Investors are cautiously looking for opportunities in the technology sector as consumer demand slows. Better-than-expected CPI numbers gave tech stocks a huge boost last week with the Nasdaq now up +4% in the past month as Wall Street is betting the Fed can ease its fight against inflation.

Higher rates have a negative effect on technological growth. Most tech stocks, including the big tech stocks, are often valuable to their growth prospects, but this could continue to fade in the near term.

That said, let’s look at two tech stocks that can buck this trend and should add valuable diversification to stock portfolios.

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Image source: Zacks Investment Research

DBX by Dropbox

Dropbox currently sports a Zacks Rank #2 (Buy), as earnings estimates rise even as giants like Alphabet GOOGL see their earnings estimates fall.

The Dropbox platform allows users to store digital content including files, photos, videos, songs and spreadsheets. DBX has struggled a bit since its 2018 IPO. But past performance doesn’t determine future success.

DBX’s earnings are forecast to rise 2% in 2022 and jump another 10% in FY23 to $1.73 per share, based on estimates from Zacks. Top-line growth is also expected, with sales set to climb 7% this year and another 6% in FY23 to $2.46 billion.

DBX is down -10% YTD to outperform the S&P 500 -18% and the Nasdaq -28%. DBX is now down -22% since its IPO, which underperformed the benchmark and the Nasdaq.

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Image source: Zacks Investment Research

Trading around $22 per share, investors have an opportunity to get into DBX stock closer to its IPO range of $16-18 per share. At its current levels, DBX is trading for 14.1x forward gains. This is 20.3x below the industry average P/E. Even better, this is well short of its high of 1,835.2x and median of 36.5x since it went public.

Now could be a good opportunity to buy DBX stock with the average Zacks price target suggesting a 26% upside from current levels, and consolidated digital storage becomes more important as cloud services grow.

Jabil JBL

Another name to consider in the technology sector is Jabil Inc. The company brings diversity to investor portfolios as one of the largest global providers of electronics manufacturing services. Jabil provides electronic design, manufacturing, product management and aftermarket services to customers spanning aerospace, automotive, information technology, consumer, defense, industrial, medical, networking, storage, telecommunications and more.

JBL currently boasts a Zacks Rank #1 (Strong Buy) with rising earnings estimates for FY23 and FY24. Jabil’s earnings are expected to rise 7% in the company’s fiscal 2023 and increase another 6% in fiscal 24 to $8.69 per share. Sales are expected to increase 3% in FY23 and another 3% in FY24 to $35.54 billion.

JBL’s electronics manufacturing services space is currently in the top 1% of more than 250 Zacks Industries. JBL is only down -1% YTD to broadly outperform the S&P 500 and Nasdaq. More impressively, JBL is up +266% over the past decade, close to the stellar performance of the Nasdaq and beating the benchmark.

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Image source: Zacks Investment Research

Trading around $69 a share and near 52-week highs, JBL still has an attractive valuation with an 8.2x forward P/E. This is 11.6 times below the industry average. Better yet, JBL is trading at a significant discount from its 10-year high of 130.2x and well below its median of 12.7x.

Zacks’ average price target suggests a 13% upside from current levels.

Bottom line

At the moment, investors may not want to be overweight in the technology sector, but there are good opportunities in the making. Now could be a good opportunity to buy these two tech stocks as they are seeing earnings estimate revisions ramping up as the market and the broader economy expect slower growth.

Zacks Names ‘Best Single Pick for Doubles’

Out of thousands of stocks, 5 Zacks experts each picked their favorite to skyrocket +100% or more in the months ahead. Out of these 5, Research Director Sheraz Mian picks one that has the most explosive edge of all.

It’s a little-known chemical company that’s up 65% from last year, but it’s still cheap. With relentless demand, rising earnings estimates for 2022, and $1.5 billion in share buybacks, retail investors could step in at any moment.

This company could match or outpace other recent Zacks stock set to double as Boston Beer Company which is up +143.0% in just over 9 months and NVIDIA which is up +175.9% in a year.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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