In this article, we discuss 5 cheap NASDAQ stocks to buy. If you want to see more cheap NASDAQ stocks to buy, the risk/reward, and methodology of this list, go directly to 11 Cheap NASDAQ Stocks to Buy.
5. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 80
Given the broader market decline, semiconductor maker QUALCOMM Incorporated (NASDAQ:QCOM) shares have declined 37.4% year to date to trade for a forward P/E ratio of 9.38 which is fairly attractive given the company’s quality business and its earnings potential.
Despite macroeconomic challenges, QUALCOMM Incorporated (NASDAQ:QCOM)’s Q4 fiscal 2022 sales rose 22% year over year to $11.39 billion and its diluted EPS rose 23% year over year to $3.13. While the company expects its largest customers to draw down inventory for Q1 fiscal 2023 which might negatively impact EPS by approximately $0.80, QUALCOMM Incorporated (NASDAQ:QCOM) nevertheless expects to earn an adjusted diluted EPS of $2.25 – $2.45 per share for the quarter.
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 140
Apple Inc. (NASDAQ:AAPL) is the most valuable company listed on the Nasdaq stock exchange with a market capitalization of almost $2.15 trillion. Apple Inc. (NASDAQ:AAPL) is also one of the most profitable companies in the world with net income of $99.8 billion for the twelve months ended September 24, 2022.
What is perhaps most impressive about Apple Inc. (NASDAQ:AAPL) is that the company’s earnings per share actually increased in the three months ended September 24 2022 from the prior year same period despite the inflation headwinds.
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 177
Meta Platforms, Inc. (NASDAQ:META) is a cheap stock given its substantial competitive advantages and forward P/E ratio of 15.21. While Meta Platforms, Inc. (NASDAQ:META)’s forward valuation isn’t exactly the lowest in tech, the company’s earnings estimates are fairly low given analysts expect the social media giant to spend a lot next year. If Meta Platforms, Inc. (NASDAQ:META) cuts back on spending, the forward P/E ratio could look more attractive.
ClearBridge Investments commented on Meta Platforms, Inc. (NASDAQ:META) in a Q3 2022 investor letter,
Meta Platforms, Inc. (NASDAQ:META), one of two overweights among the mega cap stocks, underperformed in the third quarter (-15.9%) and is the Strategy’s largest detractor year to date. Meta has also trailed mega cap advertising peer Alphabet, which we don’t own, as revenue growth has slowed due to tough comparables to a strong e-commerce environment in early 2021, negative impacts from Apple’s privacy changes and rising expenses.
While we have trimmed our position close to 20%, we remain invested as we do not think the stocks’ valuation at about 13x consensus 2023 earnings appropriately reflects its long-term earnings and free cash flow generation potential. Despite current revenue headwinds, we believe Meta is well-positioned to navigate industrywide changes to advertising targeting and its transition to the Reels short-form video format will monetize in the coming years, helping to re-accelerate revenue growth.
We also welcome Meta’s implementation of cost-cutting measures, which should help uncover the company’s high underlying profitability. Lastly, we see Meta’s investments in augmented reality as a call option for long-duration investors.
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 269
Amazon.com, Inc. (NASDAQ:AMZN) stock hasn’t done well this year given slower growth. For the fourth quarter, for example, Amazon.com, Inc. (NASDAQ:AMZN) expects sales of between $140 billion and $144 billion versus the consensus of $155 billion.
While sales have been slowing, many investors nevertheless regard Amazon.com, Inc. (NASDAQ:AMZN) stock as cheap given the growth potential of the company’s leading cloud business, Amazon Web Services. If AI services grow substantially in the future, demand for computing power in the cloud to process the AI could increase substantially too.
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 269
Microsoft Corporation (NASDAQ:MSFT) ranks #1 on our list of 11 Cheap NASDAQ Stocks to Buy given 269 hedge funds in our database owned shares at the end of Q3. Like many other big tech stocks, Microsoft Corporation (NASDAQ:MSFT) hasn’t done well this year given macroeconomic headwinds.
Nevertheless, the company could be cheap in the long term if it succeeds in unlocking the potential of AI. Over the years, Microsoft Corporation (NASDAQ:MSFT) has invested a lot in the technology and the investments could help the company grow earnings in the long term if its anything like OpenAI’s ChatGPT which Microsoft Corporation (NASDAQ:MSFT) also invested in during 2019.
Baron Funds commented on Microsoft Corporation (NASDAQ:MSFT) in a Q3 2022 investor letter,
Shares of Microsoft Corporation (NASDAQ:MSFT) pulled back with the overall software industry on the back of macroeconomic issues, including inflation concerns and rising interest rates. The company reported another strong quarter, highlighted by total revenues growing 16% on a constant currency basis and Microsoft Cloud revenues, now 48% of total sales, growing 33%, with Azure (Microsoft’s infrastructure cloud) growing 46%. These results were driven by strong demand for large commercial cloud contracts, as more businesses are standardizing on Microsoft’s platform and the company is signing larger and longer deals. Initial fiscal year 2023 guidance calls for healthy double-digit revenue and operating income growth. Both foreign exchange and personal computer headwinds were contemplated in the guidance and have continued to worsen, but we have conviction in the company’s strong competitive positioning, durable growth drivers, and margin expansion opportunity over the mid- to long term.
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