The recent dip in the stock market has created a buying opportunity for your favorite tech stocks that you thought you missed out on. The equity market breakdown was caused by anxious investors concerned about an economic slowdown.
The Eurozone economy is slowing down, and US investors are concerned that we will follow. Softer than expected service-sector figures combined with the implication of a manufacturing slowdown sent the European markets into a sell-off frenzy since Tuesday, the first trading day of the 4th quarter.
The European market saw a roughly 5% breakdown this week, while the US’s S&P 500 has fallen just over 3% in the two and a half days of this quarter so far.
Below are a couple of your favorite tech stocks that have fallen into buying territory for those looking for long term investments.
ADBE has been outperforming the market aggregate with a share price appreciation of over 20% so far this year. These shares hit their all-time high of $313 at the end of July and has since broken down over 13%.
This breakdown is due to broad market volatility hitting growth stocks with high valuations multiples. When market uncertainty is high, investors tend to price out some growth upside.
Adobe released its Q3 earnings report in mid-September, and the report was very positive. The company beat both top and bottom-line metric estimates and raised full-year guidance. Adobe appears to be growing its topline by over 20% in perpetuity. Analysts have raised their estimates and pushed ADBE into a Zacks Rank #2 (Buy).
Adobe has been able to niche itself in the cloud software market. It is now a must-have software for professionals in both creative fields and marketing. They are the clear leader in digital content creation, which is a category that is only going to grow as our society becomes increasingly digitalized. Being an essential provider of software for professionals in a growing industry gives this firm a solid backing for a buy recommendation at the right valuation.
Below you can see that ADBE has been bouncing off its 200-day moving average for the last 3 years, making a solid support level for traders and investors to use. Right now, the level is around $270, and ADBE looks to be bouncing off it as we speak, having traded down to $266 yesterday and rallying up to $271 today.
AMZN has fallen over 14% since its disappointing earnings report back in July. The company experienced larger than expect expenses due to its one-day and same-day delivery offering. This new delivery service is bringing in an increasing number of prime members, and the long-term gains will outweigh the short-term costs that this program is expecting.
Amazon’s cloud segment, AWS, also missed estimates, decelerating the growth of this segment quicker than expected. AWS is anticipated to be the primary growth driver moving forward. This larger than expected slowdown caused uneasy AMZN sentiment in the market.
Amazon has been struggling with short term costs due to its investment in one-day delivery domestically and internationally. Analysts are anticipating that Amazon’s high margin AWS cloud business will make up for the thinning margins in e-commerce. 70 to 80% of operating income is expected to be derived from AWS by the end of this year.
Prime Day was an enormous success, and the single largest event in Amazon history with sales surpassing Black Friday and Cyber Monday combined. Expect the benefits of this event to be reaped in Q3. Look for Q3 results in Amazon’s upcoming earnings report, which is expected October 24th.
I believe that these short-term margin cuts will not affect the long-term growth of the company, and as AMZN’s price falls, the buying opportunity ripens. The question is, what price makes these shares a truly ripe buy? The price at which I would not hesitate to pull the trigger on AMZN is anything below $1,500.
Below you can see that the 50-day average is closing in on the 200-day and if it crosses below that this stock could be in for a larger downside. AMZN appears to have stalled its returns waiting on the upcoming earnings report for a decisive directional move.
Facebook (FB) and its seemingly omnipotent social media product offering is trading almost 15% off its all-time high. FB is a solid long-term play with its perpetually growing user base and its entrance into the financial field with its cryptocurrency Libra, which has sizable potential.
Intel (INTC) has been trading all over the board this year, with the semiconductor industry experiencing a cyclical slowdown. It looks to be lining up as a buy with valuations metrics appearing to be some of the best in the industry. Its long-standing reputation as a tech leader and 2.5% dividend make this stock a safe bet.
The recent breakdown in the equity markets has created an opportunity for savvy traders and investors looking for long term gains, as stocks becoming relatively cheaper.
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