It’s hard to tell when the pain that tech companies are facing will subside until we have more clarity on where rates are headed. Regardless, it’s encouraging that big tech stocks have regained leadership. Even in the face of the regional banking turmoil, tech stocks have helped lift the S&P 500 (SPX) over the last few weeks.
Therefore, in this piece, we’ll use TipRanks’ Comparison Tool to analyze three high-quality tech stocks with Strong Buy consensus ratings from analysts. With solid upside potential ahead for each stock, they’re worth looking into.
Block is a fallen fintech innovator headed by the great Jack Dorsey. It’s been a devastating collapse for the firm formerly known as Square, which is down around 76% from its peak. More recently, the stock fell under pressure at the hands of a short report issued by Hindenburg.
The allegations in Hindenburg’s report are serious (accusing SQ of fraudulent activities), and while Block fired back quickly, it may still be too early to draw any conclusions. It’s just another cause for concern for Block investors who’ve been on the chopping block of late. However, despite the new pressures, I remain bullish.
Unlike its tech peers, Block can’t seem to catch a break this year. As shares turn lower again as investors digest the short report, the fintech innovator could run into no man’s land. Indeed, it’s hard to factor a short report into one’s valuation without conclusive evidence. It isn’t easy to tell what’s true and what’s exaggerated.
Hindenburg is no slouch. You do not want the well-known firm targeting a company you own shares in, especially if there’s already chaos in the rearview mirror. That said, such a report should be taken with a grain of salt.
As a part of the report, Hindenburg alleges that 40%-75% of Cash App accounts are fake or fraudulent. If the allegations are true, Block stock could easily crumble to multi-year lows.
Fortunately, many analysts aren’t buying the Hindenburg allegations. Bank of America (NYSE:BAC) and Citigroup (NYSE:C) are just some of the big banks sticking with their Buy recommendations. They’re siding with Jack Dorsey, who’s committed to fighting off Hindenburg.
What is the Price Target for SQ Stock?
The analyst community has a Strong Buy on Block, with 25 Buys and five Holds. The average SQ stock price target of $96.96 implies 42% upside potential.
ServiceNow is up an impressive 22% year-to-date, thanks partly to the broader bounce-back in high-multiple tech. Shares were also dealt a nice upgrade this week, with Baird’s Rob Oliver hiking his price target to $548 from $475 over the resiliency of ServiceNow’s end markets and the strength of secular tailwinds. I’m also bullish on NOW stock as it looks to prove doubters wrong in a period of economic sluggishness.
Indeed, it’s easy to forget about secular tailwinds when everyone fears a recession and the headwinds it will bring. High-multiple tech stocks have been feeling the build-up to the recession for quite some time. Eventually, the tides will turn as investors take notice of the longer-term tailwinds on the other side of the shorter-lived headwinds.
With corporations cutting back on IT spending budgets, it’s natural to think ServiceNow will be one firm to get dinged. Still, ServiceNow offers more of a critical service that adds value. Such a service may not make sense to cut as firms look to operate in a “lean” fashion. Oliver views ServiceNow’s offering as “less discretionary.” I think he’s right on the money.
Only time will tell how ServiceNow and other SaaS (Software-as-a-Service) firms will hold up as the economic tides go out. Shares have climbed higher in recent months, now up around 40% off their lows.
At 13.2 times price-to-sales, NOW stock is pricier than the software industry average of about 10 times, but it may be worth the premium if it can prove its resilience through harsh times.
What is the Price Target for NOW Stock?
ServiceNow sports a Strong Buy consensus from analysts, with 24 Buys and only one Hold. The average NOW stock price target of $519.42 implies a modest 9.9% gain from here.
CrowdStrike is a cybersecurity software developer down 52% from its 2021 peak. It’s been a painful fall, but if there’s a “resilient” software category, it’s cybersecurity. Hackers and cyber threats don’t magically disappear when times get tough. As such, I expect CrowdStrike can make it through a recession without taking too big a hit to the chin. I am bullish.
Layoffs and cost cuts could continue sweeping through the economy as firms prepare for a recession. Still, don’t expect demand for CrowdStrike’s Falcon cloud-based solution to sink. If anything, demand could strengthen as the firm looks to increase market share. CrowdStrike has also been making small deals, many of which stand to add to its mighty arsenal.
Most recently, CrowdStrike invested in artificial intelligence (AI) email security firm Abnormal Security. Undoubtedly, AI has been the tech trend of the year, and breach prevention is one market that stands to benefit by leaps and bounds from continued AI advancements.
At 13.4 times sales, CRWD stock trades at a discount to the IT services and consulting industry average of 19.6 times. At these depths, analysts are big fans of the stock.
What is the Price Target for CRWD Stock?
Analysts have a Strong Buy on CrowdStrike, with 29 Buys and four Holds. The average CRWD stock price target of $164.33 suggests 28.6% upside potential in the cards over the year ahead.
Conclusion
Investors must be ready to roll with the punches as a recession is likely to occur in the upcoming quarters. Nonetheless, the following three tech plays still have analysts’ confidence and could help investors see gains in a tough year. Of the three stocks above, analysts are most bullish on SQ.
