October 18, 2021

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2 Tech Stocks to Buy on Dips Before Q4 By StockNews


© Reuters. 2 Tech Stocks to Buy on Dips Before Q4

It’s been a volatile start to the week for the major market averages, with the S&P-500 (SPY) and Nasdaq-100 Index (QQQ) both sliding more than 3% to start the week on an intra-day basis. The good news is that while the market itself remains expensive, as do many QQQ constituents, there are a few names trading at reasonable prices when factoring in their industry-leading growth rates. Two of these names are Paycom Software (NYSE:) and Amazon.com (NASDAQ:), with Paycom recently breaking out of a large base and Amazon currently pulling back after a failed breakout earlier this year.It’s been a volatile start to the week for the major market averages, with the S&P-500 (SPY) and Nasdaq-100 Index (QQQ) both sliding more than 3% to start the week on an intra-day basis. While this has left the markets oversold short-term, it has not done much to help valuations for most tech stocks, with the Nasdaq-100 still up more than 120% off the March 2020 lows and some leading tech stocks easily doubling this performance. The good news is that while the market itself remains expensive, as do many QQQ constituents, there are a few names trading at reasonable prices when factoring in their industry-leading growth rates. Two of these names are Paycom Software (PAYC) and Amazon.com (AMZN), with Paycom recently breaking out of a large base and Amazon currently pulling back after a failed breakout earlier this year. While neither is cheap at current levels, they are names worth paying a close eye on if this market correction continues. Let’s take a closer look below:

(Source: TC2000.com)

Paycom Software and Amazon have little in common. One is a large-cap Enterprise-Software company. The other is a mega-cap Internet-Retail company with a cloud-computing platform, Amazon Web Services. However, two traits that each company shares are market leadership with a wide moat, and incredible compound annual earnings per share growth rates. In PAYC’s case, the company has grown earnings at an astounding compound annual rate of ~64% since FY2014. In AMZN’s case, earnings have grown at 101% compound over the past five years (FY2015). While these growth rates can not persist forever, both companies are expecting to double annual EPS again between FY2020 and FY2023, suggesting that their respective growth stories are far from over. This makes them attractive buy-the-dip candidates, especially since they’ve underperformed some of their peers over the past year, so they are nowhere near as extended from a technical basis. Let’s look at Paycom first:

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