5 Top Stock Trades for Thursday: S&P 500, NFLX, FDX, ROKU >>> READ MORE

3 Tech Stocks With Bargain Prices

Old-line tech operators are transforming, providing new opportunities for investors looking for bargains

By Tom Taulli, InvestorPlace Writer & IPO Playbook Editor

http://invstplc.com/1F86Qt2

As investors look for growth, they have piled into tech stocks like Facebook Inc (NASDAQ:FB), Twitter Inc (NYSE:TWTR) and Netflix, Inc. (NASDAQ:NFLX). The problem is that the valuations have gotten stretched.

3 Tech Stocks With Bargain PricesConsider that the tech-laden Nasdaq-100 Index sports a forward price-to-earnings ratio of 19.2.

Yet there are still some tech stocks that are undervalued — and have the potential of generating nice returns for investors. If anything, a variety of old-time operators have been undergoing transformations, such as by moving into high-growth categories like mobile, cloud computing, Big Data and the Internet of Things.

So which companies look interesting? Well, here are three to consider.

3 Tech Stocks With Bargain Prices: Oracle Corporation (ORCL)

3 Tech Stocks With Bargain Prices: Oracle Corporation (ORCL)Forward Price-to-Earnings Ratio: 14.4
YTD Performance: -3.7%

Over the years, Oracle Corporation (NYSE:ORCL) has invested heavily in areas beyond its core database franchise, such as in enterprise resource planning (ERP), middleware, analytics and so on.

The problem? Much of the software is on-premise. But of course, the industry has been rapidly moving towards cloud-based solutions.

To deal with this, ORCL has acted quickly, whether by aggressive internal development or acquisitions. And it appears that the company is starting to get results. Keep in mind that the cloud business is on an annual run-rate of over $2 billion. In fact, during the latest quarter, ORCL snagged close to 800 new cloud customers and nearly 530 expanded its cloud services.

At the same time, ORCL has taken action to deal with some other nagging problems. For example, the company has been revamping its sales organization, which has been showing an improvement in productivity. There are also signs of stabilization with the hardware business.

Yet the fact remains that ORCL will likely generate substantial cash flows because its software is mission-critical for customers. During the last year, free cash flows came to a hefty $14.5 billion. As a result, ORCL has continued with strong buybacks, which have amounted to $8.1 billion during the past year.

3 Tech Stocks With Bargain Prices: NCR Corporation (NCR)

3 Tech Stocks With Bargain Prices: NCR Corporation (NCR)Forward P/E: 9.9
YTD Performance: 1.6%

The roots of NCR Corporation (NYSE:NCR) go all the way back to 1884, but over the last five years, the company has been undergoing a transformation. The business, which was mostly hardware offerings for point of sale (POS) systems, ATMs and kiosks, has been moving towards software solutions.

Consider about 27% of overall revenues now come from this category.

Software has also been a nice source of growth. During the first quarter, the cloud business soared by 231% to $129 million.

While part of this has been from acquisitions, NCR has also invested heavily in research and development. To this end, the company recently launched Kalpana, which is a cloud-based ATM. Actually, NCR believes that this new system will reduce costs by up to 40% compared to legacy approaches.

Over time, as the company adds more software and cloud revenues, there should be a nice boost to margins and growth. But in the meantime, NCR will likely continue to crank out strong cash flows — projected at $325 million to $375 million in 2015.

3 Tech Stocks With Bargain Prices: Micron Technology, Inc. (MU)

3 Tech Stocks With Bargain Prices: Micron Technology, Inc. (MU)Forward P/E: 7.5
YTD Performance: -19.1%

It’s been a rough year for Micron Technology, Inc. (NASDAQ:MU), whose stock is off nearly 20%. But this looks like an interesting opportunity for value investors.

MU, which is a top maker of DRAM and flash memory, appears to be incredibly undervalued with a forward P/E of a mere 7.5. In other words, sentiment is already at horrible levels.

Then again, there have been some major headwinds for MU. One is the continued sluggishness in PC demand. But the soaring U.S. dollar has been another big factor. It has made it much more expensive for U.S. operators like MU to compete in global markets.

Oh, and there is the slowing of the economic growth in key markets in Asia — especially in China — as well as many parts of South America.

But again, Wall Street has already been factoring such things into the stock price. Besides, there are some catalysts that should help MU. For example, the company has invested heavily in developing new technologies for smartphones as well as emerging categories like wearables, connected cars and smart homes.

But perhaps what could have the most immediate impact is MU’s development of 3D chips, which is part of a major collaboration with Intel Corporation (NASDAQ:INTC). The next-generation technology stacks circuits, which allows for significant improvements in capacity and better energy conservation. Such things will certainly be attractive for mobile devices, which could help revive growth at MU.

And given the current rock-bottom valuation, the gains could certainly be healthy for investors.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2015/04/3-tech-stocks-with-bargain-prices-orcl-ncr-mu/.

©2019 InvestorPlace Media, LLC