Unlocking Long-Term Gains: 3 Undervalued Tech Stocks to Consider
The median American savings account balance stands at a mere $8,000, according to the Federal Reserve. Meanwhile, only 62% of adults own stocks, missing out on potential long-term growth opportunities. With the S&P 500 delivering average annual returns of over 10% since 1957, it’s essential to explore undervalued tech stocks that can maximize your gains.
DigitalOcean: A Cloud Infrastructure Gem
DigitalOcean, a cloud infrastructure company, has carved out a niche serving small businesses and independent developers with affordable “droplets” of servers. This unique strategy has enabled the company to grow at a compound annual growth rate (CAGR) of 28% from 2018 to 2023, turning profitable in 2023. Analysts expect revenue and EPS to rise at a CAGR of 13% and 85%, respectively, from 2023 to 2026. With a reasonable valuation of 40 times forward earnings, DigitalOcean has plenty of room to expand its niche market.
Oracle: A Database Software Powerhouse
Oracle, one of the world’s largest database software companies, has successfully pivoted towards cloud-based infrastructure and software services. The company has made strategic acquisitions, including NetSuite and Cerner, to accelerate its evolution. From fiscal 2019 to fiscal 2024, Oracle’s revenue and EPS grew at a CAGR of 6% and 5%, respectively. Analysts expect a significant acceleration, with revenue and EPS rising at a CAGR of 12% and 21%, respectively, from fiscal 2024 to fiscal 2027. With a forward dividend yield of 0.8% and a commitment to returning free cash flows to investors, Oracle’s stock looks attractive at 29 times forward earnings.
Dell Technologies: A PC and Server Giant
Dell, one of the world’s largest producers of PCs and servers, has undergone significant transformations since its return to the public market in 2018. Despite a decline in revenue from fiscal 2019 to fiscal 2024, analysts expect a rebound, with revenue and EPS rising at a CAGR of 8% and 24%, respectively, from fiscal 2024 to fiscal 2027. The company’s AI server business is expected to drive growth, with COO Jeff Clarke calling AI a “robust opportunity” with “no signs of slowing down.” At 12 times forward earnings, Dell looks like a dirt-cheap play on the AI market, with a forward yield of 1.3%.
These three tech stocks offer a compelling opportunity for long-term growth, despite being overlooked by the market. By investing in these undervalued companies, you can potentially unlock significant gains in 2025 and beyond.
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