In this article, we will be taking a look at the 10 Best Cheap Technology Stocks to Invest In.
Technology has been at the forefront of advancement and innovation in the recent past and is expected to be the primary catalyst in the future as well. The advancements in technology have not only improved the quality of life for individuals but have also resulted in improved productivity and efficiency across almost all aspects of life.
According to McKinsey & Company, the latest trends in the technology revolve around 14 major technologies, with clean energy, mobility, and connectivity leading the trends in terms of the investments made during 2021. Clean energy technologies focused on the whole energy value chain, from power generation to storage and distribution, were at the forefront with $257 billion investment last year. Other major trends include applied AI, Cloud, and edge computing, Web3, and immersive reality technologies, among others.
Despite the growing investments and the increasing importance of technology in our lives, the technology sector and the stocks of the companies that are part of this sector have not fared well in the recent past. The Nasdaq-100 index, heavily weighted with technology stocks, was down year-to-date by nearly 31%, as of September 26, 2022.
Global markets have been going through a rough patch with fears of an economic slowdown due to inflation and aggressive monetary policies implemented by central banks. On September 21, the US central bank raised interest rates by three-quarters of a percentage point for the third consecutive time and signaled further increases in the future.
The increase in interest rates has led to a significant drop in share prices across the US market. If economic data fails to meet expectations, there’s potential for further declines in stocks. Given the uncertainty, diversification across different companies and sectors can be a good idea. Given the lower valuations, there could be an opportunity for long term investors to buy quality blue chip stocks.
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Methodology
For the list of 10 Best Cheap Technology Stocks to Invest In, we found cheap stocks by finding stocks that were trading significantly below the average analyst price target.
We then filtered those stocks by only including tech companies and using the collective wisdom of hedge funds, we ranked them by the number of hedge fund holders in our database who held shares in the same stock at the end of Q2 2022.
10 Best Cheap Technology Stocks to Invest In
10. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 40
International Business Machines Corporation (NYSE:IBM), based in Armonk, New York, is a technology company engaged in providing hybrid cloud and artificial intelligence (AI) solutions. It offers Software, Consulting, Infrastructure and Financing solutions.
As of September 26, International Business Machines Corporation shares have lost 8.2% of their value since the beginning of the year and currently trade at a forward P/E ratio of 12.21. Despite the recent bearish trend, analysts have an average price target of $143.03 for International Business Machines Corporation shares, which represents a potential upside of 17% based on the current share price.
On August 16, Credit Suisse analyst Shannon Cross assumed coverage of International Business Machines Corporation with an ‘Outperform’ rating and a price target of $163, up from $156 for its shares. The analyst believes that the company is “is well positioned to likely benefit from what the company estimates is a $1T market opportunity in hybrid cloud.”
As of Q2 2022, 40 of the 895 hedge funds tracked by Insider Monkey owned shares of International Business Machines Corporation, valued at $948 million. Its largest shareholder was Ken Griffin’s Citadel Investment Group.
Alongside Meta Platforms, Inc. (NASDAQ:META), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT), International Business Machines Corporation is a cheap technology stock that’s held by many hedge funds at the end of Q2 2022.
9. Texas Instruments Incorporated (NASDAQ:TXN)
Number of Hedge Fund Holders: 55
Dallas, Texas-based Texas Instruments Incorporated (NASDAQ:TXN) is a global semiconductor company that designs, manufactures, tests, and sells analog and embedded processing chips. Its more than 80,000 products are used by customers across industrial, automotive, personal electronics, communications equipment, and enterprise systems.
As of September 26, Texas Instruments Incorporated shares have lost 14.4% of their value since the beginning of the year and currently trade at a forward P/E ratio of 18.09. The analyst estimate for Texas Instruments Incorporated isn’t so gloomy, however, as analysts hold an average price target of $186.61 for its shares which represents a potential upside of 16% based on the current share price.
As of Q2 2022, 55 of the 895 hedge funds tracked by Insider Monkey held shares of Texas Instruments Incorporated, worth $1.6 billion. First Eagle Investment Management was its largest shareholder with ownership of 3.5 million shares valued at $542 million.
8. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 65
Santa Clara, California-based Intel Corporation (NASDAQ:INTC) is a leading technology company best known for developing the microprocessors found in most of the personal computers used worldwide. It offers products for autonomous driving, 5G network, client connectivity, cloud computing, IoT, client computing, and AI and Analytics.
Intel Corporation shares have taken a significant beating so far this year with shares down by 46.56% year-to-date and trading at a forward P/E ratio of 10.44, as of September 26. A majority of the analysts are bullish on the prospects of the chipmaker with average price target of $37.80 for its shares, representing a 40% potential upside in the share value.
On September 7, Stifel analyst Ruben Roy initiated coverage of Intel Corporation with a ‘Hold’ rating and $32 price target. The analyst believes that “the company’s turn-around strategy is still in its “early innings” and significant capital needs will result in a negative impact to free cash flow through 2024”.
