Stocks have been in sell-off mode this year, with all major indexes in the red so far in 2022. But what if things get worse from here and the stock market falls even more?
Further market corrections present a real opportunity for savvy investors to add some top growth stocks to their portfolios at coveted valuations. Advanced Micro Devices (AMD -0.75%), ASML Holdings (Asmar -2.18%)and synapse (SYNA -2.36%) Three of these fast-growing companies are the ones investors might want to buy, just in case stock market sell-off deterioration. All three companies are growing at an eye-popping rate, which explains why they are now trading at high valuations. But if those companies lose more ground, investors can buy these stocks cheaply, building a portfolio for long-term gain.
Let’s take a look at why these three names are worth buying amid the stock market sell-off.
1. Advanced Micro Devices
AMD shares are down nearly 29% in 2022, but NASDAQ-10025 times earnings. A forward price-to-earnings ratio of 23 indicates that AMD’s earnings are poised to grow at a breakneck pace, which is why investors should consider taking advantage of further declines in the chipmaker’s stock.
After all, AMD is set for another year of healthy growth, and the good news is that the markets it operates in point to a bright future. More specifically, AMD expects to generate $26.3 billion in revenue by 2022, a 60% increase from last year.The company also expects an adjusted gross margin of 54% this year, up from 2021’s non-profit margin.GAAP Gross profit margin is 48%.
AMD’s completion of its acquisition of Xilinx in February, along with strong growth in the company’s server, semi-custom and client processor businesses, will be key catalysts for the company’s growth.
For example, the acquisition of Xilinx puts AMD in a better position to capitalize on the $135 billion revenue opportunity in cloud computing, edge computing and smart devices. That’s not surprising, as Xilinx reportedly controls half of the field-programmable gate array (FPGA) market in 2020, and the segment is expected to generate $14 billion in revenue by 2028, compared to $6 billion last year.
On the other hand, AMD’s share of the server CPU (central processing unit) market is expected to jump from 10.7% at the end of 2021 to 19% next year. Bank of America AMD’s share of the server CPU space will increase to 35% in the long run due to growing demand for the company’s chips from hyperscale cloud computing customers.
The data center business alone can bring AMD Huge long-term boostAt the same time it also has bright future In the graphics card, game consoleand the client CPU market. All of these catalysts are expected to help AMD deliver 33% annual earnings growth over the next five years, making the stock a smart buy in case the market sells off and falls.
2. ASML Holdings
ASML Holding is another stock that trades at a whopping 42 times earnings despite pulling back nearly 27% this year.Proven Semiconductor Equipment Manufacturer Supplying Machines to Top Foundries Intel, TSMCSamsung and others have begun to regain their magic in the stock market over the past few weeks.
But amid the stock market sell-off, investors would be better off taking advantage of ASML’s decline, as the Dutch giant holds the key to solving the global semiconductor shortage. Intel CEO Pat Gelsinger said the semiconductor industry could be hampered by supply shortages through 2024.
This explains why there is huge demand ASML lithography machines used to help foundries make chips. The company posted net bookings of 7 billion euros in the first quarter of 2022, well above analysts’ expectations of 3.7 billion euros. Notably, ASML’s bookings were higher than its first-quarter revenue of €3.5 billion. A company’s reservation is a system sales order for which written authorization has been accepted.
What’s more, the company saw a huge jump in bookings last quarter, bringing its total order backlog to 29 billion euros, suggesting a big jump in revenue from 18.6 billion euros in 2021. ASML expects revenue to grow by 20% by the end of 2022, which will bring its annual revenue to just over 22.5 billion euros.
So by 2023 there will be a massive backlog of ASML.This looks likely considering that as the foundry grows, demand for its machines should remain strong make more advanced chips, which is only possible with the help of ASML’s extreme ultraviolet (EUV) lithography machine. Not surprisingly, analysts expect ASML’s annual growth rate to be close to 30% over the next five years, which is why buying the stock during a market crash may be a smart long-term move.
Synaptics, another fast-growing tech stock, currently trades at 31 times earnings, but it’s worth noting that it traded at more than 91 times earnings last year. A 48% drop in Synaptics stock makes the stock even cheaper than before, and a forward price-to-earnings ratio of 10.5 suggests its bottom line is poised to grow at a breakneck pace.
Synaptics, whose chips power fast-growing applications such as Internet of Things (Internet of Things) and smartphones, currently in good shape. It released its fiscal 2022 third-quarter results on May 5 (for the three months ended March 26), and reported a 44% year-over-year increase in revenue to $470 million. Synaptics’ adjusted gross margin rose 6 percentage points from a year earlier to 61.1% last quarter, while adjusted earnings rose 85% to $3.75 per share.
Analysts expect Synaptics to grow 15% annually over the next five years, but don’t be surprised if the company grows even faster in the markets it serves. In IoT, for example, Synaptics says it has multiple design wins — meaning its products will be deployed in customers’ future products — and it’s also seen yield growth from early design wins.
More specifically, Synaptics’ Wi-Fi 6 and 6E connectivity chips are in high demand, and the company has also begun sampling integrated chips that support Wi-Fi 6E, Zigbee, and Bluetooth. These growth hotspots have enabled Synaptics’ IoT business to maintain “seven consecutive quarters of high double-digit growth rates, outpacing nearly all of its peers, and making Synaptics one of the largest IoT-focused semiconductor players, with annual sales of approximately 12 percent. One hundred million U.S. dollars.”
With the number of IoT devices expected to increase to 30.9 billion by 2025, up from 13.8 billion in 2021, Synaptics’ IoT business should see good growth for a long time to come, according to third-party estimates. With IoT accounting for 64% of its total revenue last quarter, a brighter outlook for this segment should positively impact Synaptics in the long run as addressable opportunities expand.
So this year’s sharp drop in the stock price presents investors with a great opportunity to buy this high-growth company, although they might be able to buy it at a cheaper valuation in the event of a market sell-off.