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Investors are cautiously looking for opportunities in the tech sector as consumer demand slows. Better than expected CPI numbers gave technology stocks a huge boost last week with the Nasdaq now up +4% over the last month, as Wall Street bets the Fed can ease up on its inflation fight.
Higher rates have an ill effect on tech growth. Most technology stocks, including big tech stocks, are often valuable for their growth prospects but this may continue to fade in the near term.
With that being said, let’s take a look at two tech stocks that can buck this trend and should add valuable diversification to stock portfolios.
Image Source: Zacks Investment Research
Dropbox DBX
Dropbox currently sports a Zacks Rank #2 (Buy), as it earnings estimates rise even as giants like Alphabet GOOGL see their earnings estimates decline.
Dropbox’s platform enables users to store digital content including files, photos, videos, songs, and spreadsheets. DBX has struggled somewhat since its 2018 IPO. But past performance doesn’t determine future success.
DBX earnings are now projected to rise 2% in 2022 and climb another 10% in FY23 at $1.73 per share, based on Zacks estimates. Top line growth is expected as well, with sales set to jump 7% this year and another 6% in FY23 to $2.46 billion.
DBX is down -10% YTD to outperform the S&P 500’s -18% and the the Nasdaq’s -28%. DBX is now down -22% since its IPO, which has underperformed the benchmark and the Nasdaq.
Image Source: Zacks Investment Research
Trading around $22 per share, investors have the opportunity to get in on DBX shares closer to its IPO range of $16-18 a share. At its current levels, DBX trades at 14.1X forward earnings. This is below the industry average P/E of 20.3X. Even better, this is well below its high of 1,835.2X and the median of 36.5X since going public.
Now may be a good opportunity to buy DBX shares with the Average Zacks Price Target suggesting 26% upside from current levels and consolidated digital storage becoming more important with the growth of cloud services.
Jabil JBL
Another name to consider in the tech sector is Jabil Inc. The company offers diversity to investors’ portfolios as one of the largest global suppliers of electronic manufacturing services. Jabil provides electronics design, production, product management, and after-market services to customers catering to aerospace, automotive, computing, consumer, defense, industrial, medical, networking, storage, telecom, and beyond.
JBL currently sports a Zacks Rank #1 (Strong Buy) with earnings estimates on the rise for FY23 and FY24. Jabil earnings are projected to be up 7% in the company’s fiscal 2023 and rise another 6% in FY24 at $8.69 per share. Sales are expected to climb 3% in FY23 and rise another 3% in FY24 to $35.54 billion.