As of Q2 2022, 65 of the 895 hedge funds tracked by Insider Monkey owned shares of Intel Corporation, valued at $2.5 billion. Its largest shareholder was Generation Investment Management with ownership of 14.8 million shares valued at $553 million.
7. QUALCOMM, Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 71
San Diego, California-based QUALCOMM, Incorporated (NASDAQ:QCOM) is a leading wireless technology innovator and the driving force behind the development, launch and expansion of 5G technology. Its portfolio includes products for processors, modems, platforms, RF systems, and connectivity, among others.
QUALCOMM, Incorporated is among some of the worst performing stocks in the US market with shares down by 33.73% since the beginning of the year, as of September 26. With the forward P/E ratio currently hovering around 9.36, analysts have an average price target of $186.01, which represents a 55% potential upside to the current price.
On September 27, JPMorgan analyst Samik Chatterjee reiterated his belief in QUALCOMM, Incorporated shares as the analyst believes the stock’s current valuation “provides substantial upside, while downside remains limited despite smartphone headwinds”. The analyst maintains an ‘Overweight’ rating and a price target of $185.
As of Q2 2022, 71 of the 895 hedge funds tracked by Insider Monkey were long QUALCOMM, Incorporated, holding shares worth $2.8 billion. Its largest hedge fund shareholder is Ken Griffin’s Citadel Investment Group.
6. Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 116
San Francisco, California-based Salesforce, Inc. (NYSE:CRM) is the world’s leading customer relationship management platform provider. Its cloud-based platform has applications for sales, service, marketing, and more, with more than 150,000 companies using the platform.
As of September 26, Salesforce, Inc. shares have lost 42.15% of their value since the beginning of the year and trade at a forward P/E ratio of 25.88. Analysts maintain bullish sentiments for the stock with average price target of $222.41, representing 52% upside potential.
On September 27, Jefferies analyst Brent Thill told investors in a research note that Salesforce, Inc. can deliver high-teens growth while delivering margin leverage, and the analyst finds the stock “valued attractively at trough levels”. The analyst maintains a target price of $250 and a ‘Buy’ rating.
According to the Insider Monkey data on 895 leading hedge funds, 116 hedge funds were long Salesforce, Inc. shares as of Q2 2022, with the total shares held by hedge funds valued at $7.9 billion. Ken Fisher’s Fisher Asset Management was the largest shareholder on record with ownership of 15.7 million shares valued at $2.6 billion.
Like Salesforce, Inc., Meta Platforms, Inc., Amazon.com, Inc., and Microsoft Corporation are all cheap technology stocks held by many hedge funds in our database as of Q2 2022.
5. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 128
Apple Inc. (NASDAQ:AAPL) is a leading technology company focused on the designing, manufacturing, and marketing of smartphones, personal computers, tablets, wearables, and accessories, and sells a variety of related services.
Major products of Apple Inc. include the iPhone, Mac PCs, iPad, and accessories while service offerings include Apple Care, Cloud Services, Digital Content and Payment services. iPhone sales accounted for more than half of its revenue in the last fiscal year. The company announced the launch of iPhone 14 in the first week of September which could result in a surge in the company’s revenue.
Despite the bloodbath in the technology sector, Apple Inc. shares have only lost 15.28% of their value since the beginning of the year, as of September 26. The tech giant currently trades at a forward P/E ratio of 23.34 and offers up to 21% upside potential from the current price levels based on the average analyst price target of $182.01.
On September 20, Evercore ISI analyst Amit Daryanani raised the price target on Apple Inc. shares to $190 from $185, with an ‘Outperform’ rating. The analyst sees “modest unit upside” compared to low-single digit Street expectations, although average selling prices “could surprise materially”.
Apple Inc. is among the favorites of hedge funds, with 128 of the 895 hedge funds tracked by Insider Monkey holding its shares valued at a whopping $143 billion. Warren Buffet’s Berkshire Hathaway is its biggest shareholder with ownership of 894.8 million shares valued at $122.3 billion.
4. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 153
Alphabet Inc. (NASDAQ:GOOG), based in Mountain View, California, is the parent company of several companies including the Google, Verily Life Sciences, GV (formerly Google Ventures), Calico, and X-the moonshot factory. Majority of its revenue is generated by Google Services which comprises of ads, Android, Chrome, hardware, Gmail, Google Drive, Google Maps, Google Photos, Google Play, Search, and YouTube.
Alphabet Inc. announced the release of Android 13 earlier in August, adding multiple new features focused on personalization and privacy.
As of September 26, Alphabet Inc. shares have lost significant value since the beginning of the year as the shares were down 31.46% YTD, trading at a forward P/E ratio of 16.78. Analysts maintain bullish sentiments for the search engine operator, with an average price target of $148.95 for its shares, representing 51% upside potential to the current price.
Alphabet Inc. is one of the most commonly owned stock among the 895 hedge funds tracked by Insider Monkey. As of Q2 2022, 153 hedge funds owned shares of Alphabet Inc., valued at $22.3 billion.
