2 Nasdaq shares are not likely to crush the market to buy a fist right now

Technology stocks haven’t been a plentiful hunting ground for investors over the past year, as the Federal Reserve’s hawkish stance, global economic slowdown, and fears of an imminent recession have propelled companies in this once high-flying sector. But there are some names that have bucked the trend and have seen strong price gains lately.

shares Applied materials (Is that true 2.50%) And Check out Point Software Technologies (CHKP 1.81%) It has gained impressive momentum over the past three months. They exceeded their gains Nasdaq 100 A wonderful indicator during this period. Let’s take a look at the reasons why these two Nasdaq stocks are worth buying right now.

1. Applied materials

Applied Materials stock is up 47% in the past three months. That might seem a little surprising given the softness in the semiconductor market that has hit some of the big names in the field hard. Market research company Gartner It is estimated that semiconductor sales could decline 3.6% in 2023 to $596 billion after a 4% increase in 2022.

That must be bad news for Applied Materials, which supplies semiconductor manufacturing equipment to foundries that make chips. More specifically, samsungAnd Taiwanese semiconductor industry (popularly known as TSMC), and Intel Together, we generated 42% of Applied Materials’ total revenue in the past fiscal year. TSMC was its largest customer with 20% of revenue.

But a closer look indicates that Applied Materials may be able to overcome weakness in the semiconductor market. This is because the company is sitting Standard backlog of orderswhich it believes will help it weather any declines in spending on wafer-making equipment in 2023. The Applied Materials Department said it “generated strong orders in the fourth quarter.” [of fiscal 2022] And she finished the year with a record buildup. “

It wouldn’t be surprising to see backlogs increase thanks to a jump in customer spending. TSMC, for example, announced last month that it plans to Building a second semiconductor factory in Arizona. Overall, TSMC will spend $40 billion to set up manufacturing operations in the US. Meanwhile, Samsung seems to be in no mood. reduce capital spending, Either, as the South Korean company is after a bigger chunk of the memory chip market.

These companies make up a large portion of Applied Materials’ customer base, so they can help the company pull off a positive surprise in the current fiscal year. Analysts expect a 6% drop in Applied Materials revenue in fiscal 2023 to $24 billion, but there are reasons to believe this. Semiconductor stocks It could perform better and maintain its impressive climb.

What’s more, investors can buy Applied Materials at a cheap 15 times excess dividend, representing a discount to the Nasdaq 100 multiple of 25. They may not want to miss this opportunity given the company’s huge backlog and strong capital spending by its clients.

2. Check out Point Software Technologies

Check Point Software, which specializes in cybersecurity, has seen its share price jump 15% in the past three months thanks to Great quarterly results which was released in November. Demand for Check Point offerings remained strong amid increased spending on cyber security solutions, which is evident in the company’s performance in the first nine months of 2022.

Revenue increased 8% year over year during the first three quarters of 2022 to $1.69 billion. Fourth-quarter revenue guidance of $633 million at the halfway point indicates that it is on track to finish the year with revenue of $2.32 billion, which is up 7% from 2021.

But it wouldn’t be surprising to see Check Point post stronger growth as its deferred revenue grew faster than earnings. The company generated $1.65 billion in deferred revenue at the end of the third quarter, up 13% year-over-year.

Deferred revenue is money collected in advance by the company in lieu of services to be provided later. So faster growth in this metric compared to actual revenue indicates that customers are buying more cyber security subscriptions.

As it turns out, Check Point’s subscription and security product revenue increased 13% in the third quarter of 2022, the third consecutive quarter of double-digit growth. Given that product and security subscriptions generated 60% of the company’s revenue last quarter, a stronger contribution from this segment could help accelerate Check Point’s growth.

The cyber security market is set for another year of strong increases. Gartner estimates spending will rise 11.3% in 2023 to $188 billion.

As such, Check Point’s steady growth should continue this year, and that could help Cyber ​​security inventory maintain its momentum. Given that it trades at 15 times forward earnings, it’s never too late for investors to buy this Nasdaq stock and take advantage of the potential upside.

Harsh Chauhan He has no position in any of the aforementioned shares. The Motley Fool has positions with Applied Materials, Check Point Software Technologies, Intel, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Gartner and recommends the following options: January 2023 long calls of $57.50 on Intel, January 2025 long calls of $45 on Intel, and January 2025 short of $45 on Intel. The Motley Fool has a file Disclosure policy.

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