Thursday, April 25, 2024
Stocks To Buy

7 Cheap Tech Stocks to Buy Before the Next Breakout   

There are plenty of cheap tech stocks to buy since so many lost a lot of their value over the last year.

The tech-heavy Nasdaq composite index has lost more than 33% of its value in 2022. Rising interest rates and runaway inflation have driven a lot of the fear that has caused the exodus.

With inflation showing some signs of easing there’s reason to believe an inflection point will soon be reached, and that has investors scrambling to identify cheap tech stocks to buy before the next breakout. 

The stocks below possess significant upside, can weather further issues, and benefit from secular trends. All in all, they remain cheap and should remain strong considerations for serious investors. 

AVGO Broadcom  $557.70
IBM IBM  $141.34
CSCO Cisco  $46.84
AAPL Apple  $125.89
CRM Salesforce  $136.26
QCOM Qualcomm $110.12
GOOG Alphabet  $87.20

Broadcom (AVGO)

Broadcom (NASDAQ:AVGO) should be one of the cheap tech stocks that rebounds well during the next upward cycle in tech. The company develops semiconductor and infrastructure software solutions and has strong upside built into its pricing.

Broadcom recently posted a particularly strong quarter and a strong narrative for investing becomes more apparent. The company reported revenues of $8.93 billion in Q4. That represented a 21% increase on a year-over-year basis and was in line with analyst expectations.

That said, the company’s EPS of $10.45 was well ahead of the $10.28 Wall Street had anticipated. In short, the company proved that it can exceed expectations even as broader tech worries concern investors at large. 

The strong performance led management to increase Q1 ‘23 revenue guidance 16% higher than what it expected a year ago, to $8.9 billion. 

IBM (IBM)

IBM (NYSE:IBM) is an interesting investment opportunity. The company is essentially fully priced currently. That means it’s trading near its stock price target. In general, that’s not a great entry point given it implies there is little to no upside price appreciation. 

However, investors also need to understand that the IBM of today is not the IBM of the last decade. The stock has been lampooned as one of the worst big-name performers during that period. For instance, $1,000 invested in IBM stock a decade ago would now be worth $1,196. Very disappointing in any sector, but especially in tech. 

But IBM has become a new company over the last year. It spun off its legacy IT business as a company called Kyndryl (NYSE:KD) in late 2021.

IBM is now increasingly focused on areas of secular growth including cloud and infrastructure which both saw revenues increase by 15% in Q3. The point here is that IBM has revitalized its operational focus and although it is fully priced now its strong performance indicates that it can move higher still, making itn one of the cheap tech stocks to keep your eye on. 

Cisco (CSCO) 

Investors should understand that Cisco (NASDAQ:CSCO) stock is currently in something of a sweet spot as it relates to market dynamics.

Generally speaking, investor capital tends to reward tech companies when they adjust their employee bases during tough times. In other words, tech companies that lay off workers during downturns generally see their stock price benefit. 

Layoffs were precisely what the company telegraphed when it released earnings in mid-November. CEO Chuck Robbins noted that the company would be “right-sizing certain divisions” at that time. 

And that’s what happened a month later when the company laid off 4,100 workers a week before Christmas. Brutal? Arguably yes. But also a strong signal for investors as the company is becoming leaner and likely demanding more of its core employee base.

The company raised its full-year guidance when it released stronger-than-expected earnings in mid-November. Expect it to become stronger under its now leaner operational base and already strong performance. 

Apple (AAPL)

Shares of Apple (NASDAQ:AAPL) stock are now on sale following more than a month of chaos. In November, worker clashes at Foxconn, a major iPhone supplier, caused major concern for the company.

Those concerns have been exacerbated by China’s lifting of Covid-19 lockdown measures. Now worker health becomes the primary issue as no one is sure how many Foxconn workers have contracted Covid-19. 

That may not sound very reassuring for investors in AAPL shares. However, sources close to the supply chain are confident that production is better now than it was during the worker clashes in November. The latest figures suggest that Foxconn’s production levels have recovered to nearly 70%

I believe that all of the chaos of the last few months has resulted in an opportunity for investors. AAPL shares have fallen roughly $10 as a result of all of the issues. But those issues are clearly being resolved and Apple has proven to be the best of the big tech stocks in 2022. This dip is a rare opportunity to get $10 of free upside. 

Salesforce (CRM)

Salesforce (NASDAQ:CRM) stock is either undervalued or extremely undervalued. Either way, it appears to be very cheap and worth investing in currently. 

The more than 50 Wall Street analysts covering the cloud-based customer relationship management firm assign it a consensus target price of $195. That’s more than 47% upside.

Fundamental analysis site Gurufocus assigns CRM stock a target price of $287. That’s more than double the stock’s current price of $132. Neither of those figures represents any type of guarantee of course. However, both suggest that CRM shares are cheap tech stocks to buy before the next breakout. 

Salesforce reported reasonably strong Q3 numbers with 14% revenue growth on $7.84 billion of sales. Earnings per share reached $1.40 which was well above the $1.22 consensus Wall Street had been anticipating.

The company is going through a tumultuous period of executive shuffling but the upside is difficult to ignore. Consider also that Salesforce returned $1.7 billion to investors during the quarter in the form of share repurchases. 

Qualcomm (QCOM) 

Qualcomm (NASDAQ:QCOM) stock has faced several large issues over the past year. Its place as a major supplier to Apple now looks secure.

That had been a major issue as Apple has long sought to bring chip manufacturing for its iPhone business in-house. But Qualcomm will continue to supply Apple through 2025 as Apple’s in-house 5G modem development is lagging. 

While that is a major win, Qualcomm is facing serious pressure elsewhere. Namely in flagging consumer demand for smartphones amid a worsening economy and high inventory. Qualcomm had invested heavily in building inventory during the pandemic while also benefiting from high consumer demand due to strong consumer finances. 

That doesn’t necessarily bode very well for Qualcomm. However, the company noted back in September that its automotive pipeline had reached a value of $30 billion.

The company’s Snapdragon processors are seeing strong demand in the rapidly growing automotive semiconductor sector. That, along with the Apple news, should be enough to keep QCOM relevant and set it up to rebound quickly in the future. 

Alphabet (GOOG,GOOGL)

Alphabet (NASDAQ:GOOG) shares remain relatively cheap at $89 and possess plenty of upside. Alphabet was arguably fine overall even though general ad spend has declined with the worsening economy.

The company did manage to grow its revenue base by a modest 6% in the most recent quarter. True, that was a significant decline from the 41% revenue growth between Q3 ‘20 to Q3 ‘21. But Alphabet remains a dominant force in search with an improving cloud business.

The argument then went that Alphabet is cheap now, so buy it because it won’t be supplanted. 

I’d agree with that argument. But other investors were on the fence due to declining YouTube ad revenue. That ad revenue fell 1.9% in Q3, its first-ever decline.

Alphabet is paying $2 billion for rights to NFL Sunday Ticket. That should help investors to recognize that the company will continue to improve its streaming services which should help YouTube’s flagging ad revenues. 

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks.Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

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