Although many technology stocks have tumbled in price since the beginning of the year on investors’ concerns over expected interest rate hikes, 2022 is expected to be a year of normalization for the technology sector, with an acceleration of digitization across the global economy. According to Forrester's U.S. Tech Market Outlook, U.S. tech spending is expected to expand by 6.7% in 2022.
Furthermore, an increasing dependency on cloud services and the growing popularity of wireless infrastructure should boost the industry’s growth. Investors’ interest in tech stocks is evident in the Technology Select Sector SPDR Fund’s (XLK) 23.6% gains over the past year.
Given this backdrop, we think it could be wise to bet on quality tech stocks Intuit Inc. (INTU), Constellation Software Inc. (CNSWF), and Veeva Systems Inc. (VEEV), which are currently trading below their 52-weeks highs.
Intuit Inc. (INTU)
Mountain View, Calif.-based INTU is a global technology platform that provides financial management and compliance products and services in the United States, Canada, and internationally. The company operates in Small Business & Self-Employed; Consumer; Credit Karma; and ProConnect segments. Its professional tax offerings include Lacerte, ProSeries, ProFile, and ProConnect Tax Online.
This month, INTU announced its “Early Start” campaign, which is the U.S. and Canadian QuickBooks campaign. This integrated campaign is designed to demonstrate that small start-up businesses can manage critical business operations, thus helping them grow and succeed.
During its fiscal first quarter, ended Oct. 31, 2021, INTU’s total net revenue increased 51.7% year-over-year to $2.01 billion. The company’s operating income came in at $195 million. Its net income grew 15.2% from its year-ago value to $228 million. Also, the company’s EPS rose 9.3% from the prior-year quarter to $0.82.
INTU's revenue is expected to increase 27.4% year-over-year to $12.27 billion in its fiscal year 2022. Also, its EPS is expected to increase 20.1% in fiscal 2021 and 15.2% in fiscal 2022. The stock has gained 41.7% in price over the past year. It is currently trading 23.9% below its 52-week high of $716.86, which it hit on Nov.15, 2021.
INTU's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has an A grade for Quality and a B grade for Growth and Sentiment. We have also graded INTU for Value, Stability, and Momentum. Click here to access all INTU's ratings. INTU is ranked #22 of 166 stocks in the Software – Application industry.
Constellation Software Inc. (CNSWF)
Headquartered in Toronto, Canada, CNSWF is a global provider of market-leading software and services to several industries. The company operates through Public- Sector and Private-Sector segments. CNSWF serves government and government-related customers, as well as commercial customers.
In November 2021, CNSWF created a $200 million venture capital fund. The fund is meant to provide financing for start-up and rapidly growing vertical market software businesses, most of which will have been either incubated or identified by a sponsoring CNSWF business unit.
CNSWF’s revenue increased 29.5% year-over-year to $1.3 billion in the third quarter, ended Sept. 30, 2021. The company’s net income came in at $121 million, and its EPS came in at $5.04 for the period.
CNSWF’s consensus revenue is expected to be 1.42 billion, increasing 20.5% year-over-year for its fiscal period ending March 2022. The stock has gained 28.3% in price over the past year. It is trading 13.9% below its 52-week high of $1,919.99, which it hit on Jan. 3, 2022.
CNSWF's POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. Also, the stock has an A grade for Stability B grade for Quality.
In addition to the POWR Rating grades I have just highlighted, one can see CNSWF's ratings for Momentum, Value Sentiment, and Growth here. CNSWF is ranked #23 in the Software – Application industry.
Click here to check out our Software Industry Report
Veeva Systems Inc. (VEEV)
Incorporated in 2007, VEEV provides cloud-based software for the life sciences industry in North America, Europe, the Asia Pacific, the Middle East, Africa, and Latin America. The Pleasanton, Calif., company's solutions include cloud software, data, and business consulting. VEEV's industry cloud solutions for the life sciences industry are grouped into two product areas: Veeva Commercial Cloud and Veeva Vault.
This month, PharmaEssentia, a biotechnology company, has adopted VEEV's data cloud to support the launch of BESREMi, a new therapy for polycythemia vera (PV), a rare blood cancer. With the data cloud, VEEV could support PharmaEssentia with multiple commercial analytics and operations workflows so the company can better educate key HCPs on its important new treatment option.
For its fiscal third quarter, ended Oct. 31, 2021, VEEV's total revenues increased 26.1% year-over-year to $476.11 million. The company's gross profit grew 26.2% from its year-ago value to $346.55 million. Its operating income rose 31% from the prior-year quarter to $132.71 million. Also, the company's net income increased 9.2% year-over-year to $105.87 million.
VEEV's revenue is expected to increase 26.1% year-over-year to $1.85 billion in its fiscal year 2022. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Its EPS is expected to increase 25.5% in fiscal 2021 and 8.1% in fiscal 2022. The stock is currently trading 36% below its 52-week high of $343.96, which it hit on August 5, 2021.
It is no surprise that VEEV has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has an A grade for Quality and a B grade for Sentiment and Growth.
Click here to see the additional POWR Ratings for VEEV (Value, Stability, and Momentum). The stock is ranked #23 of 87 in the Medical – Services industry.
INTU shares rose $7.03 (+1.29%) in premarket trading Thursday. Year-to-date, INTU has declined -15.12%, versus a -4.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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