As we near the second half of 2024, the correction phase points to a powerful upside potential in underrated tech stocks.
Last year witnessed an extraordinary boom in technology stocks, soaring to uncharted heights. However, the recent warning signs are becoming too loud to ignore, as evidenced by the tech-heavy Nasdaq Composite Index, which has slid 2.5% in the past month. This shift in momentum has made investors revamp their investment choices.
During this tumultuous transformation, technology behemoths like Meta (NASDAQ:META) and Nvidia (NASDAQ:NVDA) lost over $750 billion from their respective market capitalizations, exposing the tech sector’s vulnerability.
This turbulence has exposed the shortcomings in the major tech stocks while simultaneously revealing untapped potential in the broader market. While investors and the media tend to focus mostly on mega-cap stocks, many underrated businesses are quietly making significant strides. Thus, it is pertinent to identify diamonds in the rough and bet on these three tech stocks for spectacular gains.
Underrated Tech Stocks: Photronics (PLAB)
Photronics (NASDAQ:PLAB) shines brightly within the technology industry’s semiconductor equipment and materials niche. Its mastery of photomask manufacturing has led to a mind-boggling 99% year-over-year (YOY) price growth.
It’s not just the price, though. Photronics maintained resilience, posting a revenue of $216.3 million in the first quarter of 2024, which marks a 2% bump year-over-year. Seasonal fluctuations and a shorter Q1 caused sequential revenue to decline, but annual growth depicts Photronics’ ongoing capacity to increase revenues.
Moreover, Photronics’ top-line growth is greatly driven by its stronghold in advanced technology nodes, such as 22 nm and 28 nm, within the integrated circuit (IC) segment. Customers are moving toward these nodes to maximize savings and improve performance, driving up demand for Photronics’ photomask solutions.
Furthermore, Photronics’ non-GAAP earnings multiple for the trailing year trades at 13.28x, substantially less than the industry average of 21.64x. In contrast to being a valued catch, this distinguishes the continued relevance of photomasks in escalating technological experiences.
Micron Technology (MU)
Micron Technology (NASDAQ:MU), a leader in memory and storage solutions, is enhancing its role in the tech sector. It’s ramping up mass production of high bandwidth memory chips that power Nvidia’s latest artificial intelligence (AI) chips. As Micron CEO Sanjay Mehrotra boasted at the recent conference: “Our HBM3E product will be a part of Nvidia’s H200 Tensor Core GPUs, and we are progressing on additional platform qualifications with multiple customers.”
Along with Micron’s collaboration with Nvidia, its comeback story is grabbing headlines. Investors can rejoice in the company’s much-anticipated return to profitability. Following five consecutive quarters of negative earnings per share (EPS), Micron posted positive non-GAAP EPS of 42 cents in Q2 2024, exceeding expectations by 66 cents. Moreover, Micron is performing impressively with reported revenue of $5.82 billion, marking a significant 58% YOY upswing from $3.69 billion and surpassing estimates by $473.44 million.
This sustained trajectory has earned Micron a ‘strong buy’ rating from TipRanks analysts, who predict a robust 10% upside potential, further solidifying Micron’s standing in the tech sector.
Underrated Tech Stocks: Applied Materials (AMAT)
Applied Materials (NASDAQ:AMAT) has excelled as a linchpin in microchip manufacturing equipment. AMAT benefits from this significant advancement as AI applications depend increasingly on sophisticated CPUs. As a result, the company’s stock has taken off, climbing by 25% in 2024 alone. Spread these gains over the past year, and you see an astounding 84.37% bump compared to the S&P 500’s 25.74%. This result reflects the high demand for its cutting-edge equipment, which is essential for creating advanced semiconductors that form the basis of AI technology.
Building on this upbeat trajectory, AMAT reported EPS of $2.12 in Q4 2023, topping analyst expectations by 22 cents. Additionally, the business reported revenue of $6.71 billion, outperforming the projected $6.48 billion. This economic stability is further supported by a stellar 46.41% return on common equity for the trailing year, a sign of profitability and efficient capital use.
Moreover, AMAT enhances shareholder value by sweetening the pot with a dividend that has grown for six consecutive years.
On the date of publication, Nabeel Bukhari 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.