Top Tech Stocks for October 2022

HPE, EEFT, and ENPH are top for value, growth, and momentum, respectively

The technology sector is composed of businesses that sell goods and services in electronics, software, computers, artificial intelligence (AI), and other industries related to information technology (IT). The sector includes companies with the largest market capitalizations in the world, such as Apple Inc., Microsoft Corp., and Amazon.com Inc.

Tech stocks, represented by the S&P 500 Information Technology Index (XLK), have outperformed the broader market over the past year. The index has provided investors with a total return of -6.9% over the past 12 months, above the Russell 1000's total return of -12.0%. These market performance numbers and statistics in the tables below are as of Sept. 20, 2022.

Here are the top five tech stocks with the best value, fastest growth, and most momentum.

Best Value Tech Stocks

Value investing is a factor-based investing strategy that involves picking stocks that you believe are trading for less than what they are intrinsically worth, usually by measuring the ratio of the stock’s price to one or more fundamental business metrics. A widely accepted value metric is the price-to-earnings (P/E) ratio. Value investors believe that if a business is cheap compared to its intrinsic value (as measured by its P/E ratio, in this case), then its stock price may rise faster than that of others as the price comes back in line with the worth of the company. These are the tech stocks with the lowest 12-month trailing P/E ratio.

Best Value Tech Stocks
  Price ($) Market Cap ($B) 12-Month Trailing P/E Ratio
Hewlett Packard Enterprise Co. (HPE) 12.76 16.4 4.6
HP Inc. (HPQ) 26.45 26.6 4.6
Arrow Electronics Inc. (ARW) 96.48 6.2 4.8
Dell Technologies Inc. (DELL) 36.95 27.1 5.3
Avnet Inc. (AVT) 37.89 3.6 5.5

Source: YCharts

  • Hewlett Packard Enterprise Co.: Hewlett Packard Enterprise sells a broad range of products and services in areas including cloud services, high-performance computing and AI, software, and storage. The company has 55,000 customers globally, and its edge networking connects 10 million devices.
  • HP Inc.: HP sells desktop and notebook computers, workstations, retail point-of-sale systems, displays, printers and hardware, and support and services. HP’s customers include individual consumers, businesses, and governments. The company holds 27,000 patents and operates in 170 countries throughout the world. On Aug. 29, HP announced that it had completed the acquisition of Poly, a provider of video conferencing services, cameras, headsets, and related software. The acquisition is expected to bolster HP's offerings in peripherals and workforce solutions, which are $110 billion and $120 billion segments, respectively. The total enterprise value of the acquisition was about $3.3 billion.
  • Arrow Electronics Inc.: Arrow Electronics provides technology products and services, including electronic components, distribution, and solutions for clients in enterprise computing. Arrow employs nearly 21,000 around the world and serves more than 220,000 global customers. Arrow reported on Sept. 15 that its board of directors authorized the repurchase up to an additional $600 million of common stock through its existing repurchase program.
  • Dell Technologies Inc.: Dell Technologies sells computer products and services to consumers and businesses, including hardware, software, peripherals, data center infrastructure, and cloud technology, As of Jan. 28, 2022, Dell employs a roughly 32,000-person sales force and about 35,000 service and support professionals.
  • Avnet Inc.: Avnet is a distributor of electronic components and offers related services. Its offerings include development boards and kits, global linecards, embedded solutions, and more. The company ships over 283 billion units annually. Avnet announced on Sept. 6 that its board had appointed Ken A. Jacobson as chief financial officer (CFO). Jacobson has been vice president and corporate controller of the company since 2013 and served as interim CFO in 2017-2018.

Fastest-Growing Tech Stocks

These are the top tech stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in a company’s success. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with a quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.

Fastest-Growing Tech Stocks
  Price ($) Market Cap ($B) EPS Growth (%) Revenue Growth (%)
Euronet Worldwide Inc. (EEFT) 84.78 4.2 575.0 18.0
TD Synnex Corp. (SNX) 90.00 8.6 -12.9 160.7
Shift4 Payments Inc. (FOUR) 47.74 2.6 260.0 44.4
Enphase Energy Inc. (ENPH) 304.71 41.3 92.9 67.8
Monolithic Power Systems Inc. (MPWR) 410.84 19.2 104.3 57.2

Source: YCharts

  • Euronet Worldwide Inc.: Euronet Worldwide is a financial technology solutions and payments provider offering services to financial institutions, retailers, and individuals. It operates over 51,000 ATMS around the world as well as outsourced credit and debit card services in over 60 countries.
  • TD Synnex Corp.: TD Synnex sells IT services and products. It distributes a broad range of IT products, including PC systems, consumer electronics, storage, networking, and servers. The company employs 22,000 and serves customers and vendors in over 100 countries. The company released its most recent earnings report on June 28 for Q2 FY 2022. Net income climbed by 60% year-over-year (YOY) on revenues that nearly tripled. Results were impacted by the company's merger with Tech Data. TD Synnex will report results for Q3 FY 2022 on Sept. 27.
  • Shift4 Payments Inc.: Shift4 Payments provides payment processing services supporting over $200 billion in transactions and 3.5 billion separate transactions annually. For Q2 2022, ended June 30, Shift4 reported net income which more than tripled YOY on solid revenue gains. The company said that it has continued to win market share in the restaurant and hospitality industries, helping to drive growth.
  • Enphase Energy Inc.: Enphase Energy designs, builds, and sells solar energy equipment and hardware including microinverters, energy generation monitoring equipment and software, and battery storage products. Enphase has installed over 48 million microinverters on over 2.5 million homes in more than 140 countries.
  • Monolithic Power Systems Inc.: Monolithic Power Systems provides semiconductor-based power products and solutions for customers in a broad range of areas, including industrial applications, telecom infrastructures, cloud computing, and automotive. As of Dec. 31, 2021, Monolithic employed more than 2,700 in offices in Asia, Europe, and the U.S. The company announced on Sept. 15 that it would pay a Q3 dividend of $0.75 per common share. The dividend is payable Oct. 14 to shareholders as of Sept. 30.

