Top Affordable Tech Shares Worth Investing in Immediately
Tackling Tech Stocks Amid Downturn:
** mainstream indices like the S&P 500 and the Nasdaq Composite have dropped from their record highs this year due to concerns about a sluggish economy, tariffs, inflation, and interest rate hikes. However, despite the broader market pullback, several top tech stocks continue to trade near their record highs.**
But it's not all doom and gloom for value investors. Here are three promising tech stocks that are currently trading at discount valuations: DigitalOcean (DOCN), Applied Materials (AMAT), and Lumen Technologies (LUMN). Let's examine why these three affordable tech picks could be worthy investments today.
1. DigitalOcean
A cloud infrastructure platform provider, DigitalOcean supplies 'droplets' of its servers to smaller to midsize businesses (SMBs) at lower prices compared to massive cloud titans like Amazon and Microsoft. In 2023, the company acquired Paperspace and introduced GPU-powered AI processing capabilities to its servers, further increasing its appeal.**
From 2020 to 2024, DigitalOcean recorded a compound annual growth rate (CAGR) of 25% in revenue and profitability. This impressive growth rate highlights its niche market's expansion and its potential for continued expansion alongside larger industry peers.**
Analysts predict DigitalOcean's revenue and EPS will grow at a CAGR of 14% and 19%, respectively, from 2024 to 2027. Despite its business maturing, it seems undervalued, trading at 22 times forward adjusted earnings and 4 times next year's sales.**
2. Applied Materials
Applied Materials is one of the global leaders in semiconductor equipment supply. Despite the semiconductor sector's struggles during the pandemic, supply chain disruptions, trade tensions, and other macroeconomic challenges, Applied Materials' revenue and EPS increased at a CAGR of 13% and 25%, respectively, from 2019 to 2024.
The coming years could present challenges for Applied Materials, as it faces tightened export restrictions on its equipment sales to China. However, it remains optimistic about long-term growth driven by the increased demand for AI chips, energy-efficient chips, denser memory chips, and more integrated solutions.
Applied Materials is a cyclical stock, but it still appears undervalued, trading at 16 times forward earnings and 4 times next year's sales. Plus, it offers a forward dividend yield of 1% and is committed to substantial share buybacks.
3. Lumen Technologies
Lumen, previously known as CenturyLink, faced a rough patch when its stock dipped below $1 in June 2024. Its revenue drop, steep losses, and eliminated dividend reflected poorly on its wireline connection-focused strategy in contrast to the success of competitors expanding into wireless markets.
A set of AI infrastructure partnerships with companies like Microsoft saved Lumen from collapse. The combined value of these multi-year contracts mushroomed to $8.5 billion by the end of 2024, helping Lumen recover.
Analysts forecast Lumen's annual revenue to keep declining until 2027, despite its ongoing unprofitability. Its AI deals and growth in the consumer-facing fiber business, however, could stabilize its long-term growth trajectory. Though not out of the woods yet, Lumen's enterprise value of $20.4 billion is less than twice its projected 2025 revenue, suggesting a bargain.
In short, these three affordable tech stocks – DigitalOcean (DOCN), Applied Materials (AMAT), and Lumen Technologies (LUMN) – offer potential for investing due to their discount valuations and growth potential. As always, interested investors should assess each company's financial health, ongoing trends, and current market conditions before making an investment decision.
- In the tech sector, DigitalOcean (DOCN) is an undervalued stock, trading at 22 times forward adjusted earnings and 4 times next year's sales, despite its strong revenue and profitability growth from 2020 to 2024.
- Applied Materials, a global leader in semiconductor equipment supply, shows promising growth potential, even with anticipated challenges due to tightened export restrictions on its equipment sales to China. The stock trades at 16 times forward earnings and 4 times next year's sales, offering a forward dividend yield of 1%.
- Lumen Technologies (LUMN), though facing difficulties in the past, has recovered significantly thanks to its AI infrastructure partnerships and growth in the consumer-facing fiber business. Despite ongoing unprofitability, its enterprise value of $20.4 billion is less than twice its projected 2025 revenue, suggesting a potential bargain.
- Investors seeking opportunities in tech stocks might find value in exploring DigitalOcean, Applied Materials, and Lumen Technologies, given their undervalued status and growth potential in the face of broader market challenges. However, it is crucial to examine each company's financial health, ongoing trends, and current market conditions before making investment decisions.
