market value: $2.3 billion
- POWR Ratings overall rating: A (Strong Buy)
- POWR Ratings average broker rating: 1.38
Headquartered in Taiwan, Silicon Motion Technology (SIMO, $66.37) is a leading developer of microcontroller ICs for NAND flash storage devices. The company focuses on designing, developing and marketing controllers for managing NAND flash used in embedded storage applications. This includes eMMC embedded memory. Its products are used in personal computing, smartphones, tablets, flash drives and enterprise and data centers.
The firm has benefited from solid demand for its solid-state drive (SSD) controllers and eMMC and UFS controllers. This led to a year-over-year increase in both revenue and earnings per share (EPS) in the most recent quarter.
SIMO is a leading merchant supplier of client SSD controllers to module makers. Management believes the market will soon be dominated by SSDs that use TLC (triple-level cell) flash, which is a type of NAND flash memory that stores three bits of data per cell. That should bolster their use in PCs, displacing mechanical hard disk drives.
SSDs offer higher performance and competitive advantage over HDDs, which is why PCs are increasingly adopting them. Plus, Silicon Motion Technology believes its SSD controller will be used for managing 3D flash in the future, and its eMMC controllers are showing signs of a rebound.
SIMO's overall grade of A (Strong Buy) in our POWR Ratings system includes a Growth Grade of B. Its revenue has risen 22.7% over the past year. Its EBITDA (earnings before interest, taxes, depreciation and amortization) is expected to surge 30% over the next year. And in the shorter term, analysts expect earnings to soar 115.8% in the current quarter from the year prior.
Additionally, Silicon Motion Technology has a Quality Grade of B, indicating a solid balance sheet. At the end of the second quarter, the company had a cash balance of $357 million. This is up from the previous quarter and compares favorably to its current liabilities.
SIMO is down over 12% in the past month, so investors looking for great tech stocks to buy on the dip might want to keep this one on their radar. Check out the complete POWR Ratings analysis for Silicon Motion Technology (SIMO) here.
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Zebra Technologies
- Market value: $26.3 billion
- POWR Ratings overall rating: A (Strong Buy)
- POWR Ratings average broker rating: 1.62
Zebra Technologies (ZBRA, $493.13) is a leading provider of automatic identification and data capture technology for enterprises. Its solutions include barcode printers and scanners, mobile computers and workflow optimization software. The company primarily serves the retail, transportation, logistics, manufacturing and healthcare markets, designing custom solutions to improve efficiency for its customers.
ZBRA is expected to benefit from solid demand for its printing, supplies and enterprise mobile computing. In addition, growth in its RFID product lines should support sales growth. Zebra's focus on supply-chain optimization, cost-saving actions and investments in software capability also bodes well for its margins.
In addition, the firm is also seeing momentum in its Enterprise Asset Intelligence solutions due to investments in product development. Based on these developments, management raised its full-year net sales growth forecast to 23% and 25%. This was raised from its previous guidance of 18% to 22%.
The company has also been steadily strengthening its business through acquisitions. For instance, ZBRA's recent acquisition of on-demand automation firm Fetch Robotics should strengthen its capability to offer a wide range of advanced robotics solutions to customers.
The POWR Ratings system gives Zebra an overall grade of A, which translates into a Strong Buy. ZBRA has a Growth Grade of B as its EPS have grown an average of 35.3% annually over the last three years. What's more, analysts expect earnings to rise 24.2% year-over-year in the current quarter.
ZBRA also has a Quality Grade of B. At the end of the most recent quarter, ZBRA had $369 million in cash compared to only $47 million in short-term debt. Plus, its debt-to-equity ratio is low at 0.4.
Over the past month, the stock is down roughly 15%, making it one of the best tech stocks to buy right now. Get Zebra's (ZBRA) complete POWR Ratings analysis here.
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