The stock market, incredibly enough, is holding its own after a small stumble last week. Although not in full-blown rally mode, treading water while investors take some time to reassess where things are is a type of win in-and-of itself.
Still, some groups have been hit harder than others, and some names within certain groups are lagging their sector-based benchmarks. Tech stocks are among the names that lost the most ground since the market-wide July peak. They’ve also been less than impressive on the way back up, held back by some names more so than others.
Not all of those laggards are necessarily names not worth owning, though. In fact, their recent weakness has made some of the top tech stocks even bigger and better bargains.
Here’s a rundown of the market’s top tech stocks to buy while trading at beaten-down prices.
Broadcom (AVGO)
It has hardly been a disaster, but the 11% setback Broadcom (NASDAQ:AVGO) shares have suffered since their April peak is decidedly sub-par.
Yes, fears about the trade impasse with China were a key part of this weakness, though not just fears of a slowdown. The company warned investors in June that the ban on doing business with Huawei Technologies would ultimately shave $2 billion worth of revenue off of its top line this year. The trade war is also pegged as the reason Broadcom was blocked from acquiring Qualcomm(NASDAQ:QCOM) … a deal that would have proven a boon here at the advent of 5G connectivity.
Capitalism finds a way. Even if the trade meeting planned between President Donald Trump and China’s President Xi Jinping for October isn’t progressive, analysts are still modeling slow and steady profit growth for this year and next. Per-share earnings should be up 10% next year.
FireEye (FEYE)
As of December, it looked like FireEye(NASDAQ:FEYE) had finally escaped its funk. Fueled by continued sales growth and a move deeper into operational profitability, at the time, FEYE stock was up nearly 90% from its early 2017 lows.
The market changed its mind once again though. Despite the fact that the cybercrime and hacking threat only worsens every year, investors sold off their stakes in the small cybersecurity name. Since December, FireEye shares have fallen 30%. The tepid guidance issued as part of last quarter’s earnings report accounted for a sizeable chunk of that weakness.
The pullback may have created an opportunity to step into a now-undervalued name, however. As Bank of America’s Tal Liani opined after FireEye’s quarterly report, the phase-out of its third generation product and launch of its fifth-generation product is all but complete, setting the stage for a full recovery of gross margins.
Citrix Systems (CTXS)
Citrix Systems (NASDAQ:CTXS) allows enterprises and institutions to get more out of their IT infrastructure. More than just networked computers, Citrix offers tools and apps to let teams collaborate and communicate.
The market for such platforms is robust, but so is the competition. Citrix perpetually seems to be a step ahead of the others, securing the best deals. Case in point? Last month, Citrix Systems announced it would be the name to develop a “desktop as a service” solution for software giant Microsoft (NASDAQ:MSFT).
Partnerships like that are the reason the company has been able to make slow and steady progress. Subscription-based revenue, up 41% a quarter ago, adds more stability to its top and bottom lines.
CTXS stock is down 18% since the end of August of last year, but now valued at less than sixteen times next year’s projected earnings, the worst may all be in the past.
Dell Technologies (DELL)
Yes, this is the same Dell Technologies(NYSE:DELL) that was started by Michael Dell in 1984, only to be taken private in 2013. Through a complicated corporate structure involving VMware (NYSE:VMW), it became a publicly-traded entity again.
The backstory seems irrelevant given the weak demand for personal computers right now. Except the environment isn’t as weak as it seemed to be as recently as the first quarter of this year … at least not for Dell. Though last quarter’s top line was only up 1%, it was up 1% when most of its rivals saw their sales decline. Earnings of $2.15 per shareof DELL stock also trounced estimates for a profit of only $1.50.
As Raymond James analyst Simon Leopold put it, Dell is “a nice house in a tough neighborhood.”
II-VI (IIVI)
When most investors are looking for tech stocks to buy, II-VI (NASDAQ:IIVI) isn’t a name that often comes to mind. Indeed, II-VI likely isn’t even a name most investors have even heard of. Aside from the odd moniker, with a market cap of only $2.4 billion, the optoelectronic components company doesn’t get much in the way of the media’s attention.
Don’t let its small size fool you. II-VI packs a punch. Last quarter’s top line improved to the tune of 13%, and operating profits grew 29%.
