The tech sector is notorious for both its high growth potential and unpredictable volatility. After a challenging last few years, investors are on the hunt for undervalued tech stocks that present solid fundamentals with potential for outsized returns.
Undervalued tech stocks can provide lucrative opportunities if you can spot them amidst the noise. These companies are often overlooked, unprofitable, or temporarily facing short term headwinds. However, they hold underlying strengths and present strong indicators of being undervalued. While their current market valuations may not reflect their intrinsic worth, astute investors recognize the latent value waiting to be unlocked.
Now, let’s unpack the top three undervalued tech stocks to buy like there’s no tomorrow!
Airbnb (ABNB)
Airbnb (NASDAQ:ABNB) has revolutionized the travel industry by providing travelers with unique and often more affordable accommodations. With the travel industry on pace to recover to pre-pandemic levels in 2024, the stock offers a compelling long term value proposition.
Airbnb offers a vast selection of spaces, from private rooms to entire homes, catering to a diverse range of customer needs. Despite the pandemic’s blow to the travel industry, Airbnb adapted its business model. The company delivered impressive revenue growth in the following years, with record FCF and profits in the 2022 and 2023 fiscal year. However, FY23 was truly a remarkable year for the business. Its hosting community surpassed more than 5 million active users, with active listing exceeding 7.7 million.With the gradual recovery of the travel sector, Airbnb is poised to capitalize on the pent up demand. This makes Airbnb one of the top undervalued tech stocks to buy in 2024.
DoorDash (DASH)
DoorDash (NASDAQ:DASH) is one of the best undervalued tech stocks to buy now. Its user-friendly app and expansive network of restaurants and users has fueled its growth since its founding back in 2013. But the company is taking additional steps to grow sales for its merchants and expand into new verticals.
DoorDash is not a company that you may consider to be undervalued. The company has posted staggering operating losses since its IPO. However, those operating losses have been shrinking over the last several quarters as management sets sights on profitability. While the pandemic was a major boost to its business, DoorDash has maintained its momentum as the economy reopened. According to Statista, DoorDash holds 66% market share of food delivery in the United States. This is astonishing, and the company’s FCF swelled more than 6000% YOY to $1.34 billion in FY23. With further improvements to their unit economics and growing marketplace GOV, the path to profitability is right around the corner.
Microchip Technology (MCHP)
Microchip Technology (NASDAQ:MCHP) isn’t a flashy, consumer facing company in the tech sector like some of the companies previously mentioned. However, it is a critical player in the semiconductor industry that has seen impressive growth over the last several years.
Microchip designs and manufactures microcontrollers, mixed-signal, and flash-IP integrated circuits, which are the brains of countless devices. They power a variety of industries, including automotive, industrial, energy storage, and consumer electronics. The reason the company could be undervalued lies in their valuation and the sheer pervasiveness of its technology. As the world becomes more automated, the demand for microcontrollers is bound to increase. Furthermore, Microchip’s track record of steady growth and profitability lends a positive sign for the future. With a recent 26% hike to its quarterly dividend, Microchip remains well positioned for strong growth while returning cash to shareholders.
On the date of publication, Terel Miles did not have (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.
