Technology stocks are having a bad time in 2022 as investors have pressed the panic button on account of surging inflation and a hawkish Federal Reserve, while Russia's invasion of Ukraine has added to the market's volatility.
The NASDAQ-100 Technology Sector is down more than 18% so far this year, which means there is an opportunity for savvy investors to scoop up shares of top tech companies on the cheap. Intel (INTC -1.79%) and Check Point Software Technologies (CHKP 0.18%) are two such stocks that investors may want to buy right now. Let's look at the reasons why.
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1. Intel
Intel stock trades at a cheap 9.7 trailing earnings. Intel's price-to-earnings (P/E) ratio is lower than the S&P 500's multiple of 25, so investors are getting a great deal on this stock right now, and they should consider taking advantage of it. That's because shares of Intel could soar on account of a potential turnaround in the company's fortunes.
Intel aims to regain its technology lead in the CPU (central processing unit) market by 2025, and the company has started making progress on that front already. Intel's 12th-generation Alder Lake CPUs, which were launched in November last year, are helping it take market share away from Advanced Micro Devices.
According to data from personal computer benchmark and test software provider PassMark, Intel's share of the CPU market has increased from 60% in the third quarter of 2021 to nearly 66% in the first quarter of 2022. The Alder Lake processors, which are based on a 10-nanometer (nm) manufacturing process, have helped Intel bridge the performance gap with AMD, and they are considered to be the top CPUs for gaming.
Intel's product roadmap indicates that it could continue taking share away from AMD with the launch of more advanced processors. Additionally, the company is diversifying into new and lucrative markets, such as discrete graphics cards. It recently announced the launch of its first Intel Arc GPUs (graphics processing units) for notebooks and laptops, which will be followed by more powerful cards in the summer.
This jump into discrete GPUs could unlock an addressable revenue opportunity worth $54 billion by 2025 for Intel based on the revenue this market is expected to generate, according to Jon Peddie Research. All of this indicates why Intel expects its growth to gain momentum in the coming years. The company's revenue guidance of $76 billion for 2022 would translate into a jump of just 1.7% over last year. But by 2026, Intel sees itself clocking year-over-year revenue growth of 10% to 12%.
As such, buying this cheap semiconductor stock now could pay off handsomely for investors, especially considering that Intel seems to be pulling the right strings to regain its mojo.
2. Check Point Software Technologies
Shares of Check Point Software have defied the tech sell-off, gaining nearly 23% so far this year. Yet, the cybersecurity stock remains relatively cheap despite this rally, trading at 23 times trailing earnings and 19 times forward earnings. For comparison, the NASDAQ-100 has a trailing P/E multiple of 33 and a forward earnings multiple of 26. So investors who have missed Check Point's rally still have an opportunity to buy the stock since it remains cheaper than the index and is on track to grow at a faster pace.
Check Point Software finished 2021 with $2.17 billion in revenue, an increase of 5% over the previous year. For 2022 the company expects revenue to increase by 6% at the midpoint of its guidance. However, it wouldn't be surprising to see its top line coming in closer to the higher end of the range that sits at $2.37 billion. That's because Check Point is taking steps to ensure faster sales growth in 2022 with initiatives such as a 25% increase in the frontline sales force.
At the same time, demand for Check Point's security subscription offerings is increasing at a faster pace than its overall revenue. Revenue from the subscriptions business was up 14% year-over-year in the fourth quarter of 2021, up from the 10% growth seen in the prior-year period. The stronger adoption of the security subscriptions business has led to a nice increase in Check Point's deferred revenue, with the metric increasing 15% year-over-year last quarter to $1.7 billion.
Deferred revenue is the money collected in advance for services that will be delivered later. The line item is recorded as revenue on the income statement once the services or products are delivered. The faster growth in the company's deferred revenue compared to the actual revenue indicates that Check Point has built up a solid sales pipeline, driven by the growing adoption of its subscription model.
Additionally, Check Point's share of the cybersecurity appliance market puts it in a nice position to record incremental revenue growth in the long run. The company is the fourth-largest vendor of network security appliances with a 9% share, a market that's expected to add nearly $9 billion in revenue through 2026.
As such, Check Point Software looks like an ideal bet for investors looking to buy a cybersecurity stock right now, as it is not just attractively valued and is beating the market, but it is also taking steps to boost growth by targeting a bigger share of the cybersecurity space with a stronger sales force.
