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3 Beaten-Down Tech Giant Bargain Stocks To Buy On The Dip

By Investing.com (Jesse Cohen/Investing.com)Stock MarketsJun 22, 2022 07:42AM ET
www.investing.com/analysis/3-beatendown-tech-giant-bargain-stocks-to-buy-on-the-dip-200626114
3 Beaten-Down Tech Giant Bargain Stocks To Buy On The Dip
By Investing.com (Jesse Cohen/Investing.com)   |  Jun 22, 2022 07:42AM ET
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  • Technology stocks are out of favor as the US Fed hikes rates to combat inflation
  • Aggressive reset in valuations has created bargain-buying opportunities in tech
  • Investors should consider buying the dip in Apple, Intel, and IBM
  • For tools, data, and content to help you make better investing decisions, try InvestingPro+.

Stocks on Wall Street are on track for one of their worst years on record as a potent combination of slowing growth, soaring inflation, and rising interest rates unnerved investors.

The benchmark S&P 500 index is down 21.8% from its Jan. 3 record close, meeting the technical definition of a bear market.

Meanwhile, the tech-heavy NASDAQ Composite, which slumped into a bear market earlier this year, is roughly 31% below its Nov. 19, 2021, record high.

The Dow is approximately 17% off its record high reached at the start of the year.

Dow, S&P, NASDAQ Daily
Dow, S&P, NASDAQ Daily

Taking that into account, we highlight three bargain stocks from the tech sector which are well worth buying on the dip as the group attempts to bounce back from its months-long sell-off.

All three still have plenty of room to grow their respective businesses, making them solid long-term investments.

Apple

  • *Year-To-Date Performance: -23.5%
  • *Market Cap: $2.2 Trillion
  • *Pro+ Fair Value Upside: +5.8%

Apple (NASDAQ:AAPL) has seen its shares endure some turbulence lately as fears over the Federal Reserve’s aggressive rate hike plans triggered a rout in many top-rated technology companies over the past several months.

After hitting a record high of $182.94 on Jan. 4, AAPL stock—which is down 23.5% year-to-date—tumbled rapidly to a low of $129.04 on June 16, its weakest level since June 2021.

Apple shares have since staged a modest rebound, closing at $135.87 on Tuesday, but they still stand roughly 26% below their all-time high.

At current levels, the Cupertino, California-based consumer electronics conglomerate has a market cap of $2.2 trillion, making it the most valuable company trading on the US stock exchange.

AAPL Daily
AAPL Daily

Investors that missed the sharp moves higher last year should consider buying AAPL at these bargain prices, given its dependably profitable business model and enormous cash pile.

The tech behemoth is likely to continue to benefit from robust demand for its flagship iPhone 13 model and strong growth in its profitable services business, which includes sales from the App Store, subscription services, extended warranties, and licensing fees.

Not surprisingly, in an Investing.com survey of 48 analysts, 34 rated AAPL stock as a ‘buy’; nine rated it as ‘neutral’, and only one considered it a ‘sell’.

Among those surveyed, the stock had a roughly 37% upside potential with an average 12-month price target of $186.51.

AAPL Consensus Estimates
AAPL Consensus Estimates

Source: Investing.com

Likewise, according to a number of valuation models, including P/E or P/S multiples or terminal values, the average fair value for AAPL stock on InvestingPro stands at $143.75, a potential 5.8% upside from the current market value.

AAPL Fair Value
AAPL Fair Value

Source: InvestingPro

Intel

  • *Year-To-Date Performance: -26.7%
  • *Market Cap: $154.4 Billion
  • *Pro+ Fair Value Upside: +50.9%

Intel (NASDAQ:INTC) shares have cratered nearly 27% year-to-date, with investors becoming increasingly concerned by the chipmaker’s future prospects.

Once widely-considered the undisputed leader in the computer processors industry, Intel has been steadily losing market share to rivals such as Taiwan Semiconductor Manufacturing (NYSE:TSM), Advanced Micro Devices (NASDAQ:AMD), and NVIDIA (NASDAQ:NVDA) in recent years.

INTC stock, which has been making a series of new 52-week lows in recent sessions, closed at $37.73 on Tuesday, not far from its weakest level since September 2017.

At current levels, the Santa Clara, California-based semiconductor company has a market cap of approximately $154.4 billion.

INTC Daily
INTC Daily

In our view, the sizable decline in Intel’s stock has created a compelling buying opportunity for long-term investors given its bargain-basement valuation and ongoing turnaround efforts.

With a forward price-to-earnings (P/E) ratio of just 10.5, Intel comes at a significant discount when compared to its notable peers, such as NVDA and AMD, which trade at 25.7 and 16.7 forward earnings.

The chipmaking giant is also a quality dividend stock. INTC currently offers a quarterly payout of $0.365 per share, which implies an annualized dividend of $1.46 at a yield of 3.95%, one of the highest in the tech sector.

Indeed, 10 out of 43 analysts surveyed by Investing.com rate Intel’s stock as ‘outperform’, while 21 considered it as a ‘hold’.

