The recent bear market has significantly reduced the attractiveness of most stocks. With many growth stocks down 75% or more from their highs, investors are increasingly turning to other investment avenues.
But this downturn could present an opportunity for one type of shareholder: long-term investors. These potential buyers will now be able to purchase stocks at deep discounts, and returns should increase dramatically once the market recovers. Here are three discounted tech stocks you can permanently add to your portfolio. microsoft (NASDAQ: MSFT), Axon Enterprise (NASDAQ: Axon)When zoom video communication (Nasdaq: ZM).
This software giant still has a lot to offer
Jake Larch (Microsoft): A bear market can not only unbalance a portfolio, but also reduce confidence in the stock market itself. After all, the essence of investing is to grow wealth, not watch it go down.
Therefore, it is important for long-term investors to remember bear markets. intention Final Make way for a new bull market. And when that happens, smart investors will benefit from buying or holding shares in great companies.That’s why I’m strong microsoft just now.
A lot of ink has been spilled to explain why Microsoft is such a great company. He boasts one of the top (and fastest growing) cloud businesses.Additionally, its productivity and personal computing segments include some of the most well-known and trusted applications across the software industry. Still, Microsoft’s stock is down 29% year-to-date.
MSFT PE ratio data by YCharts
In fact, from a valuation standpoint, Microsoft’s stock is trading near its lowest level in five years. With a current price/earnings ratio (P/E) of 24.9, Microsoft’s stock is closing in on his five-year low of 22.6, set in early 2019.
That said, it’s important to remember that a $5,000 investment back then is worth $11,835 today. Therefore, wA bear market is both scary and a great opportunity. For investors looking for endurance stocks, Microsoft is a name worth considering.
Focus on public safety and innovation
Justin Pope (Axon Enterprise): Law enforcement is one of the most fragmented public sectors. There are approximately 18,000 police departments across the United States. It’s also a tough job, where keeping citizens and police safe is paramount.
Any technology that can save lives is welcome. That’s where Axon Enterprise was built. Axon specializes in non-lethal technology starting with tasers, and is definitely known today for body cameras. It dominates the US law enforcement department and does business with approximately 17,000 departments nationwide.
I wouldn’t be surprised by the company’s growth, but it’s been pretty solid for some time now. Revenue has grown by an average of 26% annually over the past decade. But here’s how resilient the business is. Public spending is highly reliable and law enforcement budgets are typically immune to significant budget cuts. Additionally, the company is profitable, ultimately generating both positive free cash flow and net income.
AXON Revenue (TTM) data by YCharts
Given that it sells to most law enforcement agencies, you may be wondering where future growth will come from. The company is steadily adding new services, including cloud-based software that helps law enforcement organize and process evidence and operations more effectively.
Axon’s ability to get more from its customers is evident in its 119% net dollar retention rate, and its cloud software revenue grew 43% on average from 2017 to 2021, making it the fastest growing product. I was.
Axon is a fundamentally healthy company growing at a double-digit rate, and it’s the type of stock that investors want to buy in a bear market when they’re scared to sell. The stock has fallen 43% from its highs and is now trading at 8x price-to-sales (P/S), close to its 10-year average. It’s not a bargain-based valuation, but as Warren Buffett famously said, paying fair value for quality is better than getting cheap.
The once pandemic darling still has a bright future
Will Healy (zoom video communication): Zoom’s fortunes seem to be up and down with the pandemic. Prices soared to record highs as lockdown workers turned to the platform to do business. But as they began to return to the office, investors sold their shares.
Investors who bought $5,000 worth at the April 2019 IPO price of $36 still hold about $10,500 today. In fact, the stock is down more than 85% from his 2020 high, so it may offer little relief to long-term investors.
Despite that decline, remote work hasn’t gone away. In fact, it has become a permanent fixture and growth in many workplaces. A study by Upwork estimates that by 2025, 22% of his workforce will be working remotely, an increase of 87% compared to pre-pandemic levels. Datanyze claims Zoom has about 75% of the market, probably due to its low cost and ease of use.
In fact, the revenue level of $2.2 billion in the first half of fiscal year 2023 (ending July 31) increased by only 10%. This is well below fiscal 2022, when earnings increased his 55%. Enterprise customers, however, increased by 18% to over 204,000, spending an average of 20% more on the platform than a year ago. He also saw a 37% increase in the number of customers spending over $100,000 a year. Therefore, while small businesses don’t use the platform much, Zoom has become popular with high-revenue clients.
Yes, overall revenue growth has slowed, but operating expense growth remains high. That brings his first two quarters of fiscal 2023 earnings to his $159 million, down from his $545 million in the same period last year. Still, that profit allows the company to raise money as rising interest rates make capital more expensive. This should add to the appeal of the Zoom stock as it works to keep growth on track.
Additionally, the P/E fell to 23, close to an all-time low and well below its pandemic-era four-digit P/E. As companies increasingly turn to remote work and online meetings, investors may want to reconsider Zoom stock.
10 stocks I like better than Microsoft
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Jake Lerch has no positions in any of the stocks mentioned. Justin Pope has no positions in any of the stocks mentioned.Will Healy has a position at Zoom Video Communications. The Motley Fool has positions and endorsements at Axon Enterprise, Microsoft and Zoom Video Communications. The Motley Fool’s U.S. headquarters has a disclosure policy.
The views and opinions expressed herein are those of the authors and do not necessarily reflect those of Nasdaq, Inc.
