While definitions of “cheap stocks” vary, none are more typical than growth stocks trading at low valuation ratios. With that in mind, we highly recommend taking a closer look at freelance service platforms. Fiber (NYSE: FVRR) Memory chip giant Micron Technology (Nasdaq: MU) Right now. Their stock appears to be significantly undervalued..
Micron: Cyclical Rise
The technology industry A wide and extensive cycleAn economic recovery that boosts the market almost always causes mid-market suppliers to become overly optimistic that a long-term bull market for their products might form. Often, when high demand fades sooner than expected, they end up with excess inventory of parts. Then the next boom takes everyone by surprise. Demand surges and the market realizes that all of its excess supply was sold or obsolete in the last downturn. Meanwhile, hardware providers have not built factories since the last recession began. Then manufacturers have to play catch-up by ramping up production capacity to meet the new wave of reignited demand.
That’s the reality for the memory chip industry in which Micron operates. The industry is currently facing a surge in product demand, as lots of fast memory chips are needed for every piece of the artificial intelligence (AI) puzzle. But in the aftermath of the COVID-19 crisis and the flooding in Taiwan, major memory makers are completely unprepared to meet the surge in demand.
But the upward trend continues, and it shows no signs of stopping: The devices around us, from smartphones and PC systems to data center servers and tech-packed cars, need more memory chips, so Micron is pushing ahead with a multibillion-dollar buildout into 2025 to ramp up its own manufacturing capacity.
Micron’s chip production and sales are trending upwards after a tough 2022 and 2023 crisis. Cash earnings and net income are rising as well. However, in terms of earnings per share, the company is not currently profitable. As a result, Micron’s stock may look expensive at first glance due to its negative earnings and non-existent price-to-earnings (P/E) ratio.
But the company’s profits should soar over the next few years. The stock trades for just nine times next year’s expected earnings and 4.5 times sales. Simply put, Micron is poised to thrive beyond 2025, and the stock deserves a higher forward P/E ratio. At this modest price, it’s a great buy.
Fiverr: Profitability turns around
Many investors had resigned themselves to the idea that Fiverr was merely the beneficiary of a passing fad a few years ago: Freelancing digital trades was a perfect fit for the copious amounts of free time people had during COVID-19 lockdowns, causing Fiverr’s stock to soar to unsustainable highs in the age of social distancing, then plummet as many of the platform’s users and potential users returned to work.
The company’s stock price has fallen since the beginning of 2021, dropping 92% from its peak. But a funny thing happened during Fiverr’s financial collapse.
The business never stopped growing.
Sure, after-tax profits have been in the red for a while, and revenue growth has slowed from its red-hot 2020. But Fiverr has continued to expand unflinchingly, step by step, pocketing big cash gains along the way. Fiverr’s revenue has grown 128% in three years, and its free cash flow has soared 1,400%.
Business is going well, and analysts are starting to notice. Bottom line estimates for next year are trending upwards, and Fiverr’s stock is struggling to keep up. As a result, the company’s shares are now trading at 9.7 times projected earnings and 2.3 times sales.
This small company has big ambitions. In the long term, this gig economy leader wants to change the way people think about careers and work. The company is 10 years old, but it’s still in the early stages of a big secular growth story. Fiverr’s current valuation is modest, but I believe there’s a great buying opportunity.
Should you invest $1,000 in Micron Technology right now?
Before buying Micron Technology stock, consider the following:
of Motley Fool Stock Advisor The analyst team Top 10 Stocks Here are the stocks investors should buy right now…Micron Technology was not among them. The 10 selected stocks have the potential to generate big gains over the next few years.
Things to consider NVIDIA This list was created on April 15, 2005…If you invested $1,000 at the time of recommendation, That works out to $729,857.!*
Stock Advisor With portfolio construction guidance, regular updates from our analysts, and two new stock picks every month, we provide investors with an easy-to-follow blueprint for success. Stock Advisor The service is More than 4 times First S&P 500 recovery since 2002*.
*Stock Advisor returns as of September 9, 2024
Anders Billund The Motley Fool has invested in and recommends Fiverr International and Micron Technology. The Motley Fool has invested in and recommends Fiverr International. The Motley Fool has invested in and recommends Fiverr International. Disclosure Policy.
2 Cheap Tech Stocks to Buy Now Originally published on The Motley Fool
/cdn.vox-cdn.com/uploads/chorus_asset/file/25619322/APPLE_VISUAL_INTELLIGENCE_SCREENSHOT.jpg?w=150&resize=150,150&ssl=1 "Apple’s Visual Intelligence could be a step toward Apple glasses")