Tech stocks had as difficult a year as any sector in 2022, with the Nasdaq-100 tech index falling more than 39% over the past year. It's hard to find tech stocks, which are known for their growth, that weren't hit by falling share prices.
Health Catalyst (HCAT 4.40%), Oracle (ORCL +0.75%), and Microsoft (MSFT 1.33%) are all poised to bounce back this year because their financials never really faltered, despite negative market sentiment for the sector. All three companies are riding the increase of cloud computing and above-average margins to generate improved earnings.
Savvy investors may want to buy these three now while their valuations are relatively low because they all look like great long-term investments. According to a MarketsandMarkets report, the cloud computing market was considered to be worth $545.8 billion in 2022 and is expected to have a compound annual growth rate of 17.9% over the next five years, reaching $1.2 trillion by 2027.
Health Catalyst's silver lining
Health Catalyst focuses on delivering data and analytics technology to healthcare organizations. Its cloud-based platform allows healthcare organizations to store and organize patient records and clinical data.
NASDAQ: HCAT
Key Data Points
Although the company's shares plummeted more than 73% over the past year, the company's revenue continued its upward climb. It has increased revenue by 141% over the past five years. Through the first nine months of 2022, Health Catalyst reported revenue of $207 million, up 16.8% year over year. More importantly, the company is trimming its losses. Through nine months, it had a net loss of $101.6 million, a 2.5% improvement over the same period last year, and an earnings per share (EPS) loss of $1.97 compared to an EPS loss of $2.27 in the first nine months of 2021.
The price decline makes this growth stock a better deal, as its price-to-sales and price-to-book ratios have fallen to more realistic numbers.
HCAT PS Ratio data by YCharts
Oracle sees long-term strength
Oracle, which has branched out from a computer hardware company to one that provides cloud-based services, saw its shares fall a little over 6% over the past year, which isn't bad considering what happened to other tech stocks. That's because Oracle's transformation and recent acquisitions appear to be bearing fruit and its revenue is on track for a third consecutive yearly increase. It trades at 25 times earnings.
NYSE: ORCL
Key Data Points
Through the first six months of the company's 2023 fiscal results, it reported revenue of $23.7 billion, up 18% year over year, with net income of $3.3 billion, up 172% over the same period in fiscal 2022. Oracle also reported a six-month EPS of $1.20, compared to EPS of $0.43 in the same prior year period.
Oracle has been able to absorb its $28 billion purchase of healthcare IT company Cerner in June and that deal should continue to drive revenue. Company chairman and Chief Technology Officer Larry Ellison said Oracle is hoping its Cerner division can improve the automation of clinical trials to save pharmaceutical companies money and shorten the time it takes to bring new drugs to market, saving lives in the process.
In the short term, the company may take a hit to profitability from its Cerner deal. Oracle CEO Safra Catz, on the company's second-quarter earnings call, said the company is looking for economies of scale and ways to bring Cerner's profitability up to "Oracle's level," but next fiscal year could be a trough year for margins until that happens.
Oracle also offers a quarterly dividend, which it has increased for 12 consecutive years. The most recent bump was 33% to $0.32 per share, which equals a yield of around 1.6%. Its cash dividend payout ratio is only 40.9%, so there's room for increased dividends.
Microsoft remains a slam dunk
Microsoft is a classic stock for retirement because it offers both growth and consistency, along with an above-average dividend. The company's size and diversification give it an extra edge.
MSFT Revenue (Annual) data by YCharts
Thanks to its more than 28% share drop over the past year, it is also a little more affordable (historically anyway), trading at just over 24 times earnings.
Counting a record $198.3 billion in revenue in fiscal 2022, Microsoft has increased annual revenue for six straight years while also increasing annual net income and yearly EPS for four straight years.
The company is coming off a disappointing quarter, at least by its own standards. In the first quarter of fiscal 2023, which ended Sept. 30, 2022, revenue grew 11%, year over year to $50.1 billion, but net income was down 14% to $17.6 billion and EPS declined 13% to $2.35. The company's cloud revenue was the star at $25.7 billion, up 24% over the same period last year, but personal computing decreased slightly to $13 billion because of falling sales for Windows OEM and Xbox content and services.
The company has been in transition for a while, but this past quarter showed how much things have changed with more than 50% of the company's revenue coming, for the first time, from its Cloud segment (including commercial Office 365 subscriptions, Azure, LinkedIn, and Dynamics 365).
Microsoft boosted its quarterly dividend by 10% this year to $0.68 a share, the 20th consecutive year it has increased its dividend. The yield on the dividend is around 1.1% and the cash dividend payout ratio is only 29.3%, so the company can continue to increase it.
Like Health Catalyst and Oracle, Microsoft has exposure to the healthcare industry, and this year, it updated its Azure Health Data Services and Microsoft Cloud for Healthcare.
