Whether it’s the geopolitical tensions in Europe or the prospect of higher interest rates in the US this year, there’s definitely no shortage of reasons to feel insecure about the stock market right now.
the Nasdaq 100 The tech index continues to flirt with bear market territory, defined as a loss in value of 20% or more, a level it has already surpassed a couple of times in 2022. But many individual tech stocks have already passed that brand. , losing 50% or more amid the brutal sell-off.
But it’s not all bad news. For investors with a long-term time horizon, there are plenty of high-quality companies worth buying while they are trading down. Here are five of them.
1. Cohu: Semiconductors
The semiconductor industry produces the advanced computer chips that power our everyday electronic devices, like smartphones and even the digital features in our cars. As life continues its transition to the digital realm, the semiconductor industry is poised to remain a hot player, and Cohu (COHU 1.21%) It is a stock to buy long term.
The company does not produce any chips itself, but supplies the world’s largest manufacturers with test and handling equipment, which is critical to the manufacturing process. This equipment is designed to detect defects to ensure that only quality finished products reach the end user, while maintaining production speed and efficiency.
Cohu is a minnow of the semiconductor industry, with a valuation of just $1.4 billion. It generated $887 million in revenue in 2021, with $3.45 in earnings per share, and its stock is extremely cheap compared to its peers. It trades at a price-to-earnings multiple of just 8, which is a 65% discount to the iShares Semiconductor ETFimplying that Cohu shares would have to nearly triple just to move in line with the broader sector.
2. C3.ai: Artificial Intelligence
Artificial intelligence (AI) is one of the most transformative technologies of modern times. It offers the ability to make predictions based on mountains of data, and can complete complex tasks instantly that would otherwise take humans days or even weeks. C3.ai (AI 0.28%) is an industry pioneer, creating pre-built and customizable AI applications used by 14 different industries (and counting).
C3.ai recently signed an agreement with the US Department of Defense worth $500 million over five years to accelerate the adoption of AI within the federal government. And in the private sector, it has multi-year contracts with oil and gas giants like Shell Y Baker Hughesthat use C3.ai applications to predict equipment failures and reduce carbon emissions by improving efficiency.
But perhaps nothing highlights the caliber of the company’s technology like its collaborations with tech leaders. Microsoft Y Alphabetfrom Google, who are working with C3.ai to improve cloud services for their customers.
C3.ai shares trade at a market valuation of just $1.9 billion right now, with over $1 billion in cash and short-term investments on its balance sheet. That means investors value its AI business at just $900 million, even though the company expects to generate $252 million in revenue this year and has $469 million in performance obligations remaining, which typically turns into sales with time. In a nutshell, C3.ai is trading at a bargain price right now.
3. Tenable: Cybersecurity
Cyber security is a priority for many business leaders as they are tasked with moving more of their assets online, which has altered the threat landscape. In an early 2021 survey by accounting giant KPMG, 500 CEOs ranked cybersecurity risk as the top threat to their organizations. It has led to a growing demand for proactive technologies such as threat detection and vulnerability management, and Sustainable (TENB 3.49%) is at the forefront.
The company’s Nessus vulnerability management platform ranks #1 in most important metrics, including adoption, coverage, and accuracy. It has been downloaded more than 2 million times and is deployed in 30,000 organizations, protecting users from more than 68,000 Common Vulnerabilities and Exposures (CVE), the highest number in the industry.
Tenable generated more than $541 million in revenue during 2021, and the company’s growth is being driven by its highest spending customers, who have an annual contract value of more than $100,000. In the last five years, the number of customers in that category it has grown by 54% annually to 1,095 companies today. This highlights the growing need for proactive cybersecurity tools among larger organizations, and Tenable is well positioned to serve them.
As an added bonus, of the 16 Wall Street analysts who cover Tenable stock, none recommend selling it.
4. Upstart: fintech
upstart holdings (UPST -4.62%) is a technology-focused financial services company that makes money from banks by generating loans for them. The lending business hasn’t changed much in recent decades, and most financial institutions continue to rely on the FICO scoring system to assess the creditworthiness of potential borrowers. The problem is that FICO only offers a very limited view of someone’s financial situation, at least compared to what Upstart has developed.
The company leverages artificial intelligence to assess more than 1,600 different metrics, giving lenders a more comprehensive view of a customer’s creditworthiness. But the impressive thing is that it can generate an instant decision 70% of the time, while it can take weeks for human advisors to analyze that amount of data. The result is great for lenders, and Upstart estimates it reduces default rates by up to 75%.
The growth of the company is vertiginous. In 2021, it increased revenue by 264% to $849 million, surpassing even its own forecast of $500 million. But Upstart is also profitable, generating $2.37 in adjusted earnings per share last year, a 930% increase over 2020. Much of its performance going forward could be due to its recent entry into the lucrative segment of car loans, which is something to pay close attention to. a.
With Upstart shares falling 75% amid the brutal tech sell-off, now might be an opportune time to get involved.
5. Metaplatforms: The Metaverse
Perhaps no subset of the tech industry is more interesting than the metaverse right now. The virtual world claims to be the next generation of social interaction and promises countless opportunities for business and commerce.
Of all the companies trying to develop the metaverse, none is better placed than Metaplatforms (GOAL 0.83%)given its huge budget and leading position in the social media industry with over 2.9 billion monthly active users on Facebook, Instagram and WhatsApp.
Meta seeks to build the foundations of the metaverse, meaning it could have control and pricing power over the transactions that occur within it. It is investing heavily in the project, with its Reality Labs segment spending $10 billion on development in 2021 alone, which has caught the attention of investors. But given that Meta is expected to generate $132 billion in revenue this year, that investment is a drop in the bucket.
That’s especially true when assessing the size of the metaverse opportunity, which by some estimates could be worth $1.6 trillion annually by 2030. Also, since Meta is a highly profitable company, it can afford to Be patient, just like investors.
In fact, it generated $13.77 in earnings per share during 2021, putting its shares at a price-to-earnings multiple of 14. That’s 53% cheaper than the Nasdaq 100 index’s multiple of 30, implying that Meta’s stock they would need to be doubled just for online trading with the broader tech sector.
That translates to a long-term growth opportunity in an exciting industry, heavily discounted to the market right now.