The technology sector has played a leading role in driving market growth over the past few decades. New hardware, software, and services are changing business and daily life. Technology’s ability to shape and influence nearly every industry means this sector continues to be one of the best starting points for investors looking for big returns.
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8 cheap tech stocks to watch in 2024
8 cheap tech stocks to watch in 2024
After the severe selloff that started at the end of 2021, even some fast-growing stocks may be seen as great long-term trades at this point. And for many older, slower-growing tech stocks, valuations are attractive. Here are eight “undervalued” tech stocks that could deliver strong returns over the long term.
- Lumen Technologies (Ramun -5.63%)
- applied materials (Amat -1.92%)
- alphabet (Google -2.83%)(google -2.83%)
- AT&T (T -0.23%)
- IBM (IBM -1.55%)
- meta platform (meta 0.83%)
- Qualcomm (QCOM -2.39%)
- broadcom (AVGO -3.35%)
1. Lumen Technologies
1. Lumen Technologies
As part of a broader effort to refocus our business, CenturyLink changed its name to Lumen Technologies at the end of 2020 and continues to move forward under the new banner. The stock rose 28% in 2021, but fell sharply last year, and will continue to struggle in 2023 due to the pain of business transformation. However, the stock remains undervalued (just 2.5x trailing 12-month price). Free cash flow will increase in mid-2023, providing an attractive feature for investors looking for high dividend payments.
Lumen is pivoting its core business from copper-based broadband services to high-performance fiber lines, which are in high demand in the era of next-generation internet technology. The company is also leveraging its position in enterprise internet services to explore growth opportunities in edge computing, cybersecurity, and collaboration software. If the company’s turnaround efforts are successful, this high-value stock could yield big returns.
2. Applied Materials
2. Applied Materials
Applied Materials provides the equipment needed to manufacture semiconductors. Many semiconductor companies have business cycles, with revenues and profits rising and falling depending on consumer and corporate demand. However, Applied Materials has a more stable growth business model. New chip fabs and expansions require years of planning, and the equipment requires ongoing service, which is also a source of Applied’s revenue.
The company should be able to continue to grow in tandem with the overall microchip manufacturing industry and increased demand for connected industrial equipment, electric vehicles, and artificial intelligence (AI) technology. The diversification and localization of semiconductor supply chains is also being promoted around the world. The government has allocated billions of dollars to foster new manufacturing capacity in the country. This bodes well for Applied Materials. The company consistently generates high operating margins and returns all of its free cash flow to shareholders through dividends and share buybacks. The stock trades at just 18 times trailing 12-month free cash flow.
3. Alphabet
3. Alphabet
Alphabet, a FAANG stock (large tech companies with significant competitive advantages), has risen from high-flying internet search tech to value stock status. Alphabet’s Google search business has faced intense pressure from the overall slowdown in the digital advertising industry, but the company still generates operating margins in the 25% range. The company uses its profits to fund high-growth businesses such as YouTube and Google Cloud, as well as emerging technologies such as his self-driving car startup Waymo.
Alphabet also has one of the largest cash and short-term investment balances (excluding debt) of any public company, at over $100 billion as of early 2023. Combined with its strong product suite and long-term expansion potential, there are many possibilities. We like Alphabet, especially since the stock trades at 19.5 times forward one-year earnings.
4.ATT
4.AT&T
AT&T’s big vision to build a multimedia empire that could complement its telecommunications business didn’t go as planned. The company spun off its DirecTV satellite television business in 2021. The following year, the telecom giant spun off the Time Warner division it had paid $85 billion to acquire, resulting in a merger. warner bros discovery (WBD -3.32%). Although this move reduced its cash generation capacity and reduced its dividend, the company is now leaner and more efficient, and still offers a good dividend profile.
AT&T has returned to its focus on communications services and could be in the early stages of benefiting from a focus on driving growth in its 5G and fiber internet businesses. Mobile connectivity and high-performance internet are increasingly central to business and daily life, and digital connectivity is likely to become even more important over the next decade and beyond. Even after the dividend cut, AT&T stock still yields nearly 7%, and the stock is in ultra-cheap territory, trading at just 6.5 times next year’s expected earnings.
