In this article, we discuss 10 beaten-down tech stocks to buy today for long-term gains. If you want to see more stocks in this selection, click 5 Beaten-Down Tech Stocks to Buy Today for Long-Term Gains.
Many market experts believe that beaten tech stocks have nowhere to go but up. The broad market selloff in the technology space impacted even the market leaders, and share prices eroded significantly, as did the valuations and earnings. The tech-focused NASDAQ 100 is down 24% year-to-date as of June 9, and the Dow Jones U.S. Technology Index also ran red and shed prominent value so far this year.
The technology sector was considered to be widely overvalued at its peak in 2021, and many experts thought that it was in a bubble, which would pop much like the dot-com fiasco in the late 1990s. As of late May, CNBC reported that the biggest tech firms lost more than $1 trillion in value during three trading sessions only. The tightening monetary policy has impacted the growth-heavy tech names notably.
UBS CEO Ralph Hamers said in an interview with CNBC at the World Economic Forum that technology-based business models are the ‘real’ models, considering the increasing digitization of the world. He believes that technology has altered the face of retail, finance, and most sectors remarkably, and moving forward, it will continue to be a huge part of the economy. He reiterated that the current tech selloff is unlike the dot-com bubble, because most businesses are real, stable, and integrated in the economy, rather than just ideas sold on paper.
Many investors realize that buying beaten-down tech stocks on a bargain for long-term gains is a smart strategy. Some of the most notable tech names that have stumbled year-to-date include Amazon.com, Inc. (NASDAQ:AMZN), Coinbase Global, Inc. (NASDAQ:COIN), and Netflix, Inc. (NASDAQ:NFLX).
Photo by Adam Nowakowski on Unsplash
Our Methodology
We selected the most prominent tech stocks that have posted significant year-to-date share price declines as of June 8 for this list. These companies have solid market positioning and robust balance sheets. We have mentioned the analyst ratings and Q1 2022 hedge fund sentiment around the holdings to provide better context to potential investors.
Beaten-Down Tech Stocks to Buy Today for Long-Term Gains
10. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 271
YTD Decline in Share Price as of June 8: 28.91%
Amazon.com, Inc. (NASDAQ:AMZN) is one of the Big Five American tech giants that offers expertise in e-commerce, artificial intelligence, cloud computing, and digital streaming. The company’s scalability, worldwide influence, fortress balance sheet, and ability to sustain market volatility makes it one of the top beaten-down tech stocks to consider for long-term gains.
On June 7, DA Davidson analyst Tom Forte maintained his Buy rating on Amazon.com, Inc. (NASDAQ:AMZN) and assigned a price target of $156.25 on a split-adjusted basis. As per the analyst, the stock split does not alter the fundamentals for Amazon.com, Inc. (NASDAQ:AMZN), although it could result in a positive short-term effect on the shares. He added that Amazon.com, Inc. (NASDAQ:AMZN)’s largest challenge remains the slow growth in its mature e-commerce segment, but the positive catalysts include its high-margin cloud computing and advertising businesses that are still “doing very well”.
According to Insider Monkey’s Q1 data, 271 hedge funds were bullish on Amazon.com, Inc. (NASDAQ:AMZN), compared to 279 funds in the prior quarter. Ken Fisher’s Fisher Asset Management is one of the leading stakeholders of the company, with 2.3 million shares worth $7.70 billion.
Here is what Miller Value Partners Opportunity Equity has to say about Amazon.com, Inc. (NASDAQ:AMZN) in its Q1 2022 investor letter:
“For frame of reference, Amazon (NASDAQ:AMZN) bottomed at the same valuation in the financial crisis (side note: Amazon bottomed at 4x EV/GP after the tech bubble burst)! So there’s historical precedent for the lows being in. We will see whether that holds true this time. Regardless, we think there’s significant upside over a 5-year time horizon. The one other topic I want to briefly address is our volatility. We hope to write something about the topic in more depth in the future, but we want our clients and prospective investors to understand our views on it. We think that volatility is significantly misunderstood. We believe it creates opportunities from which we can profit.”
9. Affirm Holdings, Inc. (NASDAQ:AFRM)
Number of Hedge Fund Holders: 29
YTD Decline in Share Price as of June 8: 75.56%
Affirm Holdings, Inc. (NASDAQ:AFRM) is a California-based company operating a platform for digital commerce in the United States and Canada, offering point-of-sale payment solutions for consumers, merchant commerce solutions, and a consumer-centric application. As of June 8, the shares have dropped 75.56% year-to-date. The company’s business model allows consumers and merchants to participate in the economy amid times of crisis by offering installment loans, which makes it a notable recession play and a stock with long-term feasibility. Affirm Holdings, Inc. (NASDAQ:AFRM)’s financial metrics also seem to be on the rise as of Q1 2022, as the EPS and revenue exceeded Street forecasts.
