So far, this year has been quite challenging for the U.S. technology industry, due to supply-chain disruptions, subdued international demand, geopolitical tensions, cost inflation, and rising interest rates. In these adverse operating conditions, these mega-cap tech players are trending the most among investors: Microsoft Corporation (NASDAQ: MSFT), Alphabet Inc. (NASDAQ: GOOGL), and Broadcom Inc. (NASDAQ: AVGO).
It is worth mentioning here that the Dow Jones U.S. Technology Index has declined 22.2% since the beginning of 2022. Another tech-heavy index, the NASDAQ 100 Technology Sector Index is down 26.6%, while its volumes have surged 146.4% year-to-date. A decline in prices and high trading volumes suggest that tech companies are still hot picks among investors.
According to a Statista report, revenues of the U.S. software market are forecast to increase by 5.25% CAGR, and those of the IT Services market could rise by 6.38% CAGR by 2027. For 2022, software and IT Services revenues are forecast to be $297.10 billion and $411.8 billion, respectively.
A consolidated chart of the abovementioned technology companies has been prepared using TipRank’s Stock Comparison tool.
Microsoft Corporation (NASDAQ: MSFT)
In addition to the macroeconomic headwinds discussed above, lower demand for personal computers and unfavorable movements in foreign currencies have bitten into the profits of this tech giant lately. Shares of this $2.1-trillion software company have fallen 16.1% since the beginning of 2022. However, volumes have soared 78.5% year-to-date.
For Fiscal 2023 (ending June 2023), the company anticipates revenues to benefit from the strength in commercial business and the company’s focus on expanding its market share. It anticipates revenues and operating income to expand in the double-digit range in the year.
On TipRanks, the company has a Strong Buy consensus rating based on 29 Buys. MSFT’s average price target of $331 represents 17.90% upside potential from the current level. Also, the investor sentiment on the stock is Positive, as the number of portfolios having investments in MSFT has increased 1.2% in the last 30 days.
Alphabet Inc. (NASDAQ: GOOGL)
This $1.52-trillion company is the holding company of interactive media behemoth Google. It suffered from high costs and expenses in the second quarter of 2022, which impacted its operating margin. In addition to these headwinds, uncertain economic conditions, domestically and internationally, have pressured the company since the beginning of 2022. Alphabet stock has declined 19.8% year-to-date, while its volumes have grown 105.9% so far this year.
In the quarters ahead, the company believes that its investments in computing and artificial intelligence, and its effective capital allocation policy will be advantageous. This tech giant is in the good books of analysts and commands a Strong Buy consensus rating based on 28 Buys and two Holds. GOOGL’s average price forecast of $141.28 suggests 21.46% upside potential.
On TipRanks, investors are Very Positive about the company’s prospects, as portfolios holding GOOGL have increased 3.6% in the last 30 days.
Broadcom Inc. (NASDAQ: AVGO)
Shares of this $216.3-billion semiconductor company have declined 19.3% so far this year. Uncertain economic conditions, supply-chain issues, labor problems, and cost inflation have deeply impacted the company’s operations. However, the company’s top line benefits from technological advancements, strength in server storage, and its networking businesses. Further, rewards to shareholders increase its investment appeal. The stock’s volumes have increased 53.4% year-to-date.
On TipRanks, analysts are unanimously optimistic about Broadcom, which has a Strong Buy consensus rating based on 12 Buys. AVGO’s average price target of $698.64 reflects 30.47% upside potential from the current level.
The investor sentiment is Very Positive about AVGO. In the last 30 days, portfolios holding AVGO stock have increased 3.5%.
Investors’ Liking for MSFT, GOOGL & AVGO Stocks Is Justified
Microsoft, Alphabet, and Broadcom are well-rooted companies in the technology industry, which is evident from the price trajectory visible in the chart below. Also, these companies have Smart Scores within the range of 8 to 10, which suggests their potential to outperform the broader market.
Investors seem to have complete faith in the growth prospects of MSFT, GOOGL, and AVGO, as they have skillfully used the low stock prices as an opportunity to gain exposure to these tech giants.
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