The tech sector, which helped Wall Street shrug off the coronavirus-induced short bear market and formed the new bull market, suffered a bloody blow early in 2022. Record inflation forced the Fed to become ultra-hawkish with tighter liquidity control and a higher interest rate regime. Therefore, the bloodbath in the technology sector has been visible since the beginning of the year.

However, during the first five months of this year, the valuation of this sector has been significantly corrected. The Technology Select SPDR XLK sector – one of 11 major sectors in the S&P 500 Index – has fallen 19.5% year-to-date. The tech-heavy Nasdaq Composite Index has plunged 23.3% year-to-date and is currently in bearish territory.

Most of the tech giants have seen a massive correction in stock prices and are currently available at attractive valuations. We have selected five such stocks with a favorable Zacks ranking and strong potential for the remainder of 2022. These companies are – Cadence Design Systems Inc. CDNS, GLOBALFOUNDRIES Inc. SFP, Analog Devices Inc. ADI, Roper Technologies Inc. ORP and Synopsys Inc. SNPS.

Technology is the best bet for the long term

The recent collapse of the technology sector is a temporary phenomenon. The fundamentals of this sector are solid. We must not forget that the growing demand for high-quality, high-tech products has been a catalyst for the sector in an otherwise difficult environment. A series of breakthroughs in 5G wireless networking, cloud computing, predictive analytics, AI, autonomous vehicles, personal digital assistants and IoT, have boosted the global space .

The technology has vast potential – Buy low

Major emerging markets in Asia, Latin America, Africa and some European countries are still far behind in the use of digital technology compared to the developed world. While mobile phone penetration is nearly 90% in these countries, a large number of people are still using phones with older features because voice communication and not data meets most of their needs. Even those who use smartphones rarely use online digital features.

However, the coronavirus epidemic quickly changed the lifestyle and alertness of these people. People were not fully accustomed to digital platforms for their office work (working from home), for ordering food and other daily needs or for transferring money and making payments. In addition, online schooling, videoconferencing and virtual networking have become essential.

The most digitized countries were able to minimize their losses during the pandemic. These are important lessons for other countries. Even those who are less inclined towards digital technology and online platforms, either because they have to learn how to use smartphones or tablets or because of fear of data theft, are now feeling the huge advantage of online platforms.

Our top picks

We limited our search to five US tech giants (market capital >$30 billion) that are currently trading lower. These stocks have positive growth potential for the remainder of 2022 and have seen positive earnings estimate revisions over the past 60 days. Each of our picks carries either a Zacks rank of #1 (strong buy) or 2 (buy). You can see the full list of today’s Zacks #1 Rank stocks here.

The graph below shows the price performance of our five picks over the past three months.

Image source: Zacks Investment Research

Cadence Design Systems offers products and tools that help customers design electronic products. Through the System Design Enablement strategy, CDNS offers software, hardware, services and reusable IC design blocks to electronic systems and semiconductor customers.

Cadence’s performance is driven by strength from several segments such as Digital and Approval Solutions and Functional Verification Suite. CDNS is also benefiting from greater investment in emerging trends such as IoT and autonomous vehicle subsystems, as well as strength in the semiconductor end market. Frequent product launches should help CDNS sustain revenue growth.

Zacks Rank #1 Cadence Design Systems has an expected profit growth rate of 19.8% for the current year. The Zacks consensus estimate for current-year earnings has improved 5.6% over the past 60 days. CDNS is currently trading at a 20.5% discount to its 52-week high.

GLOBAL FOUNDRIES operates as a worldwide semiconductor foundry. GFS manufactures integrated circuits, which enable various electronic devices that are ubiquitous. The company offers feature-rich solutions that enable its customers to develop innovative products for ubiquitous chips.

GLOBALFOUNDRIES manufactures a range of semiconductors including microprocessors, mobile application processors, baseband processors, network processors, radio frequency modems, microcontrollers, power management units and system microelectromechanical.

Zacks Rank #2 GLOBALFOUNDRIES has an expected earnings growth rate of over 100% for the current year. Zacks’ consensus estimate for its current-year earnings has improved 21.1% over the past 30 days. GFS is currently trading at a 26.9% discount to its 52-week high.

Analog devices operates in the communication, consumer, industrial and automotive end markets. In addition, strong demand for high-performance analog and mixed-signal solutions acted as a tailwind. The growing momentum in the electric vehicle space through robust battery management system solutions remains a positive for ADI.

Additionally, the increasing gains in power design are the other bright spots for Analog Devices. The strong momentum of the HEV platform in the cabin electronics ecosystem remains a tailwind for ADI. Additionally, Analog Devices remains optimistic about the growth prospects associated with its acquisition of Maxim and 5G.

Zacks Rank #1 Analog Devices has a projected profit growth rate of 43% for the current year (October 2022). Zacks’ consensus estimate for its current-year earnings has improved 9.6% over the past 30 days. ADI is currently trading at a 14.2% discount to its 52-week high.

Synopsis boasts strong design gains from a robust product portfolio. The growing trend of work and learning from home is driving the demand for bandwidth. Additionally, the strong traction of SNPS’ Fusion Compiler product boosted sales.

Growing demand for advanced technology, design, IP and security solutions is also creating strong prospects for Synopsys. Additionally, the growing impact of artificial intelligence, 5G, internet of things and big data is driving investments in new computing and machine learning architectures.

Zacks Rank #2 Synopsys has an expected earnings growth rate of 23.8% for the current year (October 2022). Zacks’ consensus estimate for its current-year earnings has improved 7.2% over the past 30 days. SNPS is currently trading at a 16.1% discount to its 52-week high.

roper is poised to benefit from the strength of its business, acquired assets and strong operational execution in the coming quarters. ROP’s ability to generate healthy cash flows reinforces its strength and supports its policy of rewarding its shareholders through the payment of dividends. For 2022, Roper’s overall organic sales are expected to grow 7-9% year-over-year.

The Zacks Rank #2 Roper has an expected profit growth rate of 10.2% for the current year. Zacks’ consensus estimate for its current-year earnings has improved 0.4% over the past 30 days. ROP is currently trading at a 14.6% discount to its 52-week high.

Zacks names ‘only one best choice for doubling up’

From thousands of stocks, 5 Zacks experts have each picked their favorite to skyrocket by +100% or more in the coming months. Of these 5, Research Director Sheraz Mian selects one to have the most explosive advantage of all.

It’s a little-known chemical company that’s up 65% year-on-year, but still very cheap. With relentless demand, rising earnings estimates for 2022 and $1.5 billion for stock buybacks, retail investors could step in at any time.

This company could rival or surpass other recent Zacks stocks which are expected to double like Boston Beer Company which jumped +143.0% in just over 9 months and NVIDIA which jumped +175.9% in one year .

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Analog Devices, Inc. (ADI): Free Inventory Analysis Report

Roper Technologies, Inc. (ROP): Free Stock Analysis Report

Synopsys, Inc. (SNPS): Free Stock Analysis Report

Cadence Design Systems, Inc. (CDNS): Free Inventory Analysis Report

Technology Select Sector SPDR ETF (XLK): ETF Research Reports

GlobalFoundries Inc. (GFS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.