With the S&P 500 and Nasdaq Composite both regularly setting new all-time highs in 2024, it's harder to find promising tech stocks at attractive valuations. Market darling Nvidia already trades at 37 times forward earnings, while blue-chip stalwart Apple has a forward multiple of 31.
But if we dig deeper, we can find some healthy tech stocks that still look like bargains. For instance, these three cheap stocks -- Micron Technology (NASDAQ: MU), Dell Technologies (NYSE: DELL), and Cisco Systems (NASDAQ: CSCO) -- are likely to go higher. Here's why.
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1. Micron Technology
Micron is a leading producer of DRAM and NAND memory chips. It doesn't lead either of those markets, but it generally produces denser chips than its larger competitors. The memory chip market is highly cyclical, and its latest downturn occurred in 2023 as the PC market cooled off, the 5G upgrade cycle in smartphones ended, and many data center companies prioritized purchases of AI-oriented GPUs over new memory chips. In Micron's fiscal 2023 (which ended in August 2023), its revenue tumbled by 49% and it posted an adjusted net loss.
But over the past year, a new growth cycle kicked off as the PC and smartphone markets stabilized. Data center operators also finally looked beyond GPUs and began boosting their purchases of solid-state drives (SSDs) and high-bandwidth memory (HBM) chips to support new AI applications. In fiscal 2024, Micron's revenue rebounded by 62% and it turned profitable again. For fiscal 2025, analysts expect Micron's revenue and adjusted EPS to grow 52% and 587%, respectively, as the growth cycle accelerates.
Based on those expectations, Micron's stock looks dirt cheap at 12 times forward earnings. Its growth will eventually cool off again, but this could be a great time to open a new position.
2. Dell Technologies
Dell, which returned to the public markets nearly six years ago, sells a wide range of PCs, PC peripherals, servers, and data storage products. Its PC business cooled off as fewer people bought new devices for remote work, and macro headwinds throttled the growth of its data storage business in the enterprise market. That's why Dell's revenue and adjusted EPS fell 14% and 6%, respectively, in its fiscal 2024 (which ended in February).
But for fiscal 2025, analysts expect its revenue and adjusted EPS to both grow by about 10% as the PC market stabilizes, data centers upgrade their storage devices, and it ramps up its production of dedicated AI servers. Dell generated 12% of its revenue from dedicated AI servers in its latest reported quarter, and it expects that business to drive most of its near-term growth. Super Micro Computer's recent problems could also drive even more AI server orders to Dell.
Dell isn't a high-growth AI stock, but it's a bargain at 14 times forward earnings. That low valuation could set it up for a bull run as its growth accelerates again. It also pays a dividend that yields a decent 1.3% at the current share price.
3. Cisco Systems
Cisco is one of the world's largest networking hardware and software companies. Its hardware business struggled with supply chain constraints in its fiscal 2022 (which ended in July 2022), but most of those issues receded in fiscal 2023, when its revenue and adjusted earnings grew by 11% and 16%, respectively.
But in fiscal 2024, Cisco's revenue and adjusted EPS declined by 6% and 4%, respectively. Many of its larger enterprise, service provider, and cloud computing customers -- which had aggressively ramped up their hardware purchases after Cisco resolved its supply chain issues -- ended up with more products than they could deploy. That surplus, in combination with the macro headwinds, led to a significant slowdown in their orders from Cisco.
However, for fiscal 2025, analysts expect Cisco's revenue to rise by 4% as its adjusted EPS dips 2%. Its business should gradually stabilize as its inventory issues fade and the growth of the AI market drives data center operators to further upgrade their infrastructure.
Like Dell, Cisco isn't an exciting growth stock. But it looks cheap at 16 times forward earnings, it distributes a dividend that yields an attractive 2.8% at current prices, and its top line is gradually accelerating again. That makes it a great pick for bargain-seeking investors who also want a little exposure to the AI market.
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*Stock Advisor returns as of November 18, 2024
Leo Sun has positions in Apple. The Motley Fool has positions in and recommends Apple, Cisco Systems, and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
