The tech sector held up relatively well in the COVID-19 spring of 2020. The tech-heavy NASDAQ Composite Index is up 8% year to date while the broader-market S&P 500 is trading down by 3%. But there are still plenty of deep-discount tech stocks on the table, and some of those finds involve rock-solid companies with great long-term business plans.
Here are three tech stocks that really shouldn’t sit in Wall Street’s bargain bin today, but that’s exactly where you’ll find them.
Memory-chip giant Micron Technology (NASDAQ:MU) has fallen 9% in 2020, and the stock is trading 20% below February’s 52-week highs. You can pick up Micron shares for the ultralow valuation of 10 times forward earnings right now.
The coronavirus pandemic slammed the brakes on short-term demand for many of Micron’s most important target markets, including smartphones and cars, which explains why the stock is so cheap right now. But the health crisis also softened that blow by driving strong demand for home office equipment such as desktop and laptop computers, better home networking gear, and handy tablet computers — all of which require plenty of DRAM and NAND memory chips. Cloud computing is another red-hot sector that leans heavily on DRAM and NAND memory chips. In the long run, weakened end markets like smartphones and automotive computing will come back strong when the COVID-19 crisis ends. Micron investors will remember 2020 as a speed bump on the road to fantastic long-term growth.
Micron CEO Sanjay Mehrotra explained the situation this way at an online industry conference last week: “5G will be a significant growth driver for multiple years in terms of increased unit sales as well as increased content for both DRAM and NAND. … We are at the sweet spot of the growth cycle in data center, and data center is a long-term growth driver for the industry.”
If you’re not buying Micron at these low prices, you’ll regret that decision in 2021 and beyond.
Ultra Clean Holdings
If you like Micron Technology as a value investment, you’ll love Ultra Clean Holdings (NASDAQ:UCTT) as well.
The maker of clean-room equipment used in the manufacturing process for all sorts of semiconductors is tapping into the same long-term trends as Micron. The COVID-19 crisis has barely registered as a hiccup in Ultra Clean’s financial statements so far, though. This company adopted social distancing and remote-work policies far ahead of government orders, and a global network of equipment factories allowed Ultra Clean to work around local virus-related disruptions by rerouting work to other facilities. First-quarter sales rose 23% year over year, and management expects another solid showing in the second quarter with roughly 17% revenue growth.
“While we don’t know exactly how things will unfold longer term, we see continued strong demand through the second quarter and are confident that our team will continue to perform at a high level,” CEO Jim Scholhamer said in Ultra Clean’s first-quarter earnings call. “Obviously, we’ve seen push-outs of smartphones but we do see kind of a buffer … the quality investments in the server and other areas that are still continuing and need to continue. … We’re seeing some winners kind of buffer the lower-end projection.”
All of that being said, Ultra Clean’s stock is trading 8% lower in 2020. Share prices sit 28% below February’s all-time highs, valued at 11 times forward earnings and 9.4 times free cash flows. That’s another no-brainer buy right now.
Display technology developer Universal Display (NASDAQ:OLED) set its current all-time highs in September, backing down due to multiple pressures on the important smartphone market. Universal Display suffered slowdowns from the Chinese-American trade tensions, and then the COVID-19 crisis came along. The stock is now trading 32% below those all-time highs and 24% lower in 2020 alone. This is less of an obvious deep-discount value play than the other two tech tickers on my list, trading at 37 times forward earnings today.
It’s also the most impressive long-term growth stock of the bunch:
Organic light-emitting diode (OLED) screens have mostly been…
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