Tech Stocks With the Most Momentum

Momentum investing is a factor-based investing strategy that involves investing in a stock whose price has risen faster than the market as a whole. Momentum investors believe that stocks that have outperformed the market will often continue to do so because the factors that caused them to outperform will not suddenly disappear. In addition, other investors, seeking to benefit from the stock’s outperformance, will often purchase the stock, further bidding its price higher and pushing the stock higher still. These are the tech stocks that had the highest total return over the past 12 months.

Tech Stocks With the Most Momentum
  Price ($) Market Cap ($B) 12-Month Trailing Total Return (%)
Enphase Energy Inc. (ENPH) 304.71 41.3 99.9
Aspen Technology Inc. (AZPN) 226.24 15.1 80.0
ON Semiconductor Corp. (ON) 68.48 29.7 43.7
Wolfspeed Inc. (WOLF) 119.36 14.8 42.2
First Solar Inc. (FSLR) 133.31 14.2 39.3
Russell 1000 Index N/A N/A -12.0
S&P 500 Information Technology Index N/A N/A -6.9

Source: YCharts

  • Enphase Energy Inc.: See company description above.
  • Aspen Technology Inc.: Aspen Technology provides process software and services for manufacturing and other capital-intensive industries. It has over 3,700 employees in more than 60 locations around the globe.
  • ON Semiconductor Corp.: ON Semiconductor is a semiconductor manufacturer serving markets including automotive, communications, computing, and medical. The company operates 43 design centers in 19 countries and employs about 33,000.
  • Wolfspeed Inc.: Wolfspeed, a semiconductor manufacturer focused on silicon carbide and gallium nitride products, is focusing on new markets such as energy storage, electric cars, and 5G networks. In early September, the company announced that it would build a multi-billion-dollar materials manufacturing facility in Chatham County, North Carolina. The facility will aim to increase silicon carbide production capacity more than 10-fold relative to Wolfspeed's current capacity.
  • First Solar Inc.: First Solar is a major producer of solar panels and related components. By 2025, the company expects to have a global annual manufacturing capacity of over 20 gigawatts. On Aug. 30, First Solar announced that it would invest up to $1.2 billion in an effort to scale production of American-made photovoltaic solar modules. The investment will support First Solar's plans to build its fourth fully vertically integrated domestic factory, located in the southeastern U.S. The factory is expected to begin operating in 2025.

The Impact of Inflation on Technology Stocks

Technology stocks have historically underperformed other sectors during periods of rising inflation. Conversely, the group typically outpaces the broader market during times of falling inflation. For example, the technology bull market between 2009 and 2021 coincided with an annualized historically low inflation rate of 1.7% over that period. Moreover, the sector has led broad market declines year-to-date (YTD) in 2022 amid inflation, reaching a 40-year high in June of 9.1%.

The question then becomes: why are technology stocks so sensitive to inflation? It all relates to interest rates. Rising inflation indicates that the Federal Reserve will likely increase its federal funding rate to taper demand. Higher interest rates affect technology companies in two ways. Firstly, consumers and businesses will have less income to buy technology products and services, which has a flow-on effect of slowing corporate earnings. Secondly, technology companies borrow heavily to fund startup costs, patents, and innovation expenses, meaning the cost of servicing that debt increases when interest rates rise. 

Indeed, the opposite happens when inflation declines. The Federal Reserve will likely lower interest rates, which spurs consumer demand and reduces technology companies' borrowing costs.

Advantages of Technology Stocks

Investing in Innovation: Investing in technology stocks allows investors to back revolutionary ideas that have the potential to improve people’s lives. Technology companies of all sizes continually push boundaries to be first to market with game-changing technology, whether it be Apple Inc. (AAPL) with a new health feature for its iWatch or a startup developing a game-changing semiconductor for the automotive industry.  

Growth Potential: Technology stocks offer the potential for sizeable gains, with investors usually prepared to pay a premium for future growth. For instance, as of August 2022, the technology sector trades at 20 times forward earnings. By comparison, the energy and financial sectors have forward price-to-earnings ratios (Forward P/Es) of 7.61 and 12.34, respectively. Although the biggest gains can be found in small-cap technology stocks, even mega-cap tech titans, such as the original FANG members — Meta Platforms, Inc. (META), Amazon.com, Inc. (AMZN), Netflix, Inc. (NFLX), and Alphabet Inc. (GOOGL) — have an annualized return of 20.41% over the past decade.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. Though we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

Article Sources
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  26. Wolfspeed Inc. "Wolfspeed Selects North Carolina for World’s Largest Silicon Carbide Materials Facility."

  27. First Solar Inc. "Overview."

  28. First Solar Inc. "First Solar to Invest up to $1.2 Billion in Scaling Production of American-Made Responsible Solar by 4.4 GW."

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