In this article, we’re going to talk about the 7 cheap technology stocks to buy right now.
Are Tech Stocks an Opportunity?
Before the Fed announced its September cut, analysts everywhere had clashing opinions with some supporting the 25 basis-point rate cut, and others supporting a massive 50. Even after the decision was announced, all of these analysts maintained their previous positions and continued supporting or opposing the 50 basis-point rate cut. A general advice to investors has been to remain calm and look for opportunities in stocks that could benefit from a lower interest rate environment.
Following the new interest rate announcement, Fed Chair Jerome Powell addressed reporters, affirming the Fed’s commitment to timely monetary policy adjustments. He clarified that the decision to cut rates was based on economic data and emphasized patience in navigating the current economic landscape characterized by high inflation and low unemployment. We covered this earlier in our 10 Worst Artificial Intelligence (AI) Stocks To Buy According to Financial Media article, here’s an excerpt from it:
“In response to a question about whether the rate cut was influenced by recent employment data or the high nominal level of the federal funds rate, he clarified that their policy position was established in July 2023, a period characterized by high inflation and low unemployment. He highlighted their patience in reducing the policy rate, noting that other central banks had already implemented multiple cuts while the Fed had refrained from such actions until now. This patience has reportedly paid off, as there is now greater confidence that inflation is trending sustainably toward the 2% target.
Powell indicated that the recent rate cut should not be interpreted as a new pace for future adjustments but rather as part of a recalibration of policy toward a more neutral level. He referred to the Summary of Economic Projections (S.E.P.) as a guide for understanding potential future cuts, emphasizing that economic developments could lead to adjustments in either direction.”
On September 23, RaeAnn Mitrione, Investment Management Partner at Callan Family Office, appeared in an interview on CNBC and highlighted significant market developments following the Fed’s unexpectedly larger-than-anticipated rate cut last week. This reduction has led to a notable outperformance of the tech sector compared to cyclical and industrial stocks, suggesting a positive market sentiment. Mitrione emphasized that the market is reacting favorably to lower interest rates, particularly benefiting the tech sector. She noted that this trend of broadening out in the market was evident even before the rate cut, with small-cap stocks performing well alongside cyclical sectors. The ongoing theme of AI is expected to continue driving growth within tech for the foreseeable future.
Pointing at a chart, Mitrione remarked that it is unusual to see rate cuts while markets are at record highs, raising questions about potential volatility ahead. Historically, even when rate cuts occur near market peaks, stocks often continue to rise. Much of this positive sentiment has been priced in due to prior indications of the rate cut. She explained that the economy remains strong, and the rate cut serves as a preventive measure rather than a reaction to economic weakness. This supportive environment could enhance consumer confidence and spending, further improving market performance.
As the Personal Consumption Expenditures (PCE) report is coming up on Friday, Mitrione discussed its significance as it informs the Fed’s inflation assessments. While there is a general understanding of the Fed’s direction based on recent economic projections, the focus has shifted more toward employment data. She anticipates that barring any unexpected figures from the PCE report, markets should continue their upward trajectory as rate cuts are likely to persist.
She also shared insights from her research since July 10th, focusing on small-cap stocks, value versus growth dynamics, and their implications for future performance. She observed that expectations regarding these sectors have largely been factored into current prices. Notably, since July 10th, there has been a 10% divergence between growth and value indexes; while growth has slightly declined, value stocks have risen by nearly 8%, with small caps seeing a 10% increase. With interest rates decreasing, small-cap companies are positioned to benefit significantly due to their higher levels of debt and greater exposure to floating rates compared to large-cap firms.
Overall, her analysis underscores a cautiously optimistic outlook for the markets as they navigate through these developments, particularly with tech stocks continuing to lead in performance amidst changing economic conditions. In that context, we’re bringing you a list of the 7 cheap technology stocks to buy right now.
Methodology
We used the Finviz stock screener to compile a list of 20 tech stocks with a forward P/E ratio under 20. We then selected the 7 cheapest stocks that were the most popular among elite hedge funds, and that analysts were bullish on. The stocks are ranked in ascending order of their average upside potential.
