The recent market plunge has created powerful opportunities in the tech sector. Professional investors have waited for several years to purchase shares at such a sharp discount.
The key is to make certain that the company is in the deep value zone per the fundamental metrics rather than looking purely at price.
We have identified the following 5 high-tech companies as being ideal buys right now.
1, Apple (Nasdaq:AAPL)
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The recent sell-off has even hurt the giants of the tech world. Apple, the world’s most valuable company, with a market cap of over $520 billion and $216 billion of cash/securities has dropped below $100.00 per share.
Although exasperated by the overall market sell-off, The selling is not all overall market related.
Worries of iPhone saturation, sales slowing, and a decline in revenue have pressured shares lower. Apple is down over 29% since February,2015 opposed to a 10% drop in the S&P 500.
Fundamentally, the shares are relatively cheap with a little over 10 times estimated 2016 earnings. In comparison, the S&P 500 P/E average is 15, Alphabet (Google) is 22 and Facebook clocks in at 38.
China remains a huge market for the company. Sales soared 99% in the 3rd quarter 2015 to $12 billion from China. When you consider the explosive growth of China’s middle class, we can only expect this progress to continue.
The price of Apple’s shares appears to follow the iPhone product cycle. The much anticipated iPhone 7 release happens this fall with many analysts expecting the release to improve Apple’s earnings.
Apple’s huge cash stash alone creates a compelling case to purchase the shares at the current low levels. It can use this cash to make acquisitions, ramp up its dividend, and even buy back shares. All moves that could easily send the shares rocketing higher.
Add in the fact that the company has over a billion active devices worldwide and it creates a huge future opportunity for upselling and service/product add-ons far into the future.
- Adobe (Nasdaq:ADBE)
You are probably familiar with this company from its popular Acrobat Reader but it is also a very strong force in the cloud.
Shares have been knocked down to support at the 200-day simple moving average during the recent market rout. This has set up an ideal buy opportunity for bargain hungry investors.
First, let’s take a look at the company itself. Adobe Systems Incorporated (Adobe) is a software company. It offers products and services for professionals, marketers, application developers, enterprises and consumers for creating, managing, delivering, optimizing and engaging with content.
The Company’s operates in three segments: Digital Marketing, Digital Media, and Print and Publishing.
In Digital Media, the Company is engaged in providing tools, services and solutions that enable to create, publish and promote their content. In Digital Marketing, the Company is engaged in providing solutions and services for creating, managing, executing, measuring and optimizing digital advertising and marketing campaigns.
Adobe’s Print and Publishing segment addresses various market opportunities, including eLearning solutions, technical document publishing, Web application development and high-end printing.
Recently, Adobe has moved into the cloud with very strong results.
One of its cloud products is called the Creative cloud. This cloud includes Photoshop, Illustrator, Premiere Pro and a variety of other apps.
Adobe’s other cloud products include the Document cloud with Acrobat and the marketing cloud that assists company’s improve their results on popular social platforms.
Astoundingly, Adobe is forecasting 30% annual earnings growth and 20% revenue growth through 2018!
Currently, Adobe is relatively reasonably priced with a 31X forward price earnings estimate. To put things in perspective, others in the cloud like Salesforce and ServiceNow indicate 80X and 143X respectively.
- Micron (Nasdaq:MU)
Shares of this semiconductor company have plunged to support in the $10.00 per share zone creating a great buy opportunity.
Micron manufactures and markets a full range of Dynamic Random Access Memory (DRAM), NAND Flash and NOR Flash memory, as well as other memory technologies, packaging solutions and semiconductor systems for use in leading-edge computing, consumer, networking, automotive, industrial, embedded and mobile products.
The Company operates in four segments: Compute and Networking Business Unit (CNBU), which includes DRAM and NOR Flash products; Mobile Business Unit (MBU), which includes DRAM, NAND Flash and NOR Flash products; Storage Business Unit (SBU), which includes NAND Flash components and Solid-State Drives (SSDs), cloud and removable storage markets. SBU also includes NAND Flash products, and Embedded Business Unit (EBU), which includes DRAM, NAND Flash and NOR Flash products.
Micron is in the process of morphing its core business away from the PC market via acquisitions and partnering with huge tech names such as Apple and Intel.
Most excitingly is the company’s foray into 3D chips. These chips are being distributed globally by the mighty Intel.
- FireEye (Nasdaq:FEYE)
Talk about being smacked lower! This cyber security company has been in an aggressive downward trend since September, 2015. This downward pressure was exasperated by the 2016 market meltdown that send shares plunging into the $13.00 area after building a solid technical base in the $19.00 per share zone.
What gives FireEye its major edge is its dynamic threat assessment capability. Unlike the traditional security company that relies on signatures and patterns, FireEye uses real time methods to identify and react to the latest threats.
The company continues to increase revenues and customers in the explosive enterprise cybersecurity market. Over the next 3 years, this market is expected to grow from around $15 billion to over $19 billion per Bank of America research.
FireEye has another division called Mandiant providing consulting services to major firms like Sony, Home Depot, and Anthem. This creates another source of continual revenue and a great platform for cross selling other services/products.
Shares are off by 49% since November and the company recently acquired iSight.
Street Insider commented, FireEye paid $200M in cash and a $75M performance based earn-out to acquire iSIGHT, which generated approximately $50M in billings and $40M in revenue in 2015. Management said the deal will be “slightly accretive” to operating income and cash flow in 2016. The deal will be financed with cash, leaving the company with ~$1B in cash following the transaction close.
Stifel bullishly stated “FEYE announced preliminary Q4 earnings which we view as positive, especially given significant uncertainty in the market….Mgmt guided FY16 billings to 20%+ organic with iSight incremental and positive FCF for the year…The year will be more back-end loaded, something that appears to come mostly from tougher 1H comps.”
The 20% estimated billings gains of 20% for 2016 are very positive, despite missing Wall Street’s estimates of 28%.
- Care.com (Nasdaq:CRCM)
This online child and caregiver-focused platform has been knocked down into the mid $5.00 per share where price has found support.
Today, Care.com is the world’s largest online destination for finding and managing family care, with 10.1 million families and 7.7 million caregivers* across 16 countries, including the U.S., UK, Canada and parts of Western Europe, and approximately half a million employees of corporate clients having access to our services. Spanning childcare to senior care, pet care, housekeeping and more, Care.com provides a sweeping array of services for families and caregivers to find, manage and pay for care or find employment. These include: a comprehensive suite of safety tools and resources members may use to help make more informed hiring decisions – such as third-party background check services, monitored messaging, and tips on hiring best practices; easy ways for caregivers to be paid online or via mobile app; and household payroll and tax services provided.
The company boasts a price to sales ratio of 1.35 which is relatively excellent in the sector.