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The technology sector has been suffering a bloody blow in 2022 after witnessing a meteoric rise in the last two coronavirus-ridden years. Shares of several technology behemoths have plummeted due to a higher interest rate regime led by the Fed, the soaring yield on U.S. government bonds, and a higher valuation of the sector.

We are not out of the woods as the above-mentioned headwinds persist. At the same time, it is also a fact that the sector has been corrected to a great extent with a limited scope of stiff downslide. The tech-heavy Nasdaq Composite is in bear territory dropping 22.6% year to date. The Technology Select Sector SPDR (XLK - Free Report) — one of the 11 broad sectors of the S&P 500 Index — is down 21.1% year to date.

At this stage, it should be prudent to invest in beaten-down technology stocks with a favorable Zacks Rank that are likely to gain for the rest of 2022. Here are five such stocks —  Airbnb Inc. (ABNB - Free Report), EPAM Systems Inc. (EPAM - Free Report), Oracle Corp. (ORCL - Free Report), Fortinet Inc. (FTNT - Free Report), and VeriSign Inc. (VRSN - Free Report).
 

Tech is a Long-Term Bullish Sector – Buy on the Dip

A series of breakthroughs in 5G wireless networks, cloud computing, predictive analysis, AI, self-driving vehicles, digital personal assistants, and IoT, has given a boost to the overall technology space. Consequently, the sector has vast potential.

The leading emerging markets of Asia, Latin America, Africa, and some European countries are still way behind in using 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 old features, since voice communication and not data have served most of their needs. Even those using smartphones, rarely utilize online digital features.   

However, the outbreak of coronavirus quickly changed the lifestyle and lookout of these people. They were not entirely used to the digital platforms for their office work (work from home), ordering food and other daily needs, or transferring money and making payments. Moreover, online schooling, video conferencing, and virtual networking have now become essential.

Countries that are more digitized were able to minimize their losses during the pandemic. These are major lessons for other countries. Even those less inclined toward digital technology and online platforms, either because they have to learn using smartphones or tablets or due to fear of data theft, are now realizing the huge advantage of online platforms.
 

Our Top Picks

We have narrowed our search to five U.S. technology giants currently trading at a deep discount to their 52-week highs. These stocks have strong potential for the rest of 2022 and have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #2 (Buy). 

The chart below shows the price performance of our five picks in the past three months.

Image Source: Zacks Investment Research

Airbnb (ABNB)

Airbnb is riding on an improvement in the travel industry. Continued recovery in both longer-distance and cross-border travel owing to a reduction in travel restrictions is benefiting ABNB’s Nights & Experience bookings. Additionally, growth in Average Daily Rates and Gross Booking Value is acting as a tailwind.

Growing active listings in Latin America, North America, and EMEA are contributing well to the top line. Growing sales and marketing initiatives along with continuous efforts to upgrade various aspects of the Airbnb service are helping the company gain momentum among hosts and guests.

Airbnb has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved by 0.5% over the last 7 days. ABNB is currently trading at a 41.9% discount from its 52-week high.
 

Fortinet (FTNT)

Fortinet is benefiting from rising demand for security and networking products amid the coronavirus crisis as a huge global workforce is working remotely. FTNT is also benefiting from robust growth in Fortinet Security Fabric, cloud, and Software-defined Wide Area Network offerings.

Moreover, continued deal wins, especially those of high value, are solid drivers. Higher IT spending on cybersecurity is further expected to aid Fortinet to grow faster than the security market. Also, focusing on enhancing its unified threat management portfolio through product development and acquisitions is a tailwind for FTNT.

Fortinet has an expected earnings growth rate of 31.3% for the current year. The Zacks Consensus Estimate for current-year earnings improved by 1% over the last 30 days. FTNT is currently trading at a 27.9% discount from its 52-week high.
 

Oracle (ORCL)

Oracle is benefiting from the ongoing momentum across its cloud business, driven by the strong uptake of Oracle Cloud Infrastructure services and Autonomous Database offerings. The solid adoption of cloud-based applications, comprising NetSuite Enterprise Resource Planning, Fusion ERP, and Fusion Human Capital Management, bode well.

Strong demand for the Oracle Dedicated Region Cloud@Customer is anticipated to drive the top line at ORCL. Partnerships with Accenture and Microsoft are helping Oracle win new clientele. ORCL’s share buybacks and dividend policy are noteworthy.

Oracle has an expected earnings growth rate of 6.3% for the current year (May 2023). The Zacks Consensus Estimate for current-year earnings improved by 0.2% over the last 60 days. ORCL is currently trading at a 28.6% discount from its 52-week high.
 

EPAM Systems (EPAM)

EPAM Systems is benefiting from the ongoing digital transformation and continued focus on customer engagement and product development. EPAM is benefiting from growth across all geographies and multiple industry verticals. Acquisitions and partnerships are aiding top-line growth.

EPAM mainly serves the fastest-growing areas of IT services which include mobile applications, and their testing, cognitive computing, software development, and advanced analytics. Digital transformation, focus on customer engagement, and product development have been the key catalysts for EPAM Systems.

EPAM Systems has an expected earnings growth rate of 8.2% for the current year. The Zacks Consensus Estimate for current-year earnings improved by 1.3% over the last 30 days. EPAM is currently trading at a 40.4% discount to its 52-week high.
 

VeriSign (VRSN)

VeriSign provides Internet infrastructure services that include domain name registry services and infrastructure assurance services. VRSN’s performance is gaining from growth in .com and .net domain name registrations. VeriSign ended second-quarter 2022 with 174.3 million .com and .net domain name registrations, up 2.2% year over year.

VRSN will be hiking the annual registry-level wholesale fee for each new and renewal .net domain name registration to $9.92, from $9.02 with effect from Feb 1, 2023. VeriSign is expected to benefit from growing Internet consumption globally.

VeriSign has an expected earnings growth rate of 10% for the current year. The Zacks Consensus Estimate for current-year earnings improved by 0.3% over the last 60 days. VRSN is currently trading at a 25.9% discount to its 52-week high.

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