Note: The data is sourced as of September 20, 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
7 Cheap Technology Stocks To Buy Right Now
7. Celestica Inc. (NYSE:CLS)
Forward Price-to-Earnings Ratio: 12.2
Average Upside Potential: 31.34%
Number of Hedge Fund Holders: 38
Celestica Inc. (NYSE:CLS) is a design, manufacturing, hardware platform, and supply chain electronics manufacturing services company that operates in 50 sites across 15 countries. It offers a range of services, including design, engineering, manufacturing, and supply chain management for various industries, such as aerospace, automotive, and telecommunications.
The company manufactures connectivity products for AI data centers and has seen a surge in demand for its Hardware Platform Solutions. These solutions, which include 400G and 800G switches and storage solutions, have been particularly popular among hyperscalers investing in AI data centers. This strong demand has helped increase the company’s connectivity revenues by over 50% year-over-year in the second quarter.
Overall, the second quarter of 2024 recorded $2.39 billion in revenue, up 23.33% from the prior year. This growth was of course driven by the large-scale investments in data center infrastructure from hyper-scale customers. The CCS segment (Cloud and Connectivity Solutions) saw a 51% year-to-year increase. HPS (High-Performance Solutions) revenue made up 29% of total company revenue and was up 94%.
Some of the growth was offset by the decline in ATS (Advanced Technology Solutions) segment revenue due to continued softness in the industrial business. This revenue still accounted for 32% of total revenues in Q2.
The company repurchased 200,000 shares for cancellation for $10 million. This brings the total shares repurchased year-to-date to 700,000, costing $27 million. It plans to continue repurchasing shares opportunistically throughout the rest of 2024.
The company’s success can be attributed to its comprehensive supply chain and manufacturing services, provided to clients like Meta and Amazon.
6. Concentrix Corp. (NASDAQ:CNXC)
Forward Price-to-Earnings Ratio: 4.8
Average Upside Potential: 34.11%
Number of Hedge Fund Holders: 25
Concentrix Corp. (NASDAQ:CNXC) is a global customer experience solutions company that provides a wide range of services, including customer care, technical support, sales, and marketing, serving a diverse customer base across various industries, such as technology, retail, travel, banking, automotive, energy, communications, and healthcare.
In Q2, the company won a deal with a major global retail e-commerce client. By combining GenAI tools, CX expertise, and global reach, it designed and implemented a new customer solution experience across its EMEA operations, leading to a 20% increase in revenue.
It also secured a new large global media client. The company will support the launch of its high-profile channel in EMEA and consolidate its customer experience operations in Japan and Korea, additionally building a GenAI knowledge management solution for its enterprise.
Another notable win was with a global travel client. The company leveraged its AI footprint and AI-based training tools to enhance effectiveness and efficiency, presenting an opportunity for future revenue growth as the client considers expanding its AI solution across their enterprise.
Finally, it sold Catalyst Services to a former Webhelp client in Europe, providing specialized digital engineering resources to build, enhance, and maintain its digital infrastructure and CCaaS platform, supporting its primary channel for new business.
The second quarter revenue was $2.38 billion, up 47.44% year-over-year, with an earnings per share value of $2.69. Travel and e-commerce clients grew 10% year-over-year. Revenue from banking, financial services, and insurance clients grew 6% and other verticals grew 3%. Technology and consumer electronics clients grew by over 3%. Revenue from telco and media clients decreased 3% year-over-year primarily due to lower volumes from a few North American communications clients.
GenAI is becoming a competitive advantage for the company and is being used to augment human advisors and upgrade existing systems. The Concentrix Corp. (NASDAQ:CNXC) is experiencing strong growth due to increased client demand and stable volumes.
