With the gradual slowdown in rate hikes, the Nasdaq Composite is expected to rebound in 2023. The tech-heavy index could witness substantial gains this year. So, quality Nasdaq stocks, Adobe (ADBE), Fortinet (FTNT), and Cintas (CTAS), could be ideal buys in 2023. Keep reading.
As inflation is still at an alarmingly high level, the Fed indicated recently that the rate hikes will continue as of now. However, as inflation shows signs of cooling, the rate hike regime might end in the near term. This should bode well for the rate-sensitive Nasdaq Composite.
Jay Barry, Co-Head of U.S. Rates Strategy at J.P. Morgan, said, “Investors are more comfortable that we are getting closer to the end of the tightening cycle.”
Moreover, Nasdaq witnessed a five-week rally at the beginning of 2023 after wrapping up 2022, its worst year since 2008. Furthermore, Nasdaq CEO Adena Friedman believes 2023 to be a solid growth year for tech innovation and rebound.
So, let’s delve deeper into these Nasdaq stocks mentioned above:
Adobe Inc. (ADBE)
ADBE and its subsidiaries operate as a diversified software company worldwide. It operates through three segments: Digital Media; Digital Experience; and Publishing and Advertising.
ADBE’s trailing-12-month Price/Cash Flow of 18.92x is 3.4% lower than the industry average of 19.59x.
Its trailing-12-month ROCE and ROTC of 32.97% and 19.98% are 563.2% and 523.3% higher than the industry averages of 4.97% and 3.21%.
ADBE’s total revenue came in at $4.53 billion for the fourth quarter that ended December 2, 2022, up 10.1% year-over-year. Its non-GAAP net income increased 9% year-over-year to $1.68 billion, while its non-GAAP EPS came in at $3.60, representing a 12.5% year-over-year rise.
Analysts expect ADBE’s revenue to increase 9.3% year-over-year to $19.25 billion for the current fiscal year 2023. Its EPS is expected to increase 11.7% year-over-year to $15.31 in 2023. It surpassed EPS estimates in all four trailing quarters. ADBE’s shares have lost marginally intraday to close the last trading session at $323.38.
ADBE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ADBE has an A grade for Quality and a B for Sentiment. Within the Software – Application industry, it is ranked #18 out of 140 stocks. Click here for the additional POWR Rating for Growth, Value, Momentum, and Stability for ADBE.
Fortinet, Inc. (FTNT)
FTNT provides cybersecurity and networking solutions worldwide. It offers FortiGate hardware and software licenses for various security and networking functions.
On March 1, 2023, FTNT launched new and enhanced products and services for operational technology (OT) environments as an expansion of the Fortinet Security Fabric for OT. Such new product additions are expected to garner increased customer attention.
Its trailing-12-month gross profit margin of 75.44% is 53.4% higher than the industry average of 49.18%. Its trailing-12-month EBITDA margin of 24.21% is 114.5% higher than the industry average of 11.28%.
FTNT’s total revenue came in at $1.28 billion for the quarter that ended December 31, 2022, up 33.1% year-over-year. Its non-GAAP net income increased 69.9% year-over-year to $349.70 million, while its non-GAAP EPS increased 76% year-over-year to $0.44.
Street expects FTNT’s revenue to increase 23.2% year-over-year to $5.44 billion in the current fiscal year 2023. Its EPS is expected to increase 18.5% year-over-year to $1.41 in 2023. It surpassed EPS estimates in all four trailing quarters. Over the past month, the stock has gained 10.1% to close the last trading session at $58.44.
It’s no surprise that FTNT has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has an A grade for Quality and a B for Growth and Sentiment.
Cintas Corporation (CTAS)
CTAS provides corporate identity uniforms and related business services, primarily in the United States, Canada, and Latin America. It operates through Uniform Rental and Facility Services; First Aid and Safety Services; and All Other segments.
CTAS’ trailing-12-month gross profit margin of 46.50% is 60.8% higher than the industry average of 28.91%. Its trailing-12-month EBITDA margin of 23.73% is 79.7% higher than the industry average of 13.21%.
CTAS’ total revenue came in at $2.17 billion for the quarter that ended November 30, 2022, up 13.1% year-over-year. Its net income increased 10.1% year-over-year to $324.29 million, while its EPS increased 13% year-over-year to $3.12.
CTAS’ revenue is expected to increase 11.1% year-over-year to $8.73 billion for the current fiscal year 2023. Its EPS is expected to increase 9.3% year-over-year to $12.73 for 2023. It surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 15.3% to close the last trading session at $429.14.
CTAS has an overall B rating, equating to a Buy in our POWR Ratings system.
It has an A grade for Quality and a B for Stability. It is ranked #11 out of 41 stocks in the B-rated Outsourcing – Business Services industry. For additional CTAS ratings for Growth, Value, Momentum, and Sentiment, click here.
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ADBE shares were unchanged in premarket trading Thursday. Year-to-date, ADBE has declined -3.91%, versus a 3.22% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master’s degree in economics, she helps investors make informed investment decisions through her insightful commentaries.