Having outperformed over the past three years, tech stocks have seen a major downturn in 2022 due to the inevitable macroeconomic headwinds. In response to rising inflation, the Federal Reserve has signaled an aggressive plan to raise benchmark interest rates this year, and will soon begin shrinking its balance sheet through bond sales. Reflecting this, the yield on the 10-year US Treasury has risen by more than a full percentage point in the year to date, from 1.62% to 2.73% as of this writing.
This rise in long-term interest rates has generally hit the multi-growth stocks. But then, some fear the Fed will move too aggressively in its efforts to stem inflation and induce a recession. Concerns about this outcome led the market to outbid the values of multi-asset, cash-generating companies in the technology sector such as FAANG shares and also semiconductor players.
But with the Nasdaq down about 17% from its November high, there are bound to be some bargains available now. These three leading tech names have competitive advantages, long growth runways, and also cheap sports valuations, making them a shout-out to buy today.
Amazingly cheap meta pads
There is a lot of pessimism ID pads” (FB 0.40% ) The stock price these days. Among the many issues at hand are concerns about last October’s whistleblower scandal, a frequently mocked company name change, upgrades to the iOS mobile operating system that increased user privacy and reduced Meta’s ad targeting capabilities, and the higher costs associated with security monitoring. . Platform.
With all that on investors’ minds, it’s no wonder that Meta Platforms is down 42% from its all-time high.
So why is Meta a blatant buy now? Because all this bad news seems to be priced in stocks. Currently, it’s trading at just 15.5 times overdue earnings, and even that earnings figure is down about 20% due to the company’s $10 billion investment in its spin-offs. Factor that, plus Meta’s nearly $50 billion cash in the books, and we’re talking about a low double-digit P/E ratio for the core Instagram and Facebook platforms, as well as WhatsApp, which are potentially low on income.
This seems like a very low multiplier. While many have pointed to the video-focused social platform TikTok as a competitive threat, there is no better way to keep up with friends than Instagram and Facebook. While Meta’s top growth days may be behind it, these platforms will be paying huge dividends for years to come, allowing them to invest in their efforts to help create the metaverse while also buying back shares.
And of course, there’s always the possibility that this inverted thing will take off. Every major innovation in history has had its naysayers. But if the metaverse apps gain traction over the next few years, so will Meta’s stock price.
Micron chips are indispensable for our digital future
If you think Meta is cheap with low P/E ratio in low teens, wait till you see micron technology (MU 0.58% ). Micron is one of only three major producers of DRAM (Dynamic Random Access Memory), and one of only five major producers of NAND flash memory, a force within the global oligopoly of memory chips, which will see demand rise for decades.
So why does Micron trade at nine times the post-earnings? Well, growth in the memory market does not happen on a consistent basis, so Micron has a good reputation for being very cyclical.
That’s why, although it beat expectations and provided solid guidance when it reported for its fiscal second quarter on March 29, the stock is down 10% since then and is down 22.6% over the year.
Although memory prices tend to fluctuate with supply and demand, there are some good reasons to believe that Micron will be more consistent going forward. First, the demand for memory is growing and expanding. While the memory market was concentrated in computers, and later in mobile phones, more and more applications are becoming digital and thirst for memory. Cloud data centers, factory automation, and autonomous electric vehicles will require an increasing amount of memory per unit over time, providing new and diverse stages of revenue growth for Micron and its peers.
So even if there is a softness in one area of technology, there may be a recovery in another. For example, although the market is currently concerned about the slowdown in PC sales after the pandemic, CEO Sanjay Mehrotra said in Micron’s latest conference call that strong demand for enterprise desktops is offsetting the slowdown in the consumer segment.
Second, the production capacity of chips is becoming more difficult and expensive to deliver online. While this means that memory companies will need to allocate significant amounts to buying the hardware they need, it also means that players, as a group, are less likely to oversupply the market as much as they sometimes have in the past.
Finally, under Mehrotra, Micron outperformed its competitors over the past few years, outperforming competitors in mass production of the latest memory chips. That should mean Micron’s profitability should improve compared to its competitors.
T-Mobile: The best 5G at the lowest price
Wireless Network Player T-Mobile (TMUS 2.59% ) It is one of the rare technology stocks to do reasonably well in 2022, up 12.5% over the year, although still 11.5% below its all-time high.
Trading at 54 times a profit, T-Mobile might not sound like a bargain, but it has such a high percentage because GAAP earnings are low due to integration expenses associated with its acquisition of Sprint in 2020. This year, management expects free cash flow to increase more than 30% as more revenue is generated. Synergy. Free cash flow should continue to rise next year as well, and management says the company is on track toward its long-term goals. At T-Mobile Analysts Day 2021, it forecast free cash flow to be between $13 billion and $14 billion in 2023. Given a market capitalization of $164 billion today, that gives it a 2023 price-to-free cash flow ratio of 12 only until 13.
T-Mobile has a massive two-year lead in deploying 5G, thanks to the valuable mid-band spectrum that Sprint has brought with it. The mid-range offers a happy average of range and reliability, and speeds are significantly higher than those of 4G. Deploying its 5G network also allows T-Mobile to enter the market for wireless broadband service, which is a huge opportunity. Not only that, but since T-Mobile has traditionally offered lower rates than competitors, a value proposition for a better 5G service at a lower price could motivate cash-strapped consumers to switch to “Un-Carrier”.
Despite its ups and downs this year, T-Mobile still looks like a bargain here, so investors shouldn’t hesitate to buy some shares to hold for the long term.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.