FPA Queens Road Small Cap Value Fund stated the following regarding Concentrix Corporation (NASDAQ:CNXC) in its first quarter 2024 investor letter:
“Concentrix Corporation (NASDAQ:CNXC) is one of two top customer experience (CX) vendors globally. The company started managing call centers but has since evolved into a high-tech business process outsourcer (BPO) that also designs and manages customer-facing websites and apps, integrates the data, and optimizes a client’s customer interactions. The company was spun out from TD Synnex, another of the Fund’s core holdings, and we have always been impressed with the company’s innovation and growth. CX is a relatively new business model, and Concentrix has been rolling up smaller competitors. In March, 2023 they bought WebHelp, a leading European CX player, for $4.8B in cash and stock. We believe the WebHelp acquisition will help consolidate an industry where Concentrix and Teleperformance are the largest players.
On Jan. 24, 2024 Concentrix reported Fiscal 2023 earnings that included weak 1% – 3% organic growth guidance for 2024. The market’s current concern about the potential of artificial intelligence to disrupt Concentrix’ core call center business has resulted in the underperformance in the shares across the industry. Concentrix has three turns of debt from the Webhelp deal which will be a problem if earnings deteriorate quickly. But Concentrix now trades at less than five times adjusted EPS. We think, but don’t know, that Concentrix’ domain knowledge and integration into customers’ workflows make for meaningful switching costs. We have held on to our Concentrix shares but have not added to the position.”
5. Amkor Technology Inc. (NASDAQ:AMKR)
Forward Price-to-Earnings Ratio: 12.06
Average Upside Potential: 40.50%
Number of Hedge Fund Holders: 39
Amkor Technology Inc. (NASDAQ:AMKR) is a semiconductor product packaging and test services provider with a wide range of packaging and testing services for integrated circuits (ICs), including flip chip, ball grid array (BGA), and wire bond packaging. Its services help semiconductor manufacturers improve the performance, reliability, and cost-effectiveness of their ICs.
The company made $1.46 billion in Q2 2024 revenue, recording a year-over-year increase of 0.24% and a 7% rise sequentially, driven by demand for advanced packaging, notably for premium tier smartphones within the iOS ecosystem and 2.5D technology for AI solutions. Communications market revenue grew 10% sequentially. Revenue within the Android supply chain declined sequentially but rose 20% year-over-year. Automotive and industrial market revenue was also down 2% sequentially.
In this quarter, the company remained focused on its strategic priorities to strengthen its market leadership, and successfully expanded its 2.5D technology capacity in Korea and qualified advanced SiP and memory technology in Vietnam. Notably, it achieved a major milestone by establishing a US manufacturing presence for advanced packaging.
The advanced packaging technology supports various smartphone applications, from RF and cameras to AI-enabled app processors. The SiP and flip-chip technologies enable high-speed, high-density interconnect.
The company recently reached a preliminary agreement with the US Department of Commerce for up to $400 million in grants under the CHIPS and Science Act. These funds will support the construction of a new facility in Arizona, focusing on advanced packaging and testing for high-performance computing, AI, communications, and automotive markets.
All of these developments contribute to the development of a robust US semiconductor supply chain while Amkor Technology Inc. (NASDAQ:AMKR) joins a strong ecosystem of front-end fabs, IDMs, and suppliers. These developments also evidently position the company for long-term growth.
4. Full Truck Alliance Co. Ltd. (NYSE:YMM)
Forward Price-to-Earnings Ratio: 19.49
Average Upside Potential: 51.75%
Number of Hedge Fund Holders: 28
Full Truck Alliance Co. Ltd. (NYSE:YMM) operates as a software company that develops digital freight and logistics platforms in China, connecting shippers with truck drivers through an online platform, and providing efficient and cost-effective freight transportation solutions.
The company reported a 36.48% increase in revenue for the second quarter of this year. Transaction service revenue accounted for 34% of the total revenue, up 63% year-over-year. Average shipper MAUs reached 2.65 million, an increase of 32.8% year-over-year, and 23.7% sequentially.
Full Truck Alliance Co. Ltd.’s (NYSE:YMM) eventual aim is to become the one-stop shipping platform for 30 million small and medium-sized shippers. The number of active shippers has increased significantly, with average monthly active users reaching 2.65 million in Q2 2024, up 32.8% from the previous year and 23.7% sequentially. Additionally, the 12-month shipper retention rate remains strong at 80%.