The average INTC stock analyst price target is around $51, representing an upside of approximately 35% from current levels over the next 12 months.

INTC Consensus Estimates
INTC Consensus Estimates

Source: Investing.com

Similarly, the quantitative models in InvestingPro point to a gain of roughly 51% in INTC stock from current levels over the next 12 months, bringing shares closer to their fair value of $56.93.

INTC Fair Value
INTC Fair Value

Source: InvestingPro

IBM

  • *Year-To-Date Performance: +3.1%
  • *Market Cap: $124.1 Billion
  • *Pro+ Fair Value Upside: +25%

International Business Machines (NYSE:IBM) is one of the few major tech stocks to deliver positive returns in 2022, outperforming the broader market by a wide margin as it continues to make progress on its massive multiyear restructuring.

Shares of the Armonk, New York-based company are up 3.1% year-to-date, compared to the S&P 500’s 21% decline over the same timeframe.

Over the past year, IBM has reshaped its business, spinning off its managed IT services unit, now known as Kyndryl, to focus on hybrid cloud computing and artificial intelligence.

IBM stock rose to $144.73 on June 6, a level not seen since October 2021; it ended Tuesday’s session at $137.85, earning it a valuation of $124.1 billion.

IBM Daily
IBM Daily

IBM is poised to continue to benefit from its turnaround efforts, while taking advantage of strong demand for its hybrid cloud offerings, which will help power future earnings growth and allow it to focus on increasing shareholder returns.

The 111-year-old tech titan, which is the highest-yielding stock in the technology sector, raised its dividend for the 27th consecutive year in April.

IBM currently offers an annualized dividend payout of $6.60 per share at a sky-high yield of 4.89%, nearly triple the implied yield for the S&P 500, which is 1.64%.

Additionally, at a P/E ratio of 24.6, IBM’s stock is a relative bargain compared to its major competitors, such as Microsoft (NASDAQ:MSFT), and Oracle (NYSE:ORCL), which trade at around 27 and 28 times earnings, respectively, and Amazon (NASDAQ:AMZN), which has a P/E ratio of 52.5.

Out of the 20 analysts covering the stock, per an Investing.com survey, the consensus recommendation comes to ‘outperform’ with fairly high conviction. Eight analysts rate IBM at ‘buy’, ten consider it a ‘hold’, and two have it at ‘sell’.

Meanwhile, their average target price of $143.83 gives IBM implied upside of roughly 4.3% over the next year.

IBM Consensus Estimates
IBM Consensus Estimates

Source: Invesing.com

Additionally, the average fair value price for IBM stock on InvestingPro stands at $172.29, a potential 25% upside from the current market value.

IBM Fair Value
IBM Fair Value

Source: InvestingPro

***

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3 Beaten-Down Tech Giant Bargain Stocks To Buy On The Dip
 

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3 Beaten-Down Tech Giant Bargain Stocks To Buy On The Dip

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Comments (5)
jason xx
jason xx Jun 25, 2022 7:30AM ET
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I wish you would have talked about INTC switch to semi manufacturing that the government is supposed to back? I have no inside knowledge of the inner workings and politics of such a big move but the people that do clearly are not interested?
Joseph Obrzut
jzut Jun 22, 2022 4:55PM ET
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One out of three I'll agree with. IBM has had their run up.Always in a trading range. AAPL definitely. INTC has had their problems and the price shows it. My 3. AAPL GOOG/GOOGL, MSFT. INTC if you've got a longer time horizon.
Son Yay
Son Yay Jun 22, 2022 12:20PM ET
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Anyone linking their lips at a 5% upside at Apple? Better to just buy their bond or any other company yielding closed to double digits?
jason xx
jason xx Jun 22, 2022 12:20PM ET
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Why only 5%?
Son Yay
Son Yay Jun 22, 2022 12:17PM ET
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Comparing IBM to Amazon? Why? How? Comparing its ~5% yield to an index avg of ~500 <2% LoL yeah so what? Apples and oranges. Easy to call 50pc upside when it's dropped 25% in a panic. Does anyone use this Pro plus thing? Seems overrated.
LL MM
LL MM Jun 22, 2022 11:13AM ET
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Turnaround affects are based on what? New models, new factories, new nodes?? Come on, if you look realisticly at it, competition wont disappear anymore from one to another day. They will stay there forever, Intel is in a tight spot, and will remain there for a long time probably forever, even if they get up with their Intel4 node. They simply will have to live with having to share their buffet with others. So the TAM is more of a hypothetical TAM, that has to be shared with many others these days, and those wont back off. And by the way outrunning a runner that is not stopping, while you are already 100 miles behind will prove to be a difficult task, even if Intel could find back to its old tick tock scheme. Some people are still dreaming of the old Intel, but its not let alone Intel that has simply changed, but also everything around them. Nobody really wants to realize the sad true. It will be a very very expensive last attempt to recover, what is unrecoverable. Hope dies last.
 
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