3 unstoppable growth stocks to buy in the event of a market liquidation
Nvidia (NASDAQ: NVDA), Ambarella (NASDAQ: AMBA), and Synaptic (NASDAQ: SYNA) crashed the stock market in 2021, as shares of all three tech companies appreciated significantly on the back of tremendous business growth.
Nvidia has been riding the wave of massive demand for graphics cards, while demand for Ambarella’s computer vision chips has exploded, thanks to their use in cars and security cameras. Synaptics turned out to be the biggest winner of the lot, as its Internet of Things (IoT) chips are in high demand.
NVDA data by YCharts.
However, the huge appreciation in the stock prices of these three companies has made them expensive, so investors should be on the lookout for downturns to buy more. A potential stock market crash could allow savvy investors to buy them at a relatively cheaper valuation.
Let’s see why buying these three unstoppable stocks in a market crash seems like a good idea.
Nvidia stock is trading at 95 times earnings after its hot rally in 2021. Although its forward price-to-earnings (P / E) ratio of 60 points towards huge earnings gains, it’s still not. cheap. A drop in Nvidia stock in the event of a stock market crash could make this graphic designer relatively affordable, and investors should consider seizing such an opportunity with both hands.
Nvidia is one of the best ways to capitalize on several tech trends ranging from video games and data centers to self-driving cars and the metaverse. Some of these markets are already doing a lot for Nvidia. For example, the gaming and data center markets currently account for nearly 87% of the chipmaker’s revenue and appear designed for exceptional long-term growth.
Image source: Getty Images.
Nvidia’s gaming revenue grew 42% year-over-year in the third quarter of fiscal 2022 to $ 3.22 billion, while data center activity grew by 55% over the period of the previous year to reach $ 2.93 billion. Nvidia’s total quarterly revenue grew 50% year-over-year to $ 7.1 billion. The reason Nvidia is experiencing exceptional growth in the gaming and data center markets is its dominance in these markets.
Jon Peddie Research points out that Nvidia had an 83% share of the discrete graphics processor (GPU) market in the third quarter of 2021. The chipmaker appears well positioned to retain as large a share of the discrete GPU market as its user. the base goes to its last cards. Nvidia CFO Colette Kress stressed during the company’s November earnings call that “NVIDIA RTX technology is driving our biggest refresh cycle with gamers.”
Graphics card sales are expected to reach $ 54 billion in 2025, up from $ 23.6 billion last year, according to Jon Peddie Research. Nvidia’s strong market share and 85% of its installed user base are ready to switch to a new card, so its gaming momentum is here to stay.
Data center business is another long-term catalyst for Nvidia as the company introduced new chips to expand its addressable opportunities in this vertical. The launch of a Data Processing Unit (DPU) has dramatically increased Nvidia’s data center opportunity, while its foray into data center server processors is likely to unlock another massive market. Add in additional growth engines like self-driving cars and the Metaverse, which could significantly boost Nvidia’s long-term growth, and it’s easy to see why this unstoppable stock may continue to rally and are worth buying. in the event of a stock market crash.
Ambarella’s tremendous rise in 2021 brought its price-to-sell ratio to nearly 25, which is significantly higher than its five-year average sell multiple of 8.6. This rich valuation is not surprising, given the pace of growth of Ambarella this year.
The company’s third-quarter fiscal 2022 revenue increased 64% year-on-year to $ 92.2 million, while adjusted profit climbed to $ 0.57 per share, from just $ 0.09 per share a year ago. A review of Wall Street estimates indicates that Ambarella’s high growth levels are here to stay for the long haul. The chipmaker’s earnings could register a compound annual growth rate of nearly 87% over the next five years, which is not surprising given the addressable opportunity it can tap into.
Ambarella management said during the company’s December earnings call it had a potential revenue opportunity of $ 1.8 billion in the auto camera market. He’s already got $ 700 million in design payouts. With Ambarella on track to generate $ 331 million in revenue this year, the company’s automotive design pipeline indicates it could continue to grow revenue at an impressive rate.
More importantly, Ambarella’s revenue opportunities may continue to expand in the long term, with the deployment of more cameras in vehicles, as well as the growing adoption of internet-enabled security cameras. Fortune Business Insights estimates that the automotive camera market could reach $ 10 billion in value by 2027, growing 21.5% annually over the long term.
Meanwhile, the internet enabled camera market is also expected to register an annual growth of 14% through 2025 and exceed $ 20 billion in revenue by the end of the forecast period, according to Global Market Insights. The good part is that Ambarella’s security camera chips are deployed by OEMs (original equipment manufacturers) across the world. The company is gaining market share outside of China and expanding its presence worldwide, while major Chinese camera makers Hikvision and Dahua are also using its chips.
All of this indicates that Ambarella remains a solid game on the growing use of cameras in key applications. This should help him maintain tremendous profit growth for a long time.
Synaptics’ share price has more than tripled in the past year as the company has reached a milestone, thanks to its goal of selling more IoT chips instead of personal computer (PC) or smartphone chips. The chipmaker’s IoT revenue had jumped 70% year-over-year in the first quarter of fiscal 2022 and accounted for 55% of revenue.
The impressive segment growth led to a 13.5% year-over-year increase in Synaptics’ quarterly revenue to $ 372.7 million, while adjusted profit climbed 45% from year over year at $ 2.68 per share. Analysts expect Synaptics’ growth to accelerate during the year, forecasting an 18% increase in revenue and a 36% increase in earnings per share.
The company is expected to achieve 15% annual profit growth over the next five years, but don’t be surprised to see it exceed that bar. This is because Synaptics is experiencing tremendous growth in its IoT business, thanks to new product ramps and new designs. CEO Michael Hurlston noted on the November earnings conference call that: “In general, our wireless products are seeing an increase in winning design across a long lineup of customers and applications, which gives us confidence in the belief that we will meet our goal of doubling revenues again over the next 18 months. “
Specifically, Synaptics’ WiFi Bluetooth Combo Chips are its fastest growing offerings, as they are used in a variety of applications such as fitness equipment and portable scanners. As the global IoT connectivity market is expected to grow nearly 21% through 2026, and Synaptics’ IoT sales are growing at a faster rate than the wider market, the chipmaker appears to be growing. have a bright future ahead of him.
However, the stock is trading at 92 times earnings and 8.43 times sales. For comparison, Synaptics was trading at 2.55 times sales in 2020 and a price / earnings ratio of 30. That is why investors should consider taking advantage of any drop in Synaptics in the event of a stock market crash and adding that unstoppable IoT stock to their wallets.
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Harsh Chauhan has no position in the mentioned stocks. The Motley Fool owns and recommends Nvidia. The Motley Fool recommends Synaptics. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.