The word “undervalued” doesn't apply to many tech stocks these days, especially after rising prices. Nasdaq Composite The index has soared 46% over the past year. And it's true that you'll have to pay much more for quality business today than you would have paid in early 2023.
That's the price investors have to pay for brightening Wall Street sentiment. As billionaire Warren Buffett pointed out in 2008, “If you wait for the robins, the spring is over.”
Still, there is always relative value in the market, especially when the investment horizon spans decades. Let's take a look at two attractively priced “tech” stocks (see below for why “tech” is in quotes).
1. This apple looks delicious.
Unlike software rivals microsoft, apple (AAPL -0.22%) It is not currently in the $3 trillion market cap club. The main reason for this is that the iPhone maker's stock price has significantly underperformed the market in recent months. Shares have risen just 16% over the past year, compared to Microsoft's 66% rise.
This gap creates a potentially attractive buying opportunity for patient investors.
Admittedly, Apple is in a bit of a downturn right now. Last quarter, the company's sales barely increased, rising just 2% compared to Microsoft's 16% year-over-year growth. Growth prospects for the next year or so are not particularly bright either. Most Wall Street professionals expect sales to increase by about 6% next year, after a slight decline in fiscal year 2024.
However, in this time of heightened pessimism, consider the value of owning Apple. Compared to Microsoft's price-to-sales (P/S) ratio of 14, this stock trades at just 7x annual sales. Apple has also prioritized ample cash profits, with $27 billion paid directly to shareholders in the form of stock last quarter alone. Stock buybacks and dividends.
These cash gains come primarily from share buybacks and should continue to help earnings per share outpace sales growth in 2024 and beyond. This could provide a nice cushion for growth to pick up again as shareholders wait for Apple to release new products and expand into more services.
2. Walmart should be considered a tech stock.
I know it might seem like a big deal to make a phone call. walmart (WMT -0.56%) It's a tech stock, but hear me out. The retailer just finished a great year in which e-commerce grew by 23% and annual sales exceeded $100 billion. For context, Amazon Product sales in 2023 increased by 5% to reach ~$256 billion. eBay Annual sales are reported at $73 billion.
Walmart is also seeing further revenue growth from other technology sources, including its burgeoning digital advertising business. So it's little surprise that profit margins are rising. The chain posted a 10% increase in operating profit last year, outpacing Walmart's 6% revenue increase.
Even with strong growth in technology-focused segments, traditional retail will be Walmart's main show for the foreseeable future. The good news is this division is firing on all cylinders as well. Customer footfall during the holiday period grew steadily (up 4% year-on-year), customer satisfaction was on the rise, and the chain gained market share in groceries and general consumer goods (including high-income customers). ing.
You can own Walmart stock at a P/S of less than 1, or about the same valuation you would pay. the goal In stock now. This price seems like a great bargain for a fast-growing e-commerce business backed by a strong brick-and-mortar company.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Demitri Kalogeropoulos has positions at Amazon and Apple. The Motley Fool has positions in and recommends Amazon, Apple, Microsoft, Target, and Walmart. The Motley Fool recommends his eBay and recommends the following options: A January 2026 $395 long call on Microsoft, an April 2024 $45 short call on eBay, and a January 2026 $405 short call on Microsoft. The Motley Fool has a disclosure policy.
