The Fed recently announced a 50-basis point rate hike for December 2022 to achieve its 2%-3% inflation target range. Rate hikes are expected to continue well into 2023. Tech stocks witnessed significant losses, with the Nasdaq composite slumping 32.6% year-to-date, while the industry has lost a massive $7.40 trillion in one year.
However, the tech industry might witness a potential rebound in 2023. According to Wedbush's analysts Dan Ives and John Katsingris, "We believe overall the tech sector will be up roughly 20 percent in 2023 from current levels with big tech, software, and semis leading the charge despite the macro and Fed wild cards abound."
Moreover, amid rapid digitalization, demand for tech goods and services is robust. The global digital transformation market is expected to grow at a CAGR of 23% from 2022 to 2027.
Given the backdrop, fundamentally sound tech stock Salesforce, Inc. (CRM) looks poised to deliver solid returns. However, given its weak growth prospects, Coinbase Global, Inc. (COIN) might be best avoided now.
Stock to Buy:
Salesforce, Inc. (CRM)
CRM is a customer relationship management technology provider. The company's Customer 360 platform enables its customers to work together to deliver connected experiences.
On September 21, 2022, CRM partnered with Zywave at InsureTech Connect Vegas 2022. This collaboration aims to integrate the domains of insurance agency sales and client service, leading to more efficient, strategic workflows.
In terms of forward Price/Book, CRM is currently trading at 2.13x, 41.2% lower than the industry average of 3.63x.
CRM's gross profit margin of 72.69% is 46.4% higher than the 49.64% industry average, while its Levered FCF margin of 30.62% is 308.8% higher than the industry average of 7.49%.
CRM's total revenues increased 14.2% year-over-year to $7.83 billion for the third quarter that ended October 31, 2022. Moreover, its subscription and support revenue increased 13.4% year-over-year to $7.23 billion. Also, its gross profit increased 14.5% year-over-year to $5.75 billion.
Analysts expect CRM's revenue to increase 16.9% year-over-year to $30.97 billion in 2023. Its EPS is expected to increase by 3.1% year-over-year to $4.93 in 2023. It surpassed EPS estimates in all four trailing quarters. CRM's shares have gained marginally intraday to close the last trading session at $129.01.
CRM's strong fundamentals are reflected in its POWR Ratings. The stock's overall B rating indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CRM has an A grade for Growth and a B grade for Sentiment. In the Software - Application industry, it is ranked #13 out of 139 stocks. Click here for the additional POWR Ratings for Value, Momentum, Stability, and Quality for CRM.
Stock to Sell:
Coinbase Global, Inc. (COIN)
COIN provides financial infrastructure and technology for the crypto economy worldwide. The company offers the primary financial account in the crypto economy for retailers; and technology and services that enable ecosystem partners to build crypto-based applications and securely accept crypto assets as payment.
COIN's forward Price/Book multiple of 1.48 is substantially higher than the industry average of 1.21.
COIN's trailing-12-month ROCE of negative 22.08% is lower than the industry average of 11.55%, while its trailing-12-month ROTA of negative 1.10% is lower than the industry average of 1.16%.
COIN's total revenue came in at $590.34 million for the third quarter that ended September 30, 2022, down 55% year-over-year. Moreover, its net loss came in at $544.64 million, compared to a net income of $405.34 million in the year-ago period. Additionally, its loss per share came in at $2.43, compared to an EPS of $1.62 in the year-ago period.
COIN's revenue is expected to decrease 2.4% year-over-year to $830,000 for the quarter ending December 2022. Its EPS is expected to remain negative in 2022. The stock has lost 85.2% over the past year to close the last trading session at $35.17.
COIN has an overall F rating, equating to a Strong Sell in our POWR Ratings system. It has an F grade for Growth, Stability, and Sentiment and a D for Value, Momentum, and Quality.
COIN is ranked last in the Software - Application industry. Get all COIN's ratings here.
CRM shares were trading at $129.23 per share on Tuesday afternoon, up $0.22 (+0.17%). Year-to-date, CRM has declined -49.15%, versus a -18.66% rise in the benchmark S&P 500 index during the same period.
About the Author: RashmiKumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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