With the S&P 500 and Nasdaq Composite regularly hitting all-time highs in 2024, finding promising tech stocks at reasonable valuations has become a challenge.
High-profile names like Nvidia and Apple already trade at premium multiples, with Nvidia boasting a forward price-to-earnings (P/E) ratio of 37 and Apple at 31. However, savvy investors willing to dig deeper can uncover tech stocks that remain undervalued despite strong growth prospects.
Here, we highlight three such stocks—Micron Technology (NASDAQ: MU), Dell Technologies (NYSE: DELL), and Cisco Systems (NASDAQ: CSCO)—that appear well-positioned for gains. Let’s take a closer look at why these companies deserve a spot in your portfolio.
1. Micron Technology: Riding the Memory Chip Market’s Rebound
Micron Technology is a major player in the production of DRAM and NAND memory chips. Although not the market leader, Micron has carved out a niche with its ability to produce denser chips than some of its larger competitors.
The memory chip market is notoriously cyclical, and Micron experienced a significant downturn in 2023. This was driven by a cooling PC market, the end of the 5G smartphone upgrade cycle, and data centers prioritizing AI-oriented GPUs over memory chip upgrades.
READ ALSO: Tether Mints Over $3 Billion in USDT: A Bold Move Reflecting Growing Market Demand
Micron’s fiscal 2023 (ending August 2023) reflected these challenges, with revenue plummeting by 49% and the company posting an adjusted net loss. However, the tides began to turn as the PC and smartphone markets stabilized. Additionally, data center operators resumed investments in solid-state drives (SSDs) and high-bandwidth memory (HBM) chips to power AI applications.
This recovery was evident in Micron’s fiscal 2024, where revenue surged by 62% and the company returned to profitability. Analysts predict even stronger growth for fiscal 2025, with revenue expected to increase by 52% and adjusted earnings per share (EPS) forecasted to soar by 587%.
Despite this optimistic outlook, Micron’s stock remains attractively valued at just 12 times forward earnings. While the memory chip market will inevitably face another downturn, the current growth cycle offers a compelling opportunity for long-term investors.
2. Dell Technologies: Benefiting from Stabilization and AI Demand
Dell Technologies, a household name in the PC and data storage market, has been publicly traded for nearly six years. Like many in the tech sector, Dell faced headwinds as demand for remote work devices waned and macroeconomic challenges weighed on enterprise spending. Consequently, Dell’s fiscal 2024 (ending February) saw revenue and adjusted EPS decline by 14% and 6%, respectively.
READ ALSO: Ruben Amorim Criticizes Lack of Preparation as Man Utd Stumble to Ipswich Draw
However, the company is now poised for a rebound. Analysts forecast a 10% increase in both revenue and adjusted EPS for fiscal 2025, driven by a stabilizing PC market, rising enterprise spending on data storage solutions, and a growing focus on AI servers.
AI-related hardware is becoming an increasingly important part of Dell’s portfolio. In its most recent quarter, 12% of Dell’s revenue came from AI servers, a segment that the company expects will fuel much of its near-term growth. Notably, supply chain challenges faced by competitors, such as Super Micro Computer, could further boost Dell’s AI server orders.
At just 14 times forward earnings, Dell represents a bargain for value-conscious investors. In addition to its growth prospects, the stock offers a dividend yield of 1.3%, making it an attractive choice for those seeking income along with capital appreciation.
3. Cisco Systems: A Steady Play with AI Exposure
Cisco Systems, a global leader in networking hardware and software, has weathered supply chain challenges and shifting customer demand over the past few years. After a strong fiscal 2023 (ending July 2023), during which revenue and adjusted earnings grew by 11% and 16%, respectively, the company faced a slowdown in fiscal 2024.
This slowdown was driven by inventory surpluses among Cisco’s key customers—enterprise clients, service providers, and cloud computing companies—that had over-ordered during the supply chain recovery. As a result, Cisco’s revenue and adjusted EPS fell by 6% and 4%, respectively.
READ ALSO: SAND, MANA, and AXS: Must-Watch Gaming Cryptocurrencies for the Week Ahead
Looking ahead, Cisco is expected to regain momentum in fiscal 2025. Analysts project a 4% increase in revenue as the company works through its inventory challenges and benefits from AI-driven upgrades in data center infrastructure.
Cisco’s valuation remains attractive at 16 times forward earnings. Moreover, the company offers a robust dividend yield of 2.8%, appealing to income-focused investors. While Cisco may not be a high-growth stock, its gradual recovery and exposure to the AI market make it a solid pick for long-term value investors.
While high-growth stocks like Nvidia and Apple often grab headlines, they come with lofty valuations that can limit their upside potential. In contrast, undervalued stocks like Micron, Dell, and Cisco provide a blend of growth potential, income opportunities, and relative safety.
For instance, a $1,000 investment in companies like Nvidia in 2009 or Apple in 2008 has yielded extraordinary returns. But such opportunities are rare, and identifying the next wave of winners often involves looking beyond the obvious choices.
With promising growth trajectories and attractive valuations, Micron Technology, Dell Technologies, and Cisco Systems are worth considering for your portfolio. These companies combine strong fundamentals with exposure to transformative trends like AI, making them well-suited for today’s market environment.
Investing in tech doesn’t always mean chasing the latest headline-grabbing stocks. By focusing on undervalued opportunities like Micron, Dell, and Cisco, you can position yourself to benefit from growth while mitigating the risks associated with high valuations. As 2024 unfolds, these hidden gems could become the market’s next big winners.