2 Smart Tech Stocks to Buy in 2023 and Beyond After the brutal sell-off last year due to the Fed's aggressive interest rate hikes, the tech industry is well-positioned for growth in the long term due to the solid demand...
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After the brutal sell-off last year due to the Fed's aggressive interest rate hikes, the tech industry is well-positioned for growth in the long term due to the solid demand for smart tech solutions. Therefore, it could be wise for investors to buy fundamentally strong tech stocks Microsoft (MSFT) and Canon (CAJ). Keep reading.
The tech industry bore the worst sell-off induced by the Fed's aggressive interest rate hikes last year, with the tech-heavy Nasdaq losing 23.6% over the past year. However, the Fed's seven interest rate hikes showed signs of inflation easing, with December's Consumer Price Index (CPI) showing a 6.5% rise in prices over the past year and a 0.1% decrease over the previous month.
Still, the headwinds of inflation, a tight jobs market, and fears of an economic slowdown are hovering. However, thanks to the high demand for digital solutions, the tech industry is well-positioned for growth. Rapid digitalization across industries is expected to keep investments in the tech space flowing.
According to Wedbush analyst Dan Ives, the tech sector would jump 20% in 2023. The information technology market is expected to grow at a CAGR of 7.9% to reach $11.96 trillion in 2027.
To that end, it could be wise for investors to buy fundamentally strong smart tech stocks Microsoft Corporation (MSFT) and Canon Inc. (CAJ), given their promising growth prospects.
Microsoft Corporation (MSFT)
MSFT develops, licenses, and supports software, services, devices, and solutions worldwide. The company operates in three segments: Productivity and Business Processes; Intelligent Cloud; and More Personal Computing.
On December 14, 2022, MSFT and Viasat, Inc. (VSAT) announced a new partnership to help deliver internet access to 10 million people around the globe, including 5 million across Africa.
MSFT's VP of Technology and Corporate Responsibility, Teresa Hutson, said, "Working with Viasat, we will use satellite to reach remote areas that previously have had few, if any, options for conventional connectivity. Together, we will be able to rapidly scale and expand Airband's reach, exploring a wider pipeline of projects and new countries where we haven't yet worked."
For the quarter that ended September 30, 2022, MSFT's total revenues increased 10.6% year-over-year to $50.12 billion. The company's operating income increased 6.3% from the prior-year period to $21.52 billion.
Its adjusted net income increased 2% year-over-year to $17.56 billion. Also, its adjusted EPS came in at $2.35, representing an increase of 3.5% year-over-year. In addition, its gross margin increased 9.5% year-over-year to $34.67 billion.
MSFT's EPS for the quarter ending March 31, 2023, is expected to increase 5.9% year-over-year to $2.35. Its revenue for the quarter that ended December 31, 2022, is expected to increase 2.8% year-over-year to $53.20 billion.
It has a commendable earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. The stock has fallen 1.1% over the past three months to close the last trading session at $235.81.
MSFT's POWR Ratings reflect solid prospects. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR ratings assess stocks by 118 different factors, each with its own weighting.
Within the Software - Business industry, it is ranked #9 out of 52 stocks. The company has a B grade for Stability, Sentiment, and Quality.
Click here to see the additional POWR Ratings of MSFT for Growth, Value, and Momentum.
Canon Inc. (CAJ)
Headquartered in Tokyo, Japan, CAJ manufactures and sells office multifunction devices, plain paper copying machines, laser and inkjet printers, cameras, diagnostic equipment, and lithography equipment. The company operates through four segments: Printing Business Unit; Imaging Business Unit; Medical Business Unit; and Industrial and Others Business Unit.
On October 31, 2022, CAJ announced a new sales and distribution partnership with DigiTech, a graphics equipment manufacturer. This working relationship is expected to provide both customer bases with evolving solutions to meet new and existing print space challenges.
CAJ's net sales for the fiscal third quarter (ended September 30, 2022) increased 19.5% year-over-year to ¥996.09 billion ($7.70 billion). The company's operating profit increased 38.7% year-over-year to ¥81.44 billion ($629.83 million).
Net income attributable to CAJ increased 9.7% year-over-year to ¥54.12 billion ($418.54 million). Additionally, net EPS attributable to CAJ came in at ¥52.88, representing a 12.2% increase from the prior-year quarter.
Analysts expect CAJ's EPS and revenue for the quarter that ended December 31, 2022, to increase 42.8% and 9.8% year-over-year to $0.66 and $9.09 billion, respectively. The stock has fallen 1.4% over the past month to close the last trading session at $21.88.
CAJ's strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. It is ranked #5 out of 43 stocks in the Technology - Hardware industry. In addition, it has a B grade for Value, Stability, and Quality.
We have also given CAJ grades for Growth, Momentum, and Sentiment. Get all CAJ ratings here.
MSFT shares fell $1.55 (-0.66%) in premarket trading Thursday. Year-to-date, MSFT has declined -2.44%, versus a 1.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research.With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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