The tech sector held up relatively well against COVID-19 in the spring of 2020. The tech-heavy NASDAQ Composite Index is up 8% year-to-date, while the S&P 500, more wide, is trading down 3%. But there are still many deep discounts tech stocks on the table, and some of these discoveries involve rock-solid companies with excellent long-term business plans.
Here are three tech stocks that really shouldn’t stay in the Wall Street trash can today, but that’s exactly where you’ll find them.
memory chip giant Micron Technology (MU -1.42% ) fell 9% in 2020 and the stock is trading 20% below February’s 52-week highs. You can buy Micron shares for the ultra-low valuation of 10 times forward earnings right now.
The coronavirus pandemic has dampened near-term demand for many of Micron’s most important target markets, including smartphones and cars, which is why the stock is so cheap right now. But the health crisis has also softened this blow by driving strong demand for home office equipment such as desktop and laptop computers, better home networking equipment and handy tablets – all of which require lots of DRAM memory chips. and NAND. Cloud computing is another hot sector that relies heavily on DRAM and NAND memory chips. In the long term, 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 path to fantastic long-term growth.
Micron CEO Sanjay Mehrotra explained the situation this way during an online industry conference last week: “5G will be a major growth driver for several years in terms of increasing unit sales. as well as increased content for DRAM and NAND. … We are at the heart of the data center growth cycle, and the data center is a long-term growth engine for the industry.”
If you don’t buy Micron at these low prices, you’ll regret the decision in 2021 and beyond.
Ultra clean farms
If you like Micron technology as a value investment, you’ll love Ultra clean farms (UCTT -2.96% ) as well.
The maker of cleanroom equipment used in the manufacturing process for all kinds of semiconductors is tapping into the same long-term trends as Micron. However, the COVID-19 crisis has barely registered as a hiccup in Ultra Clean’s financials so far. This company adopted social distancing and remote working policies long before government orders, and a global network of equipment factories enabled Ultra Clean to circumvent local virus-related disruptions by redirecting work to other locations. other facilities. First quarter sales were up 23% year over year, and management expects another strong performance in the second quarter with revenue growth of around 17%.
“While we don’t know exactly how things will play out longer term, we are seeing continued strong demand throughout the second quarter and are confident that our team will continue to perform at a high level,” the CEO said. Jim Scholhamer in Ultra Clean First Quarter Earnings Call. “Obviously we’ve seen rejections of smartphones, but we’re seeing kind of a buffer…the quality investments in server and other areas that are continuing and need to continue….We’re seeing winners kind of a buffer for the lower projection.”
That said, Ultra Clean shares are trading down 8% in 2020. Share prices are 28% below all-time February highs, valued at 11x forward earnings and 9.4x free cash flow. This is another no-brainer purchase right now.
Display Technology Developer Universal display ( OLED -2.50% ) reached its current all-time highs in September, pulling back due to multiple pressures in the important smartphone market. Universal Display suffered slowdowns due to Sino-US trade tensions, and then the COVID-19 crisis hit. The stock is now trading 32% below those all-time highs and 24% down in 2020 alone. This is less of an obvious deep discount value play than the other two tech tickers on my list, which are trading today at 37 times forward earnings.
It’s also the most impressive long-term growth stock of the bunch:
Organic light-emitting diode (OLED) displays have mostly been found in high-end smartphones and truly exclusive TVs until now, but that’s changing as Universal Display’s display-building customers ramp up product lines. improved manufacturing.
“You’re starting to see lower-cost smartphones. You’re moving into the mid-range and even the low-end,” chief financial officer Sid Rosenblatt told another industry conference in May. “You have the Honor 30, which is a $425 phone, and then you have the Galaxy M21, which is a $200 phone, all of which have OLED screens. So as capacity increases, more and more manufacturers are entering the market, obviously the costs are coming down.”
The same progress in mass production is also happening in the television market.
“Last year there were about 15 OEMs using LG screen panels. And now they’ve added four more this year. So you have VIZIO, Sharp and Huawei all coming out with OLED TVs this year,” Rosenblatt said. You can now get a 55-inch 4K OLED TV from Costco for around $1,200. So it’s getting closer to that price point.”
OLED displays have been entering the mainstream market for years, and that process will continue. Go back five years and you’ll see big-screen OLED TVs in many homes, and the technology is set to become a default choice for consumer phones too. Beyond that, Universal Display is developing energy-efficient lighting panels to break into the general lighting market, and the company is also researching materials for parts of the OLED manufacturing stack that others companies have patented so far.
In other words, Universal Display could roughly double its revenue even if the global OLED panel market no longer grows – and that market will most certainly grow in the coming years. This stock can make you richeven if you missed the torrential growth it has displayed over the past decade.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.