We recently published a list of 12 Best Affordable Tech Stocks to Buy According to Analysts. In this article, we are going to take a look at where Sensata Technologies Holding plc (NYSE:ST) stands against other best affordable tech stocks to buy according to analysts.
Stock affordability can be assessed in multiple ways. The most common approach is considering stocks with a market price below a certain threshold. Another method is evaluating stocks based on relative valuation metrics, such as a low price-to-earnings (P/E) ratio or other similar multiples. While we have earlier written about undervalued stocks based on P/Es (Read: Most Undervalued Tech Stocks to Invest), the focus for this article is a blend of both the approaches. Apart from low valuation, investors are often drawn to lower-priced stocks, particularly those under $50, because even small price movements can lead to significant percentage gains. Additionally, many investors prefer owning a larger number of shares in lower-priced stocks rather than a few shares in higher-priced ones.
However, a stock’s affordability alone does not determine its quality or long-term potential. Key factors such as financial stability, business execution, and overall market conditions play a crucial role in a stock’s performance.
Affordable tech stocks are often found in the small- and mid-cap space, particularly within the $10-$50 range, which is the focus of this article. Recently, interest in small- and mid-cap stocks has increased following the volatility in the Magnificent 7 (Mag 7) mega-cap tech stocks. Chris Retzler, portfolio manager of the Needham Small Cap Growth Fund, discussed the outlook for small-cap stocks on CNBC’s Squawk Box on January 17. He noted that while small-cap stocks have underperformed broader market indexes, recent momentum in the Russell 2000 suggests a potential shift. Chris emphasized that small-cap companies are seeking greater economic stability, which, once established, could drive broader market participation and growth. He also highlighted ongoing innovation in industries such as electric vehicles, semiconductors, and data infrastructure, which could benefit smaller firms.
Similarly, in mid-February, Gene Munster, managing partner at Deepwater Asset Management, discussed a potential shift from mega-cap tech stocks toward smaller technology companies. While he remains optimistic about the long-term prospects of the Mag 7, he believes that smaller tech firms—particularly those with a market cap below $500 billion could start outperforming as investors look for new growth opportunities.
Identifying the best affordable tech stocks is particularly challenging, given the sector’s dynamic nature and recent volatility. To gain further insights, we look at another discussion on CNBC from March 24, where Gene Munster again shared his outlook on the tech sector. He pointed to April 2 as a key event, as new tariffs are set to take effect. While acknowledging short-term volatility, Munster remains bullish on tech stocks for the next two years, viewing the market as still in the early stages of an AI-driven growth cycle, unless disrupted by a potential recession.
Despite short-term fluctuations and external factors like tariffs, the long-term outlook for tech remains strong, especially for companies positioned to capitalize on AI-driven growth and broader industry trends. That said, given the recent volatility in large tech stocks, opportunities in small- and mid-cap tech companies have come to the fore, particularly for those with strong financials and innovative offerings. As investors look beyond the Magnificent 7 and large cap tech companies, affordable tech stocks in sectors like AI, semiconductors, and data infrastructure could benefit from increased market attention.
Our Methodology
To identify the best affordable tech stocks to buy according to analysts, we screened for U.S.-listed companies with a share price between $10 and $50 and a market capitalization above $1 billion. These criteria helped us avoid volatile small-cap stocks. Next, we narrowed the selection to stocks trading at or below a forward price-to-earnings (P/E) ratio of 20 while also having an upside potential of at least 20%. From this refined list, we further filtered companies that are widely held by hedge funds, using data from Insider Monkey’s Q4 2024 hedge fund holdings database. Finally, we ranked the top 12 stocks based on their upside potential, placing those with the highest projected gains at the top.
Note: All pricing data is as of market close on March 21.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
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Sensata Technologies Holding plc (NYSE:ST)
Current Share Price: $28.0; Forward P/E: 8.5
Upside Potential: 32%
Number of Hedge Fund Holders: 40
Sensata Technologies Holding plc (NYSE:ST) is a global supplier of sensors, electrical protection devices, and power management solutions. The company serves the automotive, industrial, aerospace, and heavy vehicle markets.
The company is experiencing strong growth driven by rising demand for safer, cleaner, and more efficient products, fueled by both global regulations and changing consumer preferences. These market shifts create significant expansion opportunities, and the company is well-positioned to capitalize on them by leveraging its core strengths and global presence. In 2024, this growing emphasis on safety, sustainability, and efficiency represented a total addressable market of $15.6 billion.
Acknowledging the growth prospects, TD Cowen analyst Joseph Giordano recently reiterated a Buy rating on Sensata Technologies Holding plc (NYSE:ST) with a price target of $45, highlighting management’s strategic improvements under new CEO Stephan von Schuckmann. The analyst emphasized Sensata’s disciplined restructuring, including exiting non-core and unprofitable segments, which has strengthened its cost structure and positioned it well in the challenging automotive sector. He remains optimistic about Sensata’s global growth potential.
Joseph further emphasized that the Gigavac acquisition enhances its EV offerings in Europe and aligns with the shift to next-generation vehicles. In China, the CEO’s expertise is expected to drive deeper market penetration, despite hurdles for multinationals. In the U.S., Sensata benefits from the rising adoption of hybrid vehicles. Additionally, the analyst’s view is also bolstered by strong cash flows and an undemanding valuation at P/E of 10.
Overall, ST ranks 8th on our list of best affordable tech stocks to buy according to analysts. While we acknowledge the potential of ST to grow, our conviction lies in the belief that 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 ST but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.