The impressive start to the year may or may not keep going strong as a recession looks to finally land. Undoubtedly, the Fed’s rapid-fire rate hikes have helped wipe out a considerable amount of value in the technology sector last year, with some of the most impressive tech stocks suffering historic declines.
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Though the first quarter of relief seems to have cooled off a bit, analysts still expect great things from a number of high-tech innovators.
Therefore, in this piece, we’ll look at three stocks — NVDA, CRWD, and SQ –with Strong Buy consensus ratings that analysts remain upbeat on. Let’s use TipRank’s Comparison Tool to compare the names.
Nvidia (NASDAQ:NVDA)
It’s been off to the races for shares of Nvidia over the past six months, with the stock now up a staggering 160% from trough to peak. Undoubtedly, artificial intelligence (AI) enthusiasm has spread to Nvidia stock in a big way. Many Wall Street analysts have upgraded the name, citing AI as a primary reason. It’s hard not to get excited about Nvidia’s potential as it looks to play a critical role in the early innings of the AI boom.
With Nvidia stock getting closer to all-time highs, it’s tempting to chase the name alongside many other investors and analysts. Though the valuation has really swollen in recent months, I remain bullish.
As the AI race accelerates, many tech firms (large and small) will want a piece of what AI has to offer. With that, demand for next-generation chips could stay hotter for longer.
Undoubtedly, Nvidia is no longer a gaming-centric play; it’s an AI-centric one that also has considerable exposure to another emerging tech field — The Metaverse. Jefferies strategists referred to Nvidia as a “picks and shovels” AI play. Nvidia will be there to equip firms with the tools they need to participate in what many consider to be the fourth industrial revolution. I believe Nvidia is more than just a “picks and shovels” play. It has a lot of software innovation brewing behind the scenes as well.
Nvidia seems to be positioning itself to disrupt various software innovations with its own AI tools. Nvidia Picasso is one example of an impressive AI-powered service that could put a handful of software innovators on notice.
At a 166 times trailing price-to-earnings multiple, Nvidia stock trades at a massive premium to the semiconductor industry average of 66.7 times. This price tag can be justified if you think AI will help drive profound change over the next five years.
What is the Price Target for NVDA Stock?
Nvidia is a Strong Buy, with 30 Buys, seven Holds, and one Sell. The average NVDA stock price target of $286.94 implies upside potential of 1.8%.
CrowdStrike (NASDAQ:CRWD)
CrowdStrike is a cybersecurity software firm that’s in a grueling bear market right now. Shares plunged around 67% from peak to trough before recovering modestly. Today, the stock is down around 58% from its peak but up 27% from the bottom.
During the 2021 rally, CRWD’s valuation got out of hand. After a violent plunge, I view CrowdStrike as one of the more compelling GARP (growth at a reasonable price) plays. Given this, I’m staying bullish, but I do acknowledge that the roller-coaster ride could continue.
Best-in-class cybersecurity solutions, like those offered by CrowdStrike, stand out to me as more defensive than other cloud-based software service providers. Even when the economy heads south in a hurry, it’s typically not a good move to slash your cybersecurity budget, given how much is at risk. Not only considerable sums of cash and trade secrets, but a reputation with customers is also on the line.
CrowdStrike also has a lot to gain from advancements in AI. Its Falcon platform (which offers security as a service) harnesses AI’s power to help bolster its threat detection capabilities. According to Frost & Sullivan, Crowdstrike “leads the industry with regard to the application of artificial intelligence/machine learning.”
I don’t believe Crowd’s leadership position is being fully appreciated by the market. Falcon’s AI powers aren’t as easy to showcase to everyday consumers as the likes of a ChatGPT. Still, that doesn’t mean investors should be less excited about its potential. Like it or not, it’s at the intersection between two of the hottest areas in tech — AI and cybersecurity.
That makes the name worth careful consideration anytime it takes a dive.
What is the Price Target for CRWD Stock?
CrowdStrike is a Strong Buy, with 30 Buys and three Holds. The average CRWD stock price target of $167.60 implies 43.5% upside potential.
Block (NYSE:SQ)
Block is a fintech innovator that’s lost its way in recent years, with shares falling by as much as 82%. More recently, the firm came under fire from a Hindenburg short report, which claimed that anywhere from 40%-75% of Cash App accounts were fake, fraudulent, or duplicative. A number of analysts quickly came to Block’s defense.
Hidenburg’s report may lack the smoking gun analysts seek, but it certainly was salt in the wounds of a firm moving through some very challenging times. Nonetheless, despite the historically depressed multiple, I am neutral on the stock over competitive concerns and macro headwinds.
With Block stock moving lower again, shares look compelling for those who think the firm can build on its impressive ecosystem consisting of Cash App and Square. That said, I’m concerned that Block can’t keep its customer base from jumping ship as competitive pressures increase with time.
For instance, Apple’s (NASDAQ:AAPL) recent push into savings accounts could beckon depositors with its competitive 4.15% rate. The further Apple pushes into fintech, the more the incumbents have to lose. Block stands out to me as one fintech firm with a lot to lose.
What is the Price Target for SQ Stock?
Block stock is also a Strong Buy, with 23 Buys and six Holds. The average SQ stock price target of $96.56 implies 67.2% upside potential.
Conclusion
Analysts are bullish on the three Strong-Buy-rated tech stocks above. However, between the three, analysts expect the most upside from Block over the year ahead.
