We recently compiled a list of the 10 Cheap Technology Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Block, Inc. (NYSE:XYZ) stands against the other cheap tech stocks.
It seems that technology stocks have had a tough start to 2025. On March 4, 2025, CNBC reported that since President Donald Trump took office in January, the S&P 500 technology sector has dropped 7.5%. Tech stocks have slumped largely due to new tariffs that have set off a trade war and added fuel to the risk-off sentiment on Wall Street.
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Economists had cautioned that tariffs could lead to a rise in inflation and create global economic disruptions. Many leading tech companies assemble and manufacture products outside the US and as a result of the tariffs these companies could see manufacturing costs rise.
Semiconductor stocks have also been hit hard. On March 3, Trump cleared the way for new 25% tariffs on imports from Mexico and Canada and smashed hopes of a potential last-minute deal. According to the US President, there was “no room left” for further negotiations after weeks of talks. Trump also put an additional 10% tariff on Chinese imports.
In response, Canada said it would impose retaliatory tariffs. Mexico said it will be looking to announce a plan on Sunday. China retaliated with tariffs of up to 15% on some US goods. These developments have added to the uncertainty surrounding the tech sector.
The tech sector has experienced a decline due to economic uncertainty and trade tensions and this might present buying opportunities for some investors. Despite current challenges, some tech stocks show strong potential for growth.
Methodology
To compile our list of the 10 cheap tech stocks to buy according to hedge funds, we used the Finviz stock screener and Yahoo Finance. To find cheap tech stocks, we looked for stocks with a forward P/E ratio of less than 20. We sorted our results based on market capitalization and picked the top 25 technology companies trading at under 20 times their forward earnings as of March 3, 2025. Next, we focused on the top 10 cheap tech stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q4 2024 database of more than 1,000 elite hedge funds. Finally, the 10 cheap tech stocks to buy were ranked in ascending order based on the number of hedge funds holding stakes in them as of Q4 2024.
Why do we care about what hedge funds do? 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
An executive in a suit checking a bank of computers symbolizing the technology of the financial services industry.
Block, Inc. (NYSE:XYZ)
Forward P/E: 14.27
Number of Hedge Fund Holders: 81
Block, Inc. (NYSE:XYZ) is an American financial technology company that provides a variety of financial services to consumers and merchants. The company’s main product, Square, makes commerce and financial services accessible to sellers while Cash App allows users to send, receive, or hold money, invest in stocks and Bitcoin, apply for personal loans, and even file taxes. Block, Inc. (NYSE:XYZ) offers buy now, pay later (BNPL) services through Afterpay. Additionally, the company offers music streaming services through Tidal and self-custody Bitcoin wallet services through Bitkey. According to hedge funds, XYZ is one of the best cheap tech stocks to buy.
The company operates a diverse business model that caters to a range of customers to generate multiple revenue streams. Block, Inc. (NYSE:XYZ) is strategically focused on innovation and product development to grow its business. The company focused on enhancing Square’s onboarding process, commerce tools, and app infrastructure in 2024. Block, Inc. (NYSE:XYZ) launched a new unified app for sellers to simplify onboarding and make Square’s features easily accessible. With an aim to expand into new markets while improving customer experiences, the company also introduced new products like scan-to-pay functionality and house accounts to support sellers.
Block, Inc. (NYSE:XYZ) also strengthened its financial services ecosystem through Cash App’s “bank our base” strategy. The company aims to make Cash App the leading banking service provider targeting US households earning up to $150,000 annually. Block, Inc. (NYSE:XYZ) is creating new offerings and benefits including free overdraft coverage, a 4% savings interest rate, and priority phone support. The company reported that Cash App Card reached 25 million monthly active users by December 2024. In February 2024, Block, Inc. (NYSE:XYZ) also integrated Afterpay with the Cash App Card to allow users to pay for purchases over time. These efforts are expected to boost engagement and usage across the company’s platforms.
Overall, XYZ ranks 3rd on our list of the cheap tech stocks to buy according to hedge funds. While we acknowledge the potential of XYZ as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than XYZ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.