While the innovation sphere experienced a dramatic rise in attention, the fear of holding the bag might lead more investors to consider the (possible) virtue of targeting de-risked tech stocks. That’s a euphemism I picked up somewhere. In English, this means these securities suffered massive body blows in the market.
Ordinarily, you should avoid crimson-stained innovators, even if they’re billed as the cheap tech stocks to buy. Yes, when a security languishes near its 52-week low – which is the case for the publicly traded firms on this list – that’s not always a good thing. Indeed, it’s usually a terrible circumstance, implying deep-seated challenges with the underlying entity.
However, it’s also possible that most investors might not be seeing the opportunity correctly. And sometimes, the red ink inspires contrarian trading, leading to enormous (though unlikely) gains for speculators. If you don’t mind the heat, these are the de-risked tech stocks to consider.
Remember, we can continue the discussion via my X account if you so wish.
TD Synnex (SNX)
A multinational firm based in Fremont, California, TD Synnex (NYSE:SNX) provides information technology (IT) services to businesses. Fundamentally, the negative catalyst impacting SNX centers on the mass layoffs that companies have continued to impose. This framework suggests that not all enterprises benefit from the robust gains of the labor market. In turn, companies often look to IT to make cuts.
Still, slashing in this area may lead to operational vulnerabilities. Therefore, it’s possible that TD Synnex could make a comeback. In the meantime, with SNX trading close to its 52-week low, it could represent one of the de-risked tech stocks. Currently, shares trade hands at 7.88x forward earnings, which is well below the sector median of 13.35x.
Additionally, SNX generally benefits from robustly positive free cash flow (FCF). Still, it only trades at 6.23X FCF, inviting speculators to take a shot. Analysts rate shares a consensus strong buy, with the highest price target clocking in at $120.
Tower Semiconductor (TSEM)
Based in Israel, Tower Semiconductor (NASDAQ:TSEM) manufactures integrated circuits (ICs) using specialty process technologies. In particular, Tower features acumen in CMOS image sensors. Unfortunately, chip manufacturers have generally suffered from broader headwinds. Also, in Tower’s case, geopolitical flashpoints in the area don’t help. As a result, TSEM has taken a devastating loss, especially with buyout deal by Intel (NASDAQ:INTC) falling apart.
Nevertheless, the red ink just might make TSEM one of the de-risked tech stocks to consider. Right now, shares trade at 9.6x trailing earnings (without non-recurring items or NRI). In contrast, the median value for the semiconductor industry stands at a lofty 22.47x. Also, the market prices TSEM at 1.72X trailing sales, favorably lower than 64.39% of sector peers.
Also, it’s interesting that options flow data notes that an institutional trader (or traders) sold put contracts with a $45 strike price, collecting a premium of $25.6 million in the process. That suggests significant contrarian bullishness. Analysts rate TSEM as a moderate buy with a $36.50 average price target.
Himax Technologies (HIMX)
Based in Tainan City, Taiwan, Himax Technologies (NASDAQ:HIMX) is a leading supplier and fabless semiconductor manufacturer. Again, as with Tower Semiconductor above, Himax suffered from broader headwinds impacting the chip-making space. Losing double-digit percentage points since the start of the year, Himax has largely been on the back foot since early February.
Still, going practically full circle on a trailing 52-week basis, HIMX could be one of the cheap tech stocks to buy. Unlike the high-flying semiconductor firms focused on artificial intelligence, HIMX has been significantly de-risked. Presently, shares trade at only 8.59x forward earnings. In contrast, the sector median clocks in at just over 19x. Thus, HIMX is favorably lower than 92% of its peers regarding valuation.
Looking at options flow, institutional trader activity has begun picking up since late September this year. With significant purchases of call options at the $6 and $7 strike prices, HIMX might surprise onlookers.
Analysts rate shares a moderate buy with a $9 average price target.
SolarEdge Technologies (SEDG)
One of the more promising ideas during the first (full) year of the Covid-19 pandemic, SolarEdge Technologies (NASDAQ:SEDG) went flat from 2021 through most of the first half of 2023. Unfortunately, falling demand for solar systems bit off a major chunk of SEDG’s market value. As well, rising inventory concerns and disappointing forecasts contributed to a dour environment. Not surprisingly, shares trade at their 52-week lows.
However, it’s also possible that SEDG symbolizes one of the de-risked tech stocks to consider. Frankly, it’s an extremely risky wager. However, it’s also possible that due to the relevance of the industry, SolarEdge could fight its way back from the doldrums. Analysts broadly remain upbeat, though they’ve been slashing their price targets to reflect new realities.
And what’s interesting here is that institutional traders may be targeting early 2024 as a possible resurgence point. Given the series of bullish transactions – bought calls, sold puts – it’s not out of the question. As a moderate buy view, analysts look for $137.21 as the average target for SEDG.
As I mentioned not too long ago, financial technology (fintech) firms have been getting crushed. With a major French multinational payment and transactional services firm posting an outlook downgrade, the pessimism launched a wave of selling. Unfortunately, Block (NYSE:SQ) – formerly known as Square – suffered badly from the downdraft.
Given the scope of the damage and the recent negative acceleration, most investors should steer clear of SQ. However, for those wanting to gamble on cheap tech stocks to buy might give Block another look. To be sure, the weakening consumer economy is beginning to demonstrate signs of user stress. Therefore, fintechs suffer from a cloud of skepticism.
At the same time, Block remains relevant as a business solutions platform. Currently, SQ trades at only 16.83x forward earnings, lower than the sector median of 20.97x. Thus, it’s possibly a candidate for de-risked tech stocks. Also, analysts remain bullish, rating SQ a strong buy with an average $77.07 price target.
On surface level, Sonos (NASDAQ:SONO) appears wildly dangerous, perhaps too much so. Therefore, prospective investors will want to be cautious about adding SONO to their list of de-risked tech stocks. Since peaking around April 2021, shares have been on a severe decline, punctuated by a rise in value from September 2022 to May 2023.
At the moment, it seemingly continues to print fresh lows, making SONO only appropriate for speculators. However, some fundamental justification might exist for the underlying developer and manufacturer of audio products. Currently, the phenomenon of “funflation” – or spending on social-based experiences – has captivated consumers. Eventually, though, the spending on one-and-done experiences may get old.
In its place, consumers may look for more value. Beefing up one’s audio setup can provide years if not decades of enjoyment. At a time like this, a return of retail revenge just might materialize. And analysts seem to think so, pegging SONO a strong buy with a $20.75 target, implying over 110% upside.
As a manufacturer of television sets, Vizio (NYSE:VZIO) might seem an unusually risky idea for cheap tech stocks to buy. And it’s exactly that, I’m not going to sugarcoat it. Assuming that Vizio didn’t find bars of gold hidden in its Irvine, California-based headquarters when you look at VZIO’s chart, you’re going to see plenty of red ink. Year-to-date, trailing year, trailing five years, whatever – you’re seeing red (barring the bars).
Of course, that’s when someone might chime in and say, what’s up with mentioning VZIO? With people still focused on going on vacation and attending Taylor Swift concerts, Vizio seems grossly irrelevant. I get it. But then again, you must also consider that the average LCD TV lasts about five to seven years (in terms of the brightest setting). And that stat naturally goes down with increased viewership.
And what were people doing during the Covid-19 crisis? Yeah, watching a lot of TV, perhaps much more so than average. Fast forward a few years from the pandemic and Vizio could see increased demand.
Analysts seem intrigued, forecasting an $11.13 average price target. If you have the nerve, VZIO could be one of the de-risked tech stocks to consider.
On the date of publication, Josh Enomoto 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.