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 184
Menlo Park, California-based Meta Platforms, Inc. is a technology conglomerate focused on building products and services that help people connect and communicate. Formerly known as Facebook, Inc., the tech conglomerate reports its business under two segments: Family of Apps – comprising social media web and smartphone apps Facebook, Instagram, Messenger, and WhatsApp; and Reality Labs – comprising augmented and virtual reality products including hardware, software, and content.
As of September 26, Meta Platforms, Inc. has lost 58.25% of the share value since the beginning of the year and trades at a forward P/E ratio of 12.67. The $226.23 average analyst price target suggests 66% upside potential, however.
In August, Morgan Stanley analyst reduced the price target on Meta Platforms, Inc. shares from $280 to $225, while Loop Capital lowered the price target from $180 to $165.
Meta Platforms, Inc. is among hedge funds’ favorites as 184 of the 895 hedge funds tracked by Insider Monkey hold its shares valued at a combined total of $18.2 billion.
Here is what Alger Capital specifically said about Meta Platforms, Inc.:
“Meta Platforms, Inc. operates Facebook, the world’s largest social network. The digital advertising industry is taking market share of advertising dollars from print, radio, and tv media. However, concerns about brand risk, or having advertisements appear alongside of controversial content, caused brands and agencies to move budgets away from meta, resulting in disappointing revenue. Diminished ad tracking capability relative to consumer opt-out also weighed upon sentiment for meta shares. Meta’s share performance responded favorably, however, to first quarter results that that while not strong fundamentally, were positive against extremely low expectations among some investors. The positive contribution to portfolio performance was due to a sequential quarterly increase in customer utilization and management lowering its expense guidance $3 billion in order to protect earnings. In a market environment that is rewarding companies with relatively high current earnings, we believe Meta’s spending discipline resonated with investors.”
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 252
Amazon.com, Inc., is a multinational technology company operating online and physical stores where it sells its own products as well as allows third-party sellers to sell their products to consumers. It manufactures and sells electronic devices, including Kindle, Fire tablet, Fire TV, Echo, and Ring, and develops and produces media content; and provides cloud computing services through Amazon Web Services platform. Its ecommerce platform is home to more than 1.7 million small and medium businesses.
As of September 26, Amazon.com, Inc. shares are down by 31.75% YTD and trade at a forward P/E ratio of 49.23. Despite the stock decline, the average analyst price target of $171.18 represents a 49% upside potential based on current price.
Amazon.com, Inc. is also highly sought after by hedge funds with the second highest number of hedge funds as 252 out of the 895 tracked by Insider Monkey hold its shares with a total value of $30.1 billion. The ecommerce giant ranks #2 on the list 10 stocks to buy now according to billionaire David Tepper based on the number of hedge funds invested in the stock.
Oakmark Funds, an investment management firm, mentioned Amazon.com, Inc. in its second quarter of 2022 investor letter. Here’s what they said:
“Amazon is the leading e-commerce and cloud-computing provider in the world. Two-thirds of U.S. households are Amazon Prime subscribers, and over half of all online product searches now start on Amazon. We believe the company’s strong customer loyalty and massive infrastructure are significant barriers to entry in a growing e-commerce market. Separately, Amazon Web Services (“AWS”) controls nearly half of the market in cloud computing. We believe AWS has become utility-like in nature and scale and we expect healthy growth moving forward as IT workloads continue moving to the cloud. More recently, concerns about rising investment spending have weighed on the stock-as they have in times past-providing us another opportunity to purchase shares at a very attractive price. At our purchase price and valuing AWS like its peers, an investor isn’t paying much of anything for the immensely valuable e-commerce franchise.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 258
Redmond, Washington-based Microsoft Corporation is a leading technology company with products include operating systems, cross-device productivity applications, server applications, business solution applications, desktop and server management tools, software development tools, and video games. Microsoft Corporation boasts over 1.4 billion monthly active devices running its flagship operating system, Windows 10 or 11.
As of September 26, Microsoft Corporation shares have lost 29.26% of their value on year-to-date basis and trade at a forward P/E ratio of 19.91. Majority of analysts are bullish about the prospects of Microsoft Corporation as they hold an average price target of $332.31, 40% higher than the current price.
On September 20, board of directors of Microsoft Corporation declared a quarterly dividend of $0.68 per share, reflecting a 10% increase over the previous quarter’s dividend. Following the announcement, Morgan Stanley analyst Keith Weiss said the dividend hike highlights the stock’s “durable high-teens total return profile” when factored along with Microsoft’s high-teens percentage EPS growth. The analyst maintains an ‘Overweight’ rating and a price target of $354 for the shares.
As of Q2 2022, Microsoft Corporation is the most sought-after stock among the 895 hedge funds tracked by Insider Monkey as 258 of these hedge funds held shares in the software giant, valued at $56 billion.
You may also like to read Top 10 Stock Picks of Himanshu Shah’s Shah Capital and 10 Stocks to Sell Now According to Javier Velazquez’s Albar Capital
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This article is originally published at Insider Monkey.
