We recently compiled a list of the 7 Best Cheap Technology Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Global Payments Inc. (NYSE:GPN) stands against the other cheap technology stocks.
Another Surge in Tech Stocks
Recent analysis indicates a reset in tech stocks as the Fed has not adjusted rates quickly enough for investors. However, following this week’s rate cut, there is a renewed connection between tech stocks and market sentiment. A 50 basis point reduction can ease borrowing and spending, potentially leading to increased mergers and acquisitions activity, and heightened investments in technology, particularly AI.
Lower interest rates are expected to accelerate the shift towards AI computing by making capital more accessible. As rates decrease, expected returns on investments become more attractive, fostering greater confidence among companies to invest in AI. There is actually a relationship between how tech stocks are driving utility stocks now due to a global increase power demand thanks to electrification and AI. Michael Khouw, OpenInterest.PRO Chief Strategist, talked about this in detail earlier this week. Here’s an excerpt from the 10 Worst AI Stocks to Buy According to Reddit article that covered him:
“Khouw discussed the current state of utilities and acknowledged that while it may seem daunting to invest in a sector that has seen substantial gains, over 7.5% total return since the beginning of last year, it is still an opportune time to consider utilities as an investment. Historically, utilities have not been perceived as a growth sector, but Khouw emphasized that they are currently trading at about 19 times forward earnings, which is relatively high compared to their usual discount to the market…. He predicts that a new phase of growth in electricity demand is on the horizon, driven primarily by two factors: the rise of electric vehicles (EVs) and the increasing need for data centers fueled by artificial intelligence (AI)…. This landscape indicates a promising rise in AI stocks, driven by the increasing recognition of AI’s transformative potential across various sectors. As electricity demand surges, fueled by the rise of EVs and the expansion of data centers necessary for AI operations, investors are likely to see significant growth opportunities in AI stocks as well.”
In recent market updates, the NASDAQ Composite emerged as the best-performing major index, despite not reaching any record highs, unlike the Dow Jones and S&P 500. The NASDAQ’s resilience can largely be attributed to a rally in chip stocks, with notable contributions from big tech companies, which have been instrumental in helping recover some of its declines. The Fed’s recent interest rate cut has sparked renewed enthusiasm in the semiconductor sector, leading to significant gains for exchange-traded funds (ETFs) focused on this industry.
On September 20, CNBC’s Seema Mody reported that the VanEck Semiconductor ETF was surging post the Fed’s rate cut, driven by positive sentiment surrounding chip manufacturers. Notably, British semiconductor giant Arm has gotten attention following a meeting with management from a major financial institution, where analysts expressed confidence that the designer could achieve 20% revenue growth over the next few years. This anticipated growth is largely attributed to the increasing demand for CPUs driven by AI workloads in data centers.
Meanwhile, Nvidia saw an uptick of about 5%, marking a 10% rebound over the past couple of weeks. This resurgence coincided with CEO Jensen Huang’s active media presence, promoting the potential of accelerated computing at various conferences, including a recent event with Salesforce’s CEO Marc Benioff.
Additionally, Intel clarified that it would not sell its stake in Mobileye, which provided relief for the shares of that subsidiary, contributing to a notable 17% increase on that day. The semiconductor industry is currently awaiting earnings reports from Micron and Taiwan Semi, which could further influence market dynamics.
The combination of favorable economic conditions spurred by the Fed’s rate cut and optimistic outlooks from industry leaders has rekindled interest in semiconductor stocks. Investors are closely monitoring developments within this sector as companies position themselves to meet the growing demand of businesses and consumers for AI-powered products and services. As the outlook remains bullish for tech stocks, we’re here with a list of the 7 best cheap technology stocks to buy according to hedge funds.
Methodology
We sifted through ETFs, online rankings, and internet lists 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 the number of hedge funds that have stakes in them, as of Q2 2024.
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).
A payment terminal in action with customers apart of the experience.
Global Payments Inc. (NYSE:GPN)
Forward Price-to-Earnings Ratio: 8.42
Number of Hedge Fund Holders: 66
Global Payments Inc. (NYSE:GPN) is a financial technology company that provides payment technology and services to merchants, issuers, and consumers, including payment processing, merchant acquiring, and issuing. Its services enable businesses to accept payments in various channels, such as in-store, online, and mobile.
The company closed Q2 2024 with $2.32 billion in revenue, up 5.51% from the year-ago period. The earnings per share were $2.93. Merchant solutions grew 8%. The acquisition of Takepayments contributed less than a point to these results, offsetting the negative impact of unfavorable foreign currency exchange rates. Issuer solutions were also up 4%.
Merchant Solutions grew due to differentiated capabilities in integrated software and point-of-sale. The integrated business saw double-digit growth, driven by strong bookings and new ISV partner signings (up 30% year-to-date). The PROFAC solution has increased active merchants by 40% and average merchant volumes by 60% since late 2023.
The company is seeing increased demand for B2B acceptance solutions, driven by PayFabric platform. There was over 50% growth in new ISV partnerships leveraging PayFabric. In vertical markets, there was double-digit growth in software bookings, with particular strength in education, real estate, and healthcare. A notable win is a new partnership with the Los Angeles Unified School District.
It’s strategically expanding its international presence, with significant progress in the European market, including key partnerships in the EV charging sector and acquisitions to strengthen distribution capabilities in the UK.
Global Payments Inc. (NYSE:GPN) is a well-established player in the payments technology industry. The company is poised for growth with its diversified revenue streams, technology investments, and global expansion efforts making it a strong investment in the payments technology space.
TimesSquare Capital U.S. Mid Cap Growth Strategy stated the following regarding Global Payments Inc. (NYSE:GPN) in its Q2 2024 investor letter:
“In the Financials sector we tend to avoid banks that face credit deterioration or rising deposit costs, preferring either asset managers or specialized insurance companies. At the start of the year, we reinitiated a position in the payment processor Global Payments Inc. (NYSE:GPN). We viewed positively the installation of a new CEO who was its CFO and is well regarded by us. Global renewed its focus on merchant acquisition and card issuance, and its valuation became more attractive. However, we misjudged the lingering effects of a weaker macroeconomic environment on some of Global’s lower margin operations, which delayed the expected business pivot to merchant activities. With a lack of clarity about where the bottom might be, and its shares trading below where we projected a potential downside, we exited the position that was down -26% while held during the quarter.”
Overall GPN ranks 4th on our list of the best cheap technology stocks to buy according to hedge funds. While we acknowledge the potential of GPN as an investment, 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 GPN 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.