Orders fulfilled in the first half of 2024 increased by 25% year-over-year (reaching 49.1 million), exceeding the single-digit growth of the overall freight market. In this period, EV deliveries increased by 100% year-over-year, making up nearly 20% of total freight orders.
Orders from non-member shippers are increasing, contributing to a higher overall fulfillment rate. The company is confident in its ability to further improve the fulfillment rate through ongoing product and service enhancements.
Despite the challenging economic conditions, the company continued to drive the digital transformation of the logistics industry in the first half of 2024. Its platform helped businesses become more competitive by streamlining their logistics operations. Through a focus on cost reduction and efficiency, Full Truck Alliance Co. Ltd. (NYSE:YMM) is positioned for significant growth.
Here is what Baron Funds specifically said about Full Truck Alliance Co. Ltd. (NYSE:YMM) in its Q2 2022 investor letter:
“Full Truck Alliance Co. Ltd. (NYSE:YMM) is the largest digital freight platform in the world. Shares of the China-based company rallied after a cybersecurity review greenlighted the use of its Apps to add new user registrations. We remain investors. Digital platform penetration into China’s four trillion RMB full truck-load market is still just in the single digits. We see major upside based on the expected rollout of transaction commissions to truckers from the current 6% market penetration and less than 1% take rate, and we expect revenue to grow at 50% CAGR over the next five years.”
3. Nice Ltd. (NASDAQ:NICE)
Forward Price-to-Earnings Ratio: 13.28
Average Upside Potential: 60.71%
Number of Hedge Fund Holders: 29
Nice Ltd. (NASDAQ:NICE) specializes in customer relations management software, AI, and digital and workforce engagement management. It’s a global leader in customer experience solutions, providing a comprehensive suite of software and technology solutions that help companies improve customer interactions, optimize operations, and drive growth.
The company primarily focuses on Customer Engagement and Financial Crime and Compliance. In Customer Engagement, it offers solutions to enhance customer experience through advanced analytics, AI, and automation, serving industries like telecommunications, finance, healthcare, and retail. In Financial Crime and Compliance, it provides tools to detect and prevent financial crimes. The company is a leader in both areas, present in 150+ countries.
It recorded 14.33% year-over-year revenue growth in the second quarter of 2024, making $664.40 million in total revenue. The earnings per share at the time were $2.64. The cloud segment accounted for 71% of total revenue, growing 27% year-over-year.
Bookings for autopilot and copilot together soared 134%. The number of deals greater than $1 million ACV that included AI jumped 100% year-over-year due to the AI deals signed in Q2 (five eight-digit ACV deals).
Its CXone platform is a leading solution in the customer engagement industry, offering a comprehensive suite of AI-powered solutions that improve employee performance and provide personalized customer experiences. With its ability to handle 100 million customer interactions per month, CXone’s scale and data advantage creates a significant barrier to entry for competitors.
It signed several significant deals, replacing incumbents with CXone. Key factors included functional AI advantages and the platform’s comprehensive AI portfolio. Customers appreciated CXone’s AI capabilities, data repository, and seamless architecture.
With an estimated 80% of the customer experience market yet to migrate to the cloud, Nice Ltd.’s (NASDAQ:NICE) growth potential makes it an attractive investment option.
TimesSquare Capital U.S. Mid Cap Growth Strategy stated the following regarding NICE Ltd. (NASDAQ:NICE) in its Q2 2024 investor letter:
“Among the wide variety of Information Technology companies, we prefer critical system providers, specialized component designers, systems that improve productivity or efficiency for their clients, and others that closely tie to increasing shares of corporate IT budgets. We witnessed shares in NICE Ltd. (NASDAQ:NICE) slide by -34%. A cloud-based contact center software and compliance systems provider, NICE reported better-than-expected results. While earnings guidance was increased, projections for revenues were maintained. The market’s reaction seemed tied to overall weakness among software companies and NICE’s announcement that its CEO for the past decade plans to step down at the end of 2024. We see NICE benefiting from continued adoption of its new services, including AI-enabled ones, though want more information on the future CEO before rebuilding the position.”
