While the latest bear market may not be over, traders can start targeting top companies likely to recover in time and outperform the market on the next leg up. One way to do that is to find tech companies that underperformed the market on the way down… even as they’ve continued to grow.
For many tech companies, that may mean finding a high profit margin or strong revenue growth in today’s environment.
One company that could be a winner on a rebound is Salesforce (CRM). The customer relationship management software company reported better-than-expected earnings. That was more than enough to offset the company’s report that there would still be headwinds in the quarter ahead.
Shares are down about 30 percent over the past year, and nearly 50 percent off their peak, even after a strong rally in the past few days and following earnings.
In the meantime, the stock has moved from 53 times earnings a year ago to 33 times forward earnings. And while not profitable yet, the company is showing 26 percent revenue growth now.
Action to take: The company has a strong lead in the CRM space, and a strong platform with communications app Slack. It’s likely going to continue growing strongly, even in a potentially weak economy. That makes shares a buy here, even if the company is a long ways from paying a dividend.
For traders, the September $200 calls, last going for about $5.00, offer mid-to-high double-digit return potential in the months ahead, particularly as shares continue their rebound.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.