We recently published a list of 10 Best Tech Stocks to Invest In On the Dip. In this article, we are going to take a look at where Viasat, Inc. (NASDAQ:VSAT) stands against other best tech stocks to invest in on the dip.
How’s The Tech Sector Performing in Q3 2024?
Dan Romanoff, a senior equity research analyst at Morningstar provided insights into the current state of the technology sector, on October 1st, 2024. His analysis highlights significant challenges and opportunities for the industry. Romanoff mentioned that after a robust start to 2024, the tech sector experienced a slump in the third quarter. Despite this downturn, software and services companies have continued to report solid quarterly results, even as their stock prices have remained relatively flat. Semiconductor firms, while showing potential for recovery, are currently dragging down overall sector performance.
While discussing the sector-wise ranking of the US stock market based on the Q3 earning season, Romanoff pointed out that the technology sector has been the second-best-performing sector over the past year but ranks as the second-worst performer in the most recent quarter. Romanoff emphasizes that despite these fluctuations, there are positive long-term trends that could benefit the industry. He expressed confidence in several long-term growth drivers within technology, including cloud computing, artificial intelligence, and the expansion of semiconductor demand. He mentioned that these factors are expected to sustain growth in the sector even amidst short-term challenges.
Moreover, according to Romanoff, the Morningstar US Technology Index has risen by 32% over the past twelve months, outperforming the broader US equity market’s 24% gain. He notes that while the median US technology stock is fairly valued with a modest margin of safety, the sector trades at a slight premium on a market-weighted basis. He identifies semiconductors and hardware as being overvalued compared to software, which appears more attractive at present.
READ ALSO: 10 Best Small-Cap Stocks Ready To Explode and 10 Cheap NASDAQ Stocks To Invest In Now.
Romanoff also pointed out that generative AI is a significant force within technology. Companies are increasingly integrating next-generation AI capabilities into their products and services. This trend is particularly evident among cloud providers and semiconductor manufacturers. Despite some recent stock pullbacks for Nvidia, Romanoff believes there are still substantial investment opportunities in generative AI beyond just major players. He mentioned that he sees 34% growth in Gen AI Networking equipment spending through 2028. Romanoff also pointed out that the usage of chips and networking gear has grown together from 2022 to 2024 and he expects the trend to continue till 2028.
Our Methodology
To curate the list of the 10 best tech stocks to invest in on the dip, we used the Finviz stock screener and CNN. Using the screener we shortlisted technology stocks that were down at least 25% on a year-t0-date basis, but analysts see a more than 25% upside. Once we had an aggregated list of the tech stocks fitting our criteria, next we cross-checked their analyst upside potential from CNN. Lastly, we ranked these stocks in the ascending order of the analyst upside potential. Please note that the data was collected on November 25, 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A telecommunications tower reaching high into the sky, connected to a satellite system.
Viasat, Inc. (NASDAQ:VSAT)
Share Price: $9.62
Year-To-Date Performance: -65.69%
Analyst Upside Potential: 65.80%
Viasat, Inc. (NASDAQ:VSAT) is a global communications company that specializes in providing high-speed satellite broadband and secure networking solutions. The company offers high-speed internet services primarily through satellite technology, catering to both residential and commercial customers. This includes fixed broadband for homes and mobile broadband for businesses and government operations. It also develops a variety of satellite and wireless products, along with network and terminal solutions that facilitate broadband connectivity.
The company serves a diverse range of industries including, aviation, maritime, energy, and government sectors. In the second quarter of fiscal year 2025, Viasat reported a revenue of $1.1 billion, which represents an 8% decrease compared to the same period last year. However, when excluding a one-time revenue boost from a litigation settlement in the previous year, the revenue decline is only 1%. This slight decrease was due to lower earnings from their Communication Services segment, which was offset by growth in their Defense and Advanced Technologies (DAT) sector.
Viasat, Inc. (NASDAQ:VSAT) achieved record contract awards totaling $1.3 billion, marking a 25% increase from the previous year. The DAT segment alone saw its awards more than double, reaching about $510 million during this quarter. Although the stock of the company has been down 66% year-to-date, analysts’ 12-month median price target is pointing towards a 66% upside from current levels. It is one of the best tech stocks to invest in on the dip.
Cove Street Capital Small Cap Value Fund stated the following regarding Viasat, Inc. (NASDAQ:VSAT) in its Q3 2024 investor letter:
“Viasat, Inc. (NASDAQ:VSAT), E.W. Scripps (ticker: SSP), and Compass Minerals (ticker: CMP) were our biggest detractors this year. Each has specific fundamental problems, but they share perceptions of balance sheet issues that we would suggest are producing grossly negative viewpoints on their respective stock prices. Viasat just refinanced most of its debt stack which puts that to rest; Scripps has stated they will sell its Bounce TV network by the November earnings call; and Compass booted its CEO, and we believe we are days or quarters from a “for sale” sign. Not our finest moments, but all are stupid cheap in our opinion with real asset support. Recent Fed decisions should help here.”
Overall, VSAT ranks 4th on our list of best tech stocks to invest in on the dip. While we acknowledge the potential of VSAT 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 VSAT 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.
