In 2023, numerous technology names made a dramatic comeback following a brutal bear market in 2022. For the year, the tech-heavy Nasdaq Composite increased 43%. However, many stocks experienced triple-digit increases, leaving some investors questioning whether they could still find affordable stocks.
Google parent Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) performed well in 2023, but a new technology led some investors to question the company’s future role in tech. OpenAI’s ChatGPT introduced a generative AI tool that reinvigorated artificial intelligence, and its alliance with Microsoft made many investors wonder whether users would abandon Google in favor of Bing.
Nonetheless, Alphabet has introduced a competing generative AI tool called Gemini, a sign the company has no plans to surrender competitively. Moreover, Alphabet’s $120 billion in liquidity gives it the resources needed to remain competitive in AI. Additionally, at a P/E ratio of 27, it is the cheapest of the so-called “magnificent seven” stocks, making it a more compelling buy as it works to win over AI investors again.
Like IBM, Intel (NASDAQ: INTC) suffered for years after falling behind competitively. However, CEO Pat Gelsinger aimed to reclaim its technical lead and become a leading chip producer.
To this end, its Emerald Rapids and Meteor Lake processors have come a long way in closing Intel’s competitive gap with AMD. Also, Intel Foundry Services has attracted many of tech’s top businesses as clients.
Admittedly, Intel posted negative free cash flow for the year as it invested tens of billions in improvements. But free cash flow turned positive in the third quarter, and with the stock selling at just 16 times earnings, investors could find themselves wishing they had bought shares as it reclaims some of its competitive advantages.
IBM (NYSE: IBM) had become an afterthought in tech as its businesses became stagnant. However, buying Red Hat in 2019 and redefining itself as a cloud and supercomputing company has breathed new life into the venerable tech giant. Furthermore, it spun off its managed infrastructure business into Kyndryl, showing a willingness to part with underperforming assets.
Despite struggles, IBM maintains a growing payout with a 4% dividend yield, and its $5.1 billion free cash flow in the first nine months of 2023 covered $4.5 billion in dividend costs. With a P/E ratio of just 22 and a return to a growth trajectory, IBM is well positioned to deliver market-beating returns.
PagSeguro Digital (NYSE: PAGS) is not a familiar name to American investors. Nonetheless, the Brazil-based fintech company has stood out for offering a unique financial product. Its platform serves as a digital wallet comparable to PayPal‘s Venmo that can also act as a checking account for Brazilian consumers and businesses. Additionally, it provides point-of-sale services and prepaid cards.
For the first nine months of 2023, free cash flow came in at 368 million reais ($75 million), up from a negative 169 million reais in the same year-ago period. With the international stock showing signs of recovery and a P/E ratio of 13, investors have both a bargain price and the catalyst needed to drive significant returns.
Competition, legacy costs, and capital expenditures have hampered Verizon‘s (NYSE: VZ) stock for years. While it is one of three nationwide 5G providers, keeping up with technological change while maintaining its network quality rating has come at a high cost.
However, the rise of AI and IoT makes Verizon’s network a more vital part of the U.S. communications infrastructure. Moreover, investors receive a 6.8% dividend yield, and since free cash flow for the first nine months of 2023 rose 18% to $15 billion, the telecom stock covered the $8 billion in dividend costs. At a P/E ratio of 8, this is a bargain income investors should not ignore.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Will Healy has positions in Advanced Micro Devices and Intel. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Microsoft, PagSeguro Digital, and PayPal. The Motley Fool recommends Intel, International Business Machines, and Verizon Communications and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, short February 2024 $47 calls on Intel, and short March 2024 $67.50 calls on PayPal. The Motley Fool has a disclosure policy.
5 Cheap Tech Stocks to Buy Right Now was originally published by The Motley Fool