There is an opportunity for investors to buy shares of companies that are shaping our future at cheap valuations because of the steep decline in technology stocks. As they are on track to win big from lucrative trends, Nvidia and Apple are two tech stocks worth buying.
Buying these two stocks now could help set up investors for long-term gains.
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The company’s fiscal first-quarter results, covering the three months ended May 1, were expected to give some good news for investors. Supply chain problems in China, as well as soft demand for its gaming chips in parts of Europe, caused the graphics specialist to deliver a subdued guidance.
The current quarter’s revenue is expected to be at the lower end of the guidance range. That’s down from $8.29 billion in Q1 and accounts for a $500 million top-line hit thanks to the loss of sales in Russia and China. The company would have easily cleared the mark of $8.54 billion in revenue had it not been for the macro factors discussed above.
It is worth noting that the company is on track to deliver impressive year-over-year revenue growth despite the challenges, despite the fact that the guidance is not confidence-inspiring. Its earnings are expected to grow at a 32% annual pace over the next five years.
A closer look at the company’s key growth hot spots shows why it is expected to clock such impressive growth. The data center business is turning out to be a major catalyst for the company. This segment accounted for 45% of the company’s top line in the most recent quarter, as revenue increased by 83%.
The demand for graphics processing units by hyperscale cloud customers led to the growth. The company is pushing the envelope to ensure its dominance in this fast-growing space, which is unsurprising as the management expects the data center momentum to continue in the long run.
According to the company, the new H 100 data center graphics card provides a big jump in performance over the existing A 100 chip and should be ideal for tackling intensive artificial intelligence (ai) workload. Leading server makers and hyperscale customers are being worked on to qualify and ramp H 100. The company will double down on its data center opportunity with the Grace data center central processing unit that is set to be launched in the first half of 2023.
Several server manufacturers will be using Grace, according to Nvidia. The market that has historically been dominated by its rivals is set to get a solid entry into the market by Nvidia.
As the data center is just one of the many catalysts for the company, it wouldn’t be surprising to see the company sustain its impressive growth in the years to come. That’s why investors looking to buy a hot tech stock should take a closer look at the company, as it is trading at 48 times earnings, which is lower than its five-year average multiple of 58.
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Apple stock is trading at 23 times earnings this year, compared to 31 last year. Apple is a good stock to buy because of its cheap valuation. There are a few things that I am excited about.
The arrival of 5G smartphones has turned out to be a huge growth driver for Apple, with the company controlling a nice chunk of the fast-growing market and also enjoying robust pricing power. With some expecting sales of 5G smartphones to grow at an annual rate of 124%) through 2025, Apple could witness healthy iPhone sales growth for the next few years
According to reports, Apple is looking to tap into emerging tech trends. Reports indicate that the company is close to launching a headset. The company is expected to launch its headset sometime next year, and that could open the gates for Apple to take advantage of a market that is expected to grow substantially in the long run.
Apple’s services business has grown very fast. In the second quarter of fiscal 2022, the company’s top-line growth was 9% but its services revenue was up 17%. Apple’s services business had a gross margin of 72.6% in the last fiscal quarter, compared to an overall gross margin of 43.7%.
Services revenue currently accounts for 18% of the company’s total revenue, but could become much bigger as the company grows profitable offerings.
There are a number of reasons why Apple is worth buying now.
There is no position in any of the stocks mentioned by the man. There are positions in and recommendations for Apple by The Motley Fool. The long March 2023 $120 calls on Apple and the short March 2023 $130 calls on Apple are recommended by The Motley Fool. There is a disclosure policy for The Motley Fool.
No one has a position in any of the stocks mentioned. The Fool has positions in both Apple and Nvidia. The long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple are both recommended by The Motley Fool. The disclosure policy of The Motley Fool is outlined.