Disappointing guidance negated those strong quarterly results, allowing a long-standing dry spell for IIVI stock to grow a little longer. Shares are now priced at 25% less than early-2018 peak value. With more of the same kind of earnings and profit growth translating into a forward-looking P/E of 11.65, II-VI looks like a lower-risk, bargain-priced pickup particularly now that it’s going to merge with Finisar (NASDAQ:FNSR).
Oracle (ORCL)
All too often, Oracle (NYSE:ORCL) appears to be a proverbial punching bag. From being criticized for not offering ‘real’ cloud-based solutions to being on the wrong side of a legal argument with the Defense Department to downplaying its own MySQL platform if hosted by a competitor, the company can’t catch a break.
Yet, the stock continues to march forward. It’s anything but a straight-line march. After rallying from its late-2018 low near $43 to the July high near $60, ORCL stock fall back to nearly $51 last month. Now it’s approaching $55 again.
If you can stomach the headline-driven volatility, these dips have proven great entry points. That may have something to do with the fact that Oracle rarely fails to grow its top and bottom lines, regardless of alarming headlines.
Teladoc Health (TDOC)
Teladoc Health (NYSE:TDOC) isn’t profitable and probably won’t be for a long, long time. Ergo, it’s not a holding that’s right for everybody’s portfolio. If you understand the risks and nuances involved with a young startup though, TDOC stock has earned a spot in a list of stocks to buy for the story, even if not for the results.
Teladoc Health, in simplest terms, offers virtual doctor’s visits by using the internet to allow patients to make video calls to physicians. The company’s doctors can even write prescriptions for users of the service.
It’s certainly out of the ordinary, or was anyway. It has quickly becoming the norm, so much so that Walgreens Boots Alliance (NASDAQ:WBA) has launched an app to help its customers find a telehealth option that’s often more convenient than going to a clinic.
Further validating the idea is raw growth. Teladoc’s top line is on pace to grow 30% this year, and 25% next year.
ServiceNow (NOW)
Last week, information technology sector research outfit Gartner put software company ServiceNow (NYSE:NOW) in its so-called magic quadrant … for the sixth year in a row. The accolade means not only is ServiceNow’s core product a game-changer, but the company also delivers IT service management better than any other players in the same sliver of the tech world.
Gartner’s lofty opinion doesn’t inherently make NOW stock a buy. But, in some regards, ServiceNow’s results reflect how Gartner feels. This year’s revenue is projected to be up nearly 33%, while next year’s is forecasted to improve almost 29%. Earnings are growing commensurately with revenue.
It’s also worth noting that, despite the 17% setback since its mid-July peak, analysts still collectively feel NOW stock merits a price target of $317.72. That’s 25% better than the stock’s present price.
HP (HPQ)
HP (NYSE:HPQ), the consumer-facing half of 2015’s split from the entity that would also spawn Hewlett Packard Enterprise(NYSE:HPE), has been more than a little roughed up lately. Tepid PC demand has dragged HP stock from its late-2016 peak of $85.76 to a multi-year low of near $36 earlier this month. The bounce back to the current price of $43 only wipes away a tiny portion of that loss.
Bernstein analyst A.M. Sacconaghi made an interesting and valid point this week though, suggesting the sentiment surrounding HP stock was so pessimistic that it also serves as something of a floor.
It’s valuation certainly helps on that front. Although its future is fuzzy, priced at only seven times its trailing profits and a modest 8.5 times next year’s expected earnings, investors have more than priced in the most extreme of headwinds.
Cognizant Technology Solutions (CTSH)
Finally, add Cognizant Technology Solutions (NASDAQ:CTSH) to your list of tech stocks to buy after an unnecessarily severe selloff.
As of the latest look, even with the rebound from its May low near $57, CTSH stock’s current price around $64 is still 25% less than where shares were trading in March of last year. The selloff has nothing to do with a lack of growth or value though.
While the all-purpose IT outfit has never been a high-growth machine, single-digit sales growth has been reliable for years thanks to the company’s stature as, in Forrester Research’s words, “a strong choice for a broad range of modernization and migration tasks, including accelerated cloud migration.” Top-line growth should perk up again next year as well.
The real hook here, however, is the stock’s valuation. Priced at less than 15 times next year’s expected earnings, there’s a reason shares have already stopped falling and started testing the water of higher highs.
As of this writing, James Brumley held a long position in FireEye. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.