2. StoneCo Ltd. (NASDAQ:STNE)
Forward Price-to-Earnings Ratio: 7.62
Average Upside Potential: 64.08%
Number of Hedge Fund Holders: 25
StoneCo Ltd. (NASDAQ:STNE) provides financial technology solutions through an end-to-end cloud-based technology platform to conduct electronic commerce across in-store, online, and mobile channels in Brazil. Offerings include payment processing, point-of-sale systems, credit card acquiring, and business loans.
The company differentiates itself with superior client service, tech-enabled distribution, and a comprehensive merchant platform. In financial services, revenue is increasing while maintaining stable margins, and the software business also remains consistently profitable.
Overall, the company generated a revenue of $586.23 million in Q2 2024. However, this was a drop of 1.06% year-over-year. The biggest challenge has been the growth of PIX QR Code payments, which has impacted the card payment volume, with more transactions occurring through PIX QR Code and fewer using cards. While this is positive for the business, TPV growth is lower than expected consequently.
Still, there was robust TPV growth and progress in Credit and Banking. The company remains well-positioned to capture a substantial portion of Brazil’s growing fintech market, where it currently holds a market share of approximately 11%. Vertical software revenue grew 3% year-over-year due to an increase in recurring revenue growth offset by a decrease in non-recurring revenues in priority verticals.
It continues to gain market share in the micro and small business (MSMB) market. Financial services revenue increased 10.6% due to active client growth and higher monetization. In the second quarter alone, the company’s MSMB payments client base grew by 30% year-over-year, and the MSMB take rate increased by 7 basis points.
Based on the strong trajectory of results demonstrated through the year’s first half, StoneCo Ltd. (NASDAQ:STNE) is set to achieve its long-term goals.
Ave Maria World Equity Fund stated the following regarding StoneCo Ltd. (NASDAQ:STNE) in its fourth quarter 2023 investor letter:
“StoneCo Ltd. (NASDAQ:STNE) provides solutions that enable merchants and integrated partners to conduct electronic commerce seamlessly across in-store, online, and mobile channels in Brazil. StoneCo has faced near-term operational challenges because of the pandemic and high levels of inflation in Brazil. The company appears to be moving past these challenges and it appears that the successful integration of the newly acquired software business with its payments business will drive substantial shareholder value longer term.”
1. Nextracker Inc. (NASDAQ:NXT)
Forward Price-to-Earnings Ratio: 12.42
Average Upside Potential: 69.12%
Number of Hedge Fund Holders: 39
Nextracker Inc. (NASDAQ:NXT) is a global leader in solar tracker technology, designing, manufacturing, and selling solar trackers that optimize the performance of solar panels by following the sun’s path throughout the day. Its trackers help solar power plants increase energy production and reduce costs.
Earlier this year, the company was selected to provide its NX Horizon-XTR tracker systems for the 1.17 GW Al Kahfah solar power project in Saudi Arabia. These tracker systems are designed to optimize energy output by following the sun’s movement to maximize energy production.
It will also support the project with local partners in Saudi Arabia by providing raw materials and manufacturing support for the trackers. This order brings the company’s total capacity of smart solar trackers in the Middle East, India, and Africa region to over 10 GW.
In the first fiscal quarter of 2025, Nextracker Inc. (NASDAQ:NXT) grew its revenue by 50.13% year-over-year. For the 6th consecutive quarter, it achieved double-digit year-over-year revenue growth. Demand was strong in both the US and international markets. The backlog increased sequentially to ~$4 billion. The company also introduced new products like agri PV solutions and NX low carbon tracker.
In FQ1 2025, management announced accepting orders for solar tracker solutions with 100% US domestic content, with production expected to begin in early calendar year 2025. The company acquired Ojjo and Solar Pile International. By combining tracker systems and foundations, it can offer a comprehensive solution for various soil conditions in utility-scale projects worldwide.
The company is a market leader with products that enhance utility-scale solar projects and give it a competitive edge. Nextracker Inc. (NASDAQ:NXT) is therefore well-positioned for success.
While we acknowledge the growth potential of Nextracker Inc. (NASDAQ:NXT), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
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