These six oversold tech stocks have fallen so far that they have become significantly oversold. This is especially their case since their earnings projections are still positive for 2023.
As a result, these oversold tech stocks have low price-to-earnings (P/E) multiples now. This makes them terrific bargains.
Moreover, they all have strong and positive free cash flow (FCF). This is important for tech companies since it allows the company to fund R&D and capex spending.
Keep in mind that many tech companies account for software expenses as capital spending to keep it out of the net income statement. That requires a strong operating cash flow line. These oversold tech companies have plenty of FCF, to not only spend on capex, but also on dividends and buybacks.
Let’s dive in and look at these stocks.
| BELFB | Bel Fuse Inc. | $15.91 |
| AVT | Avnet, Inc. | $42.47 |
| MFGP | Micro Focus International plc | $3.63 |
| PLAB | Photronics, Inc. | $20.02 |
| AVGO | Broadcom Inc. | $500.83 |
| QCOM | QUALCOMM Incorporated | $122.97 |
Oversold Tech Stocks to Buy: Bel Fuse (BELFB)
Market Cap: $210.3 million
Bel Fuse (NASDAQ:BELFB) This electronic component maker seems extraordinarily cheap now. The company’s revenue is projected to grow modestly at 4%+ and earnings will grow 6.2% in 2023. For example, one analyst covering the stock projects that EPS will rise to from $2.27 in 2022 to $2.41 in 2023.
But at $15.85 on June 17, the stock trades for just 6.9x and 6.5x for 2022 and 2023 respectively. That is very cheap for a tech stock.
In addition, the stock has a 1.79% dividend yield, which makes the stock attractive at this price as investors get paid to wait for its value to emerge.
Avnet (AVT)
Market Cap: $4.1 billion
Avnet (NASDAQ:AVT) is an electronics distributor with a nominal growth rate forecast for the next year. Seeking Alpha shows that nine analysts project its EPS will rise nominally from $6.85 this year to $6.98 next year.
But at $42.39 per share as of June 22, the stock has a low 6.1x multiple of earnings for 2023. That is very inexpensive, especially since Avnet is making profits.
Moreover, AVT stock sports a 2.44% dividend yield with plenty of FCF to cover the dividend. For example, last quarter ending April 30 it produced $232.2 million in FCF. That covered its dividend payment of $25.6 million as well as share repurchases of $43.4 million.
Expect AVT stock to rise over the next year once fears of a recession start to recede.
Oversold Tech Stocks to Buy: Micro Focus Int’l Plc (MFGP)
Market Cap: $1.24 billion
Micro Focus Int’l (NYSE:MFGP) is an international enterprise software company based in the U.K. with business clients in the U.S. and Europe. It has 11,000 employees worldwide and 7,500 business partners and bills itself as one of the world’s largest enterprise software companies.
The company’s revenue was slightly lower for the year ending Oct. 31, 2021, at $2.9 billion, down from $3 billion. Analysts now project slightly highly earnings per share at $1.47 per share vs. $1.44 for the October 2021 year.
Moreover, 2023 earnings are forecast to dip slightly to $1.38. Maybe because its earnings are not growing that well, the stock is on a very low price-to-earnings multiple. For the October 2022 year, it’s on a price-to-earnings multiple (P/E) of just 2.93x and 3.12x for October 2023.
That is incredibly cheap for such a profitable company. Moreover, it pays two dividends a year, most of which come in the final dividend. But it seems to average about 28 cents to 29 cents annually. That gives MFGP stock a high 6.86% dividend yield at today’s price of $3.63 as of June 17.
These are the kind of value metrics that value investors like. They just assume that when things turn around, the stock will garner a higher valuation — certainly much higher than three times earnings. In fact, just a slight bit of growth will probably cause the P/E multiple to double. That makes this one of the best tech stocks to move higher over the 12 months.
Photronics (PLAB)
Market Cap: $1.23 billion
This semiconductor equipment manufacturer makes photomask equipment and has growing revenue, margins and earnings-per-share. Moreover PLAB stock is cheap at 10.75x this year and 9.2x next year’s forecast earnings.
In fact, revenue is forecast to rise 7.7% for the year to October 2023, and EPS could jump from $1.90 per share to $2.22, or 16.8%. So, at $19.93 per share on June 15, the stock is very cheap at 9.2x times Oct. 2023 earnings.
Although PLAB does not pay a dividend, it does produce plenty of free cash flow (FCF). According to Seeking Alpha, in the trailing 12 months (TTM) to May 31, the company produced over $125 million in FCF. That represents 16.8% of the $746.3 million in sales over the TTM to May 31. That allows the company to start buying back stock if it wants to.
Oversold Tech Stocks to Buy: Broadcom (AVGO)
Market Cap: $202 billion
This semiconductor device and software company has robust earnings growth and a cheap valuation. Revenue is forecast to grow about 5.9% in 2023 to $34.85 billion for the year to Oct. 2023. Recession or not, Broadcom (NASDAQ:AVGO) will still be growing.
Moreover, earnings are forecast to rise from $36.87 to $40.33, or 9.38% in Oct. 2023, even higher than its revenue growth forecast.
Therefore, at $500.85 per share on June 17, its earnings multiple is just 12.5x for 2023. Moreover, Broadcom has a 3.26% dividend yield and a massive buyback program of about 6.6% of its stock market value. This increases the probability that Broadcom stock could easily move much higher.
Oversold Tech Stocks: Qualcomm (QCOM)
Market Cap: $137.8 billion
This wireless technology and patent management company will post modest revenue and earnings growth over the next year. For example, earnings are forecast to rise by 4.85% to $13.18 for the FY ending September 2023, after a whopping forecasted 46.8% for this year. This is based on the average of 24-28 analysts surveyed by Seeking Alpha.
This means that Qualcomm (NASDAQ:QCOM), at $123 as of June 17, 2022, trades for less than 10x earnings for both 2022 and 2023. That is very cheap for such a powerful tech company.
Moreover, Qualcomm produces a large amount of free cash flow (FCF). It uses that to pay its 2.41% dividend yield and large amounts of buybacks. For example, last quarter alone its FCF was over $2.2 billion, and it used $1 billion of that to repurchase its shares. That works out to an annual rate of over $4.1 billion, or about 3% of its stock market value.
Given this, investors can expect to see QCOM stock move higher over the next year.
On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
