After the technology sector’s recent meltdown that saw the Nasdaq 100 index plummet by more than 20% and cross the bear market threshold at its nadir, tech stocks have been racing higher.
Between March 14 (the Nasdaq’s low point) and March 28, the tech-laden index has gained 14%, while the S&P 500 is up almost 9%, and the Dow Jones Industrial Average is up just 5.3%. Semiconductors are leading the way back, with stocks like Nvidia and Intel posting double-digit gains.
Obviously, no one knows in advance when markets will crash nor when they will reach inflection points and turn upward again, which is why it pays to not take your money out of stocks when times look bleak. Instead, the right course is to remain in the market, and if possible to take advantage by buying shares of good companies that have been beaten down.
Although the Nasdaq 100 has cut its losses by more than half, there are still good bargains in the tech sector — among them, this pair of companies with explosive growth potential.
Palantir Technologies ( PLTR 0.65% ) is a data analytics shop that once crunched numbers solely for shadowy agencies in the spy world and national security state, but has since expanded into Big Data for enterprise-level businesses.
The stock has bounced off its February lows, but it remains 55% below its 52-week high, and is as good a buy now as has been at almost any time since its 2020 initial public offering. Offered at just $10 a share, Palantir’s stock today trades less than 30% above that level, even though Wall Street forecasts it will grow earnings at a compound annual rate of 40% a year for the next five years, and its revenue is expected to more than double to over $3.5 billion by the middle of the decade.
Although Palantir’s government analytics platform, Gotham, still provides 58% of its annual revenue, Foundry, the commercial side of its business, particularly in the U.S., is the faster-growing segment.
Its U.S. business sales more than doubled in 2021, and its U.S. commercial count rose nearly five-fold for the year. Net dollar retention, or how much revenue has expanded or contracted over a certain time period, jumped to 150% in 2021 for its enterprise customers, outpacing the 146% gain for its government contracts. So both businesses are growing smartly, but there is more expansion opportunity on the private sector side.
Palantir Technologies has risen by 35% from its low point, but the company looks to have plenty of upside for years to come.
Investors have a unique chance to connect with AT&T ( T -1.30% ) again before the spinoff of WarnerMedia, which will be merged with Discovery ( DISCA )( DISCK -1.63% ) to form a new business, of which AT&T will own 71%. The entertainment business proved a misguided acquisition that saddled AT&T with debt. By shedding it, the telecom will be able to more narrowly focus its attention on its communications operations at a time when the adoption of 5G is taking off.
However, the markets seem to have instead focused mostly on the fact that AT&T will slash its dividend by nearly half following the divestiture. As a result, the telecom’s stock has tumbled by 21% over the last year. However, AT&T’s payout currently yields 8.7% annually. Even halved, it will still be one of the top dividend yields among the Fortune 500.
The deal is expected to close on April 5, at which time AT&T shareholders will receive 0.24 shares of the new Warner Bros Discovery company for each AT&T share they own. The telecom also said its board set its second-quarter dividend at $0.2775 per share. So investors in AT&T will still get a healthy dividend payment, will have shares in what could be a new growth company, and will have the growing value of the 5G communications space to look forward to.
It’s expected that much of the growth will come from consumers spending more on enhanced video, augmented reality and virtual reality, and digital gaming over 5G networks. Swedish telecom Ericsson estimates that communications service providers like AT&T will receive $3.7 trillion of the anticipated $31 trillion the entire consumer 5G network market could be worth by 2030.
It’s an explosive time for the segment, and AT&T investors should reap the rewards.
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