5.IBM
5.IBM
IBM, a longtime technology giant, has been in need of major changes in recent years. But that is certainly changing. The company is concentrating its business on cloud and hybrid cloud computing, leaving most of its traditional businesses independent. Kindrill Holdings (KD -1.19%The new IBM is back in growth mode, reporting mid-single-digit revenue growth into 2023. We expect to maintain a mid- to high-single-digit revenue growth rate over the next few years. While maintaining a high level of profitability,
IBM also pays a profitable dividend and expects to maintain that dividend as it refocuses on profitable cloud services.Stocks have high dividend yields and low dividend yields IBM’s P/E ratio (13.5x one-year forward earnings) and incremental growth opportunities in emerging computing services make it a great buy for value-seeking technology investors. there is a possibility.
6. Metaplatform
6. Metaplatform
Meta Platforms, the rebranded parent organization of Facebook, Instagram, and WhatsApp, took a hit. apple (AAPL -0.49%) and other digital advertisers have changed the way their apps track user activity on the internet. As a result, as of mid-2023, Meta was trading at just 17.5 times next year’s expected earnings. The social media giant is undervalued compared to many other giants in the tech space and has a good chance of outperforming the market over the long term if it can adapt its business. .
Meta is also making significant investments in AI, and these efforts have the potential to improve developer and platform efficiency and improve the performance of its core advertising business. In a bid for longer-term growth, the tech giant is also making big bets on the Metaverse and virtual reality. The company believes there are significant growth opportunities in the virtual world and intends to continue playing the long game in developing related technologies and platforms. With billions of users around the world, Meta can capitalize on the long-term growth of digital advertising and use the profits to drive growth in other areas such as the Metaverse and e-commerce.
7. Qualcomm
7. Qualcomm
Nearly every smartphone on the planet has some kind of Qualcomm chip inside, and as mobility expands to include other devices (cars, smart home devices, industrial equipment, etc.), Qualcomm is poised for new avenues of growth. is finding. However, Qualcomm’s trading price is lower than that of many of its semiconductor industry peers, mainly because it is widely believed that Apple will eventually break with Qualcomm entirely and use its own mobile chips in the iPhone and iPad. is also low.
In spring 2023, Qualcomm stock was valued at just 17 times its trailing 12-month free cash flow. But in the coming years, the company believes it will see even greater growth with new mobility chip designs. Along the way, shareholders receive modest dividend yields and share buybacks to sweeten the deal.
8. Broadcom
8. Broadcom
Broadcom is also a value stock in the semiconductor industry, trading at just 17 times trailing 12-month free cash flow as of spring 2023. The leading developer of mobile circuits and networking equipment has been growing slowly but steadily and is heavily indebted, giving it a steep discount compared to some of its peers.
But Broadcom uses debt to acquire complementary software services, and this business is a cash cow. It generates more than enough revenue (over 40% operating margin) to repay interest payments, gradually pay down debt, and provide a solid dividend to shareholders. Semiconductors and related computing hardware and software are Long-term growth trends make Broadcom a solid technology value stock for the long term.
Related investment topics
What to look for in tech stocks
What to look for in tech stocks
Investors can generally gain useful information by looking not just at a tech company’s sales and profit growth, but also at valuation metrics such as price-to-sales and price-to-earnings ratios. There are many other useful stock indicators to consider. For example, in addition to each company’s number of active users and customers, it’s helpful to monitor how much revenue and profit the company generates per user or per client.
The technology sector includes a vast number of companies that offer a wide variety of products and services. While there is no reliable one-size-fits-all approach to valuing stocks in this space, it is possible to chart and maintain business momentum. Keeping your core values in mind will help you identify winners.
Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. Keith Noonan He has held positions at AT&T and Warner Bros. Discovery. The Motley Fool has positions in and recommends Alphabet, Apple, Applied Materials, Meta Platforms, Qualcomm, and Warner Bros. Discovery. The Motley Fool recommends Broadcom and International Business Machines. The Motley Fool has a disclosure policy.
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