5 Beaten-Down Tech ETFs To Buy Now

Image: Bigstock

The technology sector has been on a selling spree lately thanks to renewed inflation fears. The ongoing economic recovery post pandemic has led to a surge in prices for broad-based commodities that could prompt the Federal Reserve to tighten policies earlier than expected. This has dampened the appeal for the stocks that rely on easy borrowing for superior growth.

Tech stocks tend to have higher-than-average price-to-earnings ratios, whose valuations depend heavily on future earnings. And with the astounding surge during the pandemic last year, these stocks have become expensive with lofty valuations.

The beaten-down price could be viewed as a solid entry point given that the Fed sees inflation as temporary. Additionally, the tech sector Q1 earnings have been solid with big five tech titans reporting blockbuster results. The five ‘Big Tech’ players as a whole earned $74 billion in earnings in the March quarter on $311.6 billion in revenues. This group’s Q1 earnings and revenues are up 104% and 29% from the year-earlier period, respectively. This suggests that the best growth days of the sector may be behind it.

Beyond the big five players, total Q1 earnings for the technology sector as a whole are expected to be up 50.3% from the same period last year on 23.4% higher revenues. Both earnings and revenue growth expectations are tracking much above the past four quarters and the coming four quarters.

Further, the sector paints a bright outlook as the global digital shift has accelerated e-commerce for everything, ranging from remote working to entertainment and shopping. The rapid adoption of cloud computing, big data, Internet of Things, wearables, VR headsets, drones, virtual reality, artificial intelligence, machine learning, digital communication, and 5G technology will continue to drive the sector higher.

As such, investors should buy the dip in the sector. For them, we have highlighted some ETFs that are in red over the past week but have a solid upside potential given the encouraging fundamentals:

1 2 3
View single page >> |

Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.