On June 7, after Apple officially launched its “Apple Pay Later” offering, Morgan Stanley analyst James Faucette observed that while Apple’s entry does decidedly bring competition to the space, he continues to like Affirm Holdings, Inc. (NASDAQ:AFRM)’s competitive positioning. As per the analyst, the firm provides a larger set of offerings and in his opinion, the long-term trajectory of BNPL providers remains the same. He maintained an Overweight rating and an $80 price target on Affirm Holdings, Inc. (NASDAQ:AFRM) shares.
According to Insider Monkey’s first quarter data, 29 hedge funds were bullish on Affirm Holdings, Inc. (NASDAQ:AFRM), down from 41 funds in the prior quarter. Colin Moran’s Abdiel Capital Advisors is one of the leading shareholders of the company, with 1.6 million shares worth over $78 million.
In addition to Amazon.com, Inc. (NASDAQ:AMZN), Coinbase Global, Inc. (NASDAQ:COIN), and Netflix, Inc. (NASDAQ:NFLX), Affirm Holdings, Inc. (NASDAQ:AFRM) is one of the tech stocks to buy on the dip for long-term gains.
Here is what Bireme Capital has to say about Affirm Holdings, Inc. (NASDAQ:AFRM) in its Q4 2021 investor letter:
“We opened a more idiosyncratic short position in a company called Affirm (AFRM) in Q4.
Affirm is a “Buy Now, Pay Later” (BNPL) company founded by former PayPal CTO and cofounder Max Levchin. They provide installment loans to consumers, partnering with retail companies looking to drive higher sales. They have two primary products: a zero-fee installment loan for consumers with the best credit scores, and a more traditional product with 20%+ interest rates for subprime borrowers. Their stated plan is to disrupt the credit industry with more transparent, lower-fee loans.
At a roughly $28b market cap at the start of 2022, AFRM stock was priced at more than 20x trailing sales, a steep price for a money-losing lender. While their early lead in online BNPL transactions and partnerships with fast-growing retailers like Peloton has fueled significant historical growth, a wave of competition has arrived.”
8. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 102
YTD Decline in Share Price as of June 8: 38.13%
NVIDIA Corporation (NASDAQ:NVDA) is a California-based company that specializes in computer software, cloud computing, semiconductors, artificial intelligence, GPUs, graphics cards, consumer electronics, video games, and computer hardware. The stock has tumbled over 38% year-to-date as of June 8, however, as it is one of the biggest contenders in the metaverse, it remains one of the most prominent beaten-down tech stocks to watch for long-term gains. The company also posted above consensus earnings and revenue for Q1 2022.
On May 31, after Los Alamos National Laboratory disclosed a next-gen supercomputer called “Venado”, Wells Fargo analyst Aaron Rakers highlighted the announcement as “another massive next-gen supercomputer deployment” to use NVIDIA Corporation (NASDAQ:NVDA)’s upcoming Arm-based Grace Superchip CPUs along with its Grace Hopper Superchips. The analyst reaffirmed an Overweight rating and a $250 price target on NVIDIA Corporation (NASDAQ:NVDA) stock.
According to Insider Monkey’s data, NVIDIA Corporation (NASDAQ:NVDA) was part of 102 hedge fund portfolios at the end of Q1 2022, compared to 110 funds in the earlier quarter. Brian Ashford-Russell and Tim Woolley’s Polar Capital is one of the leading shareholders of the company, with about 1.70 million shares worth $462 million.
Here is what RiverPark Long/Short Opportunity Fund has to say about NVIDIA Corporation (NASDAQ:NVDA) in its Q1 2022 investor letter:
“Nvidia is the leading designer of graphics processing chips (commonly known as GPU’s- graphics processing units), required for powerful computer processing. Over the past 20 years, the company has evolved through innovation and adaptation from a predominantly gaming- focused chip vendor to one of the largest semiconductor/software vendors in the world, dominating the core secular growth markets of gaming, data centers and professional visualization. Over the past decade, the company has grown revenue at a compound annual rate of over 20% while expanding operating margins and, through its asset light business model, producing ever increasing amounts of free cash flow. For 2021 the company generated 61% revenue growth to $27 billion, expanded its EBITDA margins to over 44% and generated over $8 billion of free cash flow. Over the past five years, the company has generated a cumulative $23 billion of FCF after cumulative capital expenditures of less than $4 billion.
We expect future growth to remain robust as NVDA chips and software are critical to many of the core technologies being adopted globally, including cloud computing, virtual reality and advanced artificial intelligence. As with NFLX, we took advantage of the over 40% recent drop in the company’s shares over the last several months to initiate a small position.”
7. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 109
YTD Decline in Share Price as of June 8: 66.03%
Netflix, Inc. (NASDAQ:NFLX) was incorporated in 1997 and is headquartered in Los Gatos, California. The company provides entertainment and digital streaming services. As of June 8, the stock has declined over 66% year-to-date. However, Netflix, Inc. (NASDAQ:NFLX) remains one of the biggest players in the digital streaming and original production space.
