So far, 2022 has been rough for investors. This is especially true for the technology and internet sectors. While the S&P 500 is "only" down 13.5% year to date, the Nasdaq 100, which comprises 100 of the largest stocks by market cap on the Nasdaq exchange, is down 22% year to date. This decline has led to many high flyers over the past decade taking quite a haircut. If you have cash available (make sure not to use margin/leverage), now could be a great time to double down on some of your favorite technology stocks.
Here are two quality Nasdaq 100 stocks to consider buying in May.
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1. Autodesk
Autodesk (ADSK -2.00%) is a software company that serves many broad industries, including architecture, engineering, construction, and media/visual effects. Its core products are Revit and AutoCAD. AutoCAD is an old computer-aided design (CAD) software invented back in 1982 that is still in use by many designers and engineers today. In fact, even though Autodesk is pushing companies to eventually expand beyond the simple AutoCAD product, the segment is still growing nicely for the company, with revenue up 14% last fiscal year to $1.2 billion.
Revit is a 3D design software with a focus on building information modeling (BIM) standards. BIM is a worldwide standard getting adopted by architects, construction companies, and governments to allow them better and more useful 3D modeling when working on projects. The standard is seeing increased penetration around the globe; however, there are only a select few countries with greater than 50% penetration on projects around the world.
What does this mean? If the trend of increasing BIM usage on products continues, Revit should see a nice tailwind to its business, seeing as it has a greater than 50% market share of BIM software. Investors can track this tailwind in Autodesk's AEC revenue segment, which houses BIM. The segment did $1.96 billion in revenue last fiscal year, up 19% year over year (YOY).
On top of these core products, Autodesk has many long-term software projects in the early stages, including Fusion 360 (a platform for mechanical design) and the Autodesk Construction Cloud. Both products are immaterial to the business right now but growing rapidly, according to management.
With the stock down 31% this year, Autodesk trades at a market cap of $42 billion. This current fiscal year, it is guiding for approximately $2.17 billion in free cash flow. That gives the stock a forward price-to-free cash flow (P/FCF) of 19, below the market average. With strong growth, a huge opportunity with Revit, and the new software products, Autodesk stock looks like a great buy right now.
2. Match Group
Match Group (MTCH -0.19%) is the owner of many popular dating applications and online services. These include Tinder, Match.com, Pairs, Hinge, and many others. The company is riding the wave that is online dating, which has grown in acceptance over the last couple of decades. And with less than 100 million monthly active users (MAUs) across its services as of the end of Q1, Match Group has a lot of room to grow over the next decade as well.
In Q1, Match Group's revenue was $799 million, up 20% YOY. Profits grew in tandem with revenue, with adjusted operating income growing 19% YOY to $273 million. The company is seeing growth across a lot of its services, with 18% growth at Tinder (its largest service by far) and 22% growth from the rest of its brands.
The market has gotten nervous with Match Group stock, selling it off 44% in 2022. This could be for a multitude of factors, but one reason is soft revenue guidance for Q2. Management now expects revenue to grow at 13% to 14% YOY in Q2 due to foreign currency factors and the Russian/Ukraine conflict, something that may have taken investors by surprise.
However, if you take the long view and understand that online dating is a steadily growing category, it can be easy to look past these short-term currency headwinds and get bullish on the stock. With a market cap of $22 billion, the stock trades at a trailing P/FCF of 23. This is slightly higher than Autodesk's but still around the average free cash flow multiple for the Nasdaq. With steady growth prospects and a dominant position in online dating, Match Group is an easy stock to double down on right now.
