It’s getting harder to find very oversold tech stocks. 2022 was a challenging year for the technology sector. Investors are more positive on tech stocks this year as companies catch up to their valuations and the prospect of slowing rate hikes starts to look more likely. That’s meant there are fewer bargain basement tech stocks lying around, but there’s still opportunity if you know where to look.
It can be difficult to find very oversold tech stocks participating in a trend as popular as artificial intelligence (AI). Mainly because investors have been talking about it non-stop for the past few months. With that in mind, it could be worth thinking about pockets of the industry that might be overlooked. Digital payments is another trend worth watching that got a lot of hype during the pandemic but isn’t quite as talked-about anymore.
One of the biggest benefits that technology offers is efficiency, so looking for tech stocks that are helping improve prospects in other industries is another good way to find diamonds in the rough. With all that in mind, lets delve into three very oversold tech stocks.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) has been one of the biggest beneficiaries of investors’ optimism around AI. MSFT’s latest results showed that revenue won’t be quite as rosy as expected thanks to slowing growth in personal computing. This is mostly a reflection of the more challenging environment, fewer people are rushing out to buy new computers with a cost of living crisis still looming.
Meanwhile AI, while exciting, is far from being a growth engine for Microsoft. But there’s no doubt its the future for the tech giant, and it should supercharge cloud revenues in the future. Microsoft’s value proposition is that it helps businesses do more with less, so although the current environment presents a challenge, it isn’t one that will stop the group in its tracks. On top of its strong cloud offerings, the group makes a whole host of programs the world can’t live without. This offers some insulation as times get tight and should continue to underpin growth well into the future.
Enphase Energy (ENPH)
Enphase (NASDAQ:ENPH) has fallen over 55% over the past year. But for investors willing to stomach some risk, this could be an opportunity to pick up a very oversold tech stock at bargain basement prices. The group made its name making micro-inverters for solar panels, but has since expanded to become a one-stop shop for residential solar-panel energy management.
Enphase comes with its challenges. One is the market it operates in. Competition is rising as the solar market gains momentum, and the recent boost in funding thanks to the U.S. Inflation Reduction Act has only stoked the fire as companies vie for a piece of the pie. But the Enphase-specific problem is the group’s asset-light model. The group outsources most of the heavy lifting, which has allowed for quick growth, but it also means the group’s at the mercy of its suppliers. Price hikes will hit the group hard, as will any supply chain kinks.
With that said, the growth opportunities are huge. Enphase is due to put out the latest iteration of its battery storage products in 2024, and solar penetration is only expected to continue rising. Globally, its expected grow at a compound annual rate of nearly 16% over the next 7 years.
PayPal (PYPL)
There’s a lot to like about PayPal (NASDAQ:PYPL), making it a strong pick among very oversold tech stocks. The group is a digital payments leader, and that comes with many benefits. Paypal has become a trusted name among consumers, which goes a long way as more transactions shift online. Merchants want to include a PayPal option because its popular among consumers and first-time users are more confident to sign up because they’ve seen the logo on many well-known websites. It’s a virtuous loop and one of PayPal’s biggest assets.
However, challenges building out the group’s third-party payment option have taken the shine off the stock somewhat. This option allows merchants to use the platform without the PayPal logo. It’s a fast-growing part of the business, but it isn’t as profitable as the legacy payment methods. The lower margins mean growth here isn’t as exciting to investors.
However with a new CEO on board, PayPal is working to turn margins around in this part of the business. If the about-face is successful, this fast-growing part of the business could become somewhat of a crown-jewel and shares could jump significantly.
On the date of publication, Marie Brodbeck 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.