Amid the growing chatter of an AI-triggered tech bubble, a number of technology stocks are still priced attractively. This year, megacap tech stocks have seen a spectacular surge, with the rally extending towards the year-end, driven by the anticipation of profit growth linked to artificial intelligence and the prospect of lower borrowing costs thanks to Federal Reserve rate cuts. Earlier in the week, the Nasdaq Composite reached a new peak as the shares of Apple, Tesla, Google’s parent company Alphabet, and chipmaker Broadcom all soared to record highs.
In this backdrop, we’ve been scouting for tech stocks that might be considered bargains by investors. Our criteria for selecting these stocks included trading at a discount compared to their sector and sub-industry, having analysts’ average 12-month price targets higher than today’s price according to FactSet, and achieving more than a 5% gain over the past month. Here’s what we found using FactSet data:
First up, DocuSign, a company specializing in e-signature software, is viewed as undervalued when comparing its price-to-earnings ratio to its sector and industry. However, recent gains leave limited room for further upside based on analysts’ consensus targets. DocuSign shares have jumped 27% over the last month following the release of strong results and optimistic guidance for the fourth quarter.
Then there’s Kyndryl, an IBM spin-off, and the largest IT infrastructure services provider globally. Its shares have seen a 70% rise this year, with an additional 7% potential gain expected, as per the consensus price target from FactSet. Bank of America expresses even more enthusiasm, having initiated a buy rating for Kyndryl with a $40 price target last month, suggesting a 13% potential upside. Analyst Tyler DuPont noted in his report from November 22, “Since its separation from IBM in 2021, Kyndryl has been steadily growing its profitable business and aims to return to organic constant-currency growth by the fourth quarter of fiscal 2025. We believe the positive shifts and growth trends are not fully accounted for in KD’s current valuation compared to peers, leaving room for more upside.”
Additionally, Enphase Energy and First Solar are perceived as fairly inexpensive, with forward price-to-earnings ratios of 20.4 and 9.8 over the next year, respectively. Both stocks have been under pressure this quarter, amid concerns that the incoming President-elect Donald Trump might overturn the Biden administration’s renewable energy initiatives. This year, Enphase has declined about 44%, while First Solar has gained 12%, buoyed by its potential to power AI-hungry data centers. According to analyst forecasts polled by FactSet, there is considerable upside for both stocks. Enphase and First Solar are also seen as offering “growth at a reasonable price.”
Deutsche Bank reaffirmed its buy rating for First Solar, indicating the company “stands to benefit from its unique position as a U.S.-based utility solar panel manufacturer and is poised to gain from forthcoming tariffs against China.” UBS echoed a similar sentiment earlier this year.
Lastly, names like Vishay Intertechnology, Dolby Laboratories, and Akamai Technologies are among the companies that made it to the top of our list.