Guggenheim analyst Michael Morris on June 2 lowered the price target on Netflix, Inc. (NASDAQ:NFLX) to $265 from $350 and reaffirmed a Buy rating on the shares. Assuming a domestic launch in Q1 2023 and a global rollout over the next two years, the analyst has incorporated an ad-supported tier to his multi-year projection for Netflix, Inc. (NASDAQ:NFLX) and now sees total company revenue reaching $75 billion by 2030, he told investors. This lifts his long-term revenue outlook but also increases the short-term cost view, the analyst noted.
Among the hedge funds tracked by Insider Monkey, 109 funds reported owning stakes in Netflix, Inc. (NASDAQ:NFLX) at the end of March 2022, compared to 113 funds in the earlier quarter. Bill Ackman’s Pershing Square is one of the biggest stakeholders of the company, with more than 3 million shares worth $1.16 billion.
Here is what ClearBridge Investments has to say about Netflix, Inc. (NASDAQ:NFLX) in its Q1 2022 investor letter:
“After being a prime beneficiary of increased viewing patterns during the stay-at-home period of COVID-19, Netflix is recalibrating what a normal growth trajectory will look like as global economies fully reopen. The stock fell sharply after the company modestly reduced its net subscriber additions for the current quarter, calling into question its ability to continue to deliver double-digit subscriber growth.
We believe one of our edges as active managers is our long-term orientation and willingness to be both early and patient with additions to the portfolio. With Netflix, we remain convinced that our thesis for owning the stock is intact. While some fear the U.S. streaming market is becoming saturated, Netflix’s penetration of global broadband homes is still less than 50%, a figure that doesn’t even include the opportunity to attract more mobile-only smartphone users.”
6. EPAM Systems, Inc. (NYSE:EPAM)
Number of Hedge Fund Holders: 38
YTD Decline in Share Price as of June 8: 48.13%
EPAM Systems, Inc. (NYSE:EPAM) is a Pennsylvania-based company that specializes in digital platform engineering and software development services, catering to customers worldwide. On May 5, the company posted earnings per share of $2.49 and a revenue of $1.17 billion, above consensus estimates by $0.72 and $112.24 million, respectively. Despite solid Q1 results, the stock has dropped over 48% year-to-date as of June 8.
On June 6, Wedbush analyst Moshe Katri raised the price target on EPAM Systems, Inc. (NYSE:EPAM) to $400 from $380 and maintained an Outperform rating on the shares. The company should continue benefiting from the moderation in disruption caused by the Russian/Ukraine war, notably lower employee relocation and recruitment costs, solid demand for digital/SMAC based services, and higher bill rates, the analyst told investors in a bullish thesis.
In the first quarter of 2022, EPAM Systems, Inc. (NYSE:EPAM) was part of 38 public hedge fund portfolios, with collective stakes worth $669 million, compared to the same number of funds in the prior quarter, holding stakes in the company valued at $503 million. Cliff Asness’ AQR Capital Management is a prominent position holder in EPAM Systems, Inc. (NYSE:EPAM), with 326,028 shares worth $96.70 million.
Like Amazon.com, Inc. (NASDAQ:AMZN), Coinbase Global, Inc. (NASDAQ:COIN), and Netflix, Inc. (NASDAQ:NFLX), elite investors are monitoring EPAM Systems, Inc. (NYSE:EPAM) for potential long-term gains.
Here is what Baron Global Advantage Fund has to say about EPAM Systems, Inc. (NYSE:EPAM) in its Q1 2022 investor letter:
“EPAM Systems, Inc. is a leader in software-based digital platform transformation and engineering services to business customers. The stock fell 56% during the quarter as a result of a potential business disruption from Russia’s military invasion of Ukraine, where many of EPAM’s employees are based. EPAM is a U.S.-based company headquartered in Newtown, Pennsylvania with 53,000 employees, 24% of whom are based in Ukraine, 17% are based in Russia and 18% in Belarus. On February 17, 2022, the company reported strong financial results for calendar year 2021, releasing financial guidance for calendar year 2022 above expectations. On February 28, 2022, the company withdrew its guidance due to Russia’s invasion of Ukraine. The magnitude and duration of the business disruption is unknown at this time. We believe EPAM is a highly resilient organization that can adapt to operational challenges by moving people and workflows to different regions — the company has further updated via an 8-K filing on April 7 that it has begun the process of exiting its operations in Russia with already a “significant number of employees who have been relocated,” while the company is also accelerating hiring in other regions. Early research from Gartner suggests that after years of delivering high-quality products, EPAM has built solid, trustful relationships with its clients, who are responding with a high level of support for the company. EPAM has demonstrated strong execution and the ability to successfully manage through prior crises. Still, the range of outcomes is extremely wide, and we have reduced our position as a result. We continue to monitor the situation closely and reassess it as facts emerge.”
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Disclosure: None. 10 Beaten-Down Tech Stocks to Buy Today for Long-Term Gains is originally published on Insider Monkey.
