One of the big questions that investors have on their minds right now is when to start adding shares of technology stocks. While buying the dip in the tech sector has largely been a successful strategy over the last year, sentiment has changed quickly due to concerns about valuations, rising interest rates, a rotation into value, and more.
There will certainly be some great deals to be had in the coming weeks given the tech sell-off, but it’s important to let the correction play out and be working on your shopping list in the meantime.
With many tech stocks down considerably from their 52-week highs, you might be tempted to start adding shares at the first signs of a reversal. However, the best approach is to be patient, wait for volatility to subside, and check for a sustained improvement in market breadth.
If you find yourself compelled to test the waters, it might be prudent to keep your positions smaller until the market starts to act better. Regardless of your game plan for the current volatility, it can’t hurt to start thinking about some of the best tech companies to buy going forward. That’s why we’ve put together a list of 3 tech stocks on sale to buy carefully based on your risk tolerance levels.
1. PayPal
This high-quality tech stock has fallen over 22% from its highs and is a strong option to watch in the coming weeks. PayPal (NASDAQ:PYPL) is one of the premier fintech companies that enables digital and mobile payments on behalf of consumers and merchants worldwide. There’s still a lot of room for growth in the electronic payments space, especially when you consider the fact that they only surpassed cash payments on a global basis a few years ago. The company is constantly innovating and recently introduced the Venmo Credit Card in addition to launching a new service that allows account holders to buy, hold, and sell cryptocurrencies on their PayPal accounts.
Another strong selling point here is the fact that PayPal’s business is highly scalable, since adding transactions into the company’s vast network isn’t too expensive. PayPal should also benefit in the long term thanks to the way e-commerce is growing. Last year was the strongest earnings performance in the company’s history, with total payment volume growing 31% year-over-year to reach $936 billion and GAAP EPS increasing 71% year-over-year to $3.54. The bottom line here is that PayPal is a tech stock that gets more and more attractive the lower it goes, so keep an eye on it in the coming weeks.
2. Microsoft
Given the current uncertainty surrounding tech stocks and concerns about their valuations, it makes sense to look at a proven tech juggernaut like Microsoft (NASDAQ:MSFT).
As the world’s largest independent software developer, it’s a buy for several reasons as the stock price pulls back. We know that tech stocks have benefitted from the digital transformation caused by the pandemic, but this is a company that will continue to thrive long after COVID-19 is in the rearview. Microsoft’s diverse business model includes productivity and business processes, intelligence cloud, and personal computing products.
With a mix of classics like Microsoft Office and newer solutions like Microsoft Teams, many of the world’s biggest businesses rely on this company’s software to achieve results. However, the company’s cloud and personal computing segments are even more exciting at this time.
The strategy shift towards commercial and cloud application businesses is paying off in a big way for Microsoft, and the company has almost doubled its market share to 17% in the public cloud infrastructure business. The company is also seeing strong revenue from its recent launch of the new Xbox gaming console and consumer-related strength thanks to increased PC demand with more people working from home. Microsoft’s Q2 numbers were impressive, as the company saw revenue increase by 17% year-over-year to $43.1 billion and Diluted Earnings Per Share increase by 34% to $2.03. This is without a doubt one of the best technology stocks to own over the long term, and any sharp dips should be considered a gift.
3. ServiceNow
The final stock on our list has been taking a beating over the last few weeks and could see more selling, which means investors need to be extra careful about when they are adding. With that said, ServiceNow (NYSE:NOW) is one of the premier options in cloud-based software-as-a-service management applications that is worth a look after its price stabilizes.
The company provides enterprise cloud computing solutions that automate workflows within and between departments within an organization. What’s great about ServiceNow’s business model is that since its applications make enterprises run better and more efficiently, its products quickly become an essential part of how each one of its customers operates.
ServiceNow should continue to deliver revenue growth for years to come thanks to the digital transformation and cloud migration trends. Given the tech selloff, investors should only be looking at the best names right now, and ServiceNow provides the #1 information technology services software.
With 6,900 global enterprise customers including roughly 80% of the Fortune 500 and a 32% year-over-year increase in subscription revenues in 2020, this is a company that is executing at a high level. The stock has declined over 18% from its highs and its price is holding the 200-day moving average at this time, which might provide a good entry point if the market stabilizes.