Many tech stocks have stumbled in 2022 as rising interest rates and other adverse macroeconomic factors have roiled markets. However, many of these stocks have also rebounded in 2023 in anticipation of falling rates and a stabilizing macroeconomic environment.
This upward trend is expected to persist into 2024, as the PC market recovers, the smartphone market stabilizes, and the smartphone market stabilizes. artificial intelligence (AI) the market is growing. I personally believe Intel (NASDAQ:INTC), HP (NYSE:HPQ)And Micron (NASDAQ:MU) will all be driven higher by these tailwinds and will outperform the S&P 500 over the next 12 months.
Intel is the largest producer of x86 central processing units (CPUs) for PCs and data centers. It saw a growth spurt during the pandemic as consumers purchased new PCs for remote working, online classes and gaming. Data centers have also been upgrading their servers with new chips to handle the increased use of their cloud-based services.
However, Intel suffered a severe downturn over the past two years, following the end of the pandemic, and macroeconomic difficulties caused companies to limit spending. Intel also fell behind Semiconductor manufacturing in Taiwan (TSMC) (NYSE:TSM) in the process race to make smaller, denser chips. Thus, its smallest rival, AMD (NASDAQ:AMD) — which subcontracted its production to TSMC — ahead of Intel with more energy-efficient chips. This is why Intel’s revenue has declined year over year for seven straight quarters.
This situation may seem bleak, but Intel’s revenue has actually increased sequentially over the past two quarters as the PC market gradually stabilized. Intel also believes its own foundries can catch up with TSMC in the process race in the near future, which would widen its competitive advantage against AMD.
Analysts expect Intel’s revenue and adjusted profit to increase by 13% and 99%, respectively, in 2024 as these tailwinds play out. Intel’s stock may not seem like a bargain at 30 times next year’s earnings, but its rising profits should quickly compress its forward valuations. as the PC market heats up again.
HP, one of the world’s largest producers of PCs and printers, has experienced a boom-and-bust cycle similar to that of Intel. Its revenue has declined year over year for six straight quarters as its consumer computer and printer sales fell after the pandemic and macroeconomic headwinds dampened its commercial hardware sales.
However, HP’s personal systems (PCs and workstations) sales still increased sequentially over the past two quarters. Its printer sales also increased sequentially last quarter.
This stabilization suggests that the company has finally reached its cyclical bottom – and analysts expect its revenue and adjusted earnings per share (EPS) to increase by 2% and 5%, respectively, over the course of the year. fiscal year 2024 (which ends in October 2024). These growth rates may seem low, but its shares are dirt cheap at eight times forward earnings and offer an attractive forward yield of 3.7%.
Looking ahead, the company plans to lay off 7% to 10% of its workforce by the end of fiscal 2025, streamline its PC portfolio and launch new products for higher-growth hybrid work markets , gaming, industrial graphics and 3D printing. . It also intends to roll out new subscription services to increase its gross margins. These ambitious plans could breathe new life into HP’s aging business and once again make it an attractive stock for long-term investors.
Micron is one of the world’s largest producers of DRAM and NAND memory chips. The end of the 5G upgrade cycle in smartphones, the slowdown in the PC market, and macroeconomic challenges for other markets have all taken a toll on its growth over the past year.
But in the first quarter of fiscal 2024 (which ended Nov. 30), Micron’s revenue grew 16% year over year and finally ended a five-quarter streak decline in income. It expects revenue growth to accelerate to 44% in the second quarter, a clear indication that its cyclical slowdown is over.
Micron attributes this recovery to the expansion of the generative AI market, strong growth in the automotive chip market and the stabilization of the smartphone market. Analysts expect its revenue to rise 32% for the full year, driven by a significant reduction in its net losses. For fiscal 2025, they expect its revenue to increase by 41% as it returns to profitability.
Micron trades at just 14 times next year’s earnings, suggesting the market has yet to fully price in its cyclical recovery. It could reach much higher in 2024, as more investors realize that better days are ahead for this memory chip maker.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Advanced Micro Devices, HP and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Mad Motley has a disclosure policy.
These 3 tech stocks could outperform the S&P 500 in 2024 was originally published by The Motley Fool