2 Cheap Tech Stocks to Buy Right Now

You can define a “cheap stock” in many ways, but there’s nothing quite as classic as a growth stock changing hands at a low valuation ratio. With that in mind, I highly recommend taking a closer look at the independent service platform Fiverr (NYSE: FVRR) and the memory chip giant Micron technology (NASDAQ: MU) right now. Their actions seem deeply undervalued.

Micron: A cyclical growth

The technology sector runs in broad and extended cycles. A market-boosting rally almost always causes middle-market providers to be overly optimistic about the long-term bull market for their commodities that could form. In many cases, they are left with overstocked components when high demand disappears faster than expected. Then everyone is caught off guard by the next boom. Demand is increasing and the market is realizing that the surplus of previous supply has been sold or has become obsolete, and meanwhile none of the hardware suppliers have built a single plant since the start of the industry’s last cyclical downturn. Manufacturers then have to catch up to increase capacity so they can handle the new wave of rekindled demand.

This is life in the memory chip sector, where Micron operates. Right now, the industry is facing increasing product demand as each piece of the artificial intelligence (AI) puzzle requires a ton of high-speed memory chips. As it happens, the aftershocks of the coronavirus crisis and the Taiwan flood disasters have left the biggest memory makers unprepared to handle this surge in demand.

But the growth is happening and I don’t see how it can be stopped. From smartphones and PC systems to data center servers and tech-packed machines, the devices around us are crying out for more memory chips. So Micron is ramping up its domestic manufacturing capacity with a multibillion-dollar construction push in 2025.

Micron’s chip production and top-line sales are on the rise after a tough slump in 2022 and 2023. Cash profits and net income follow suit. But it is unprofitable right now in terms of earnings per share. As a result, Micron stock might look expensive at first glance due to its negative earnings and non-existent price-to-earnings (P/E) ratio.

But its bottom line should turn sharply upward in the next two years. The stock trades at just 9 times next year’s estimated earnings and a reasonable 4.5 times sales. In short, Micron looks poised to thrive in 2025 and beyond, and the stock deserves a richer P/E ratio. It’s a stellar buy at these modest share prices.

The story continues

Fiverr: Turning a Corner on Profitability

Many investors wrote off Fiverr as the beneficiary of a short-lived trend a few years ago. Freelancing gigs in digital transactions have been a perfect fit for the excessive amounts of free time people have had during the COVID-19 lockdowns. So Fiverr’s stock rose to unsustainable heights during the social distancing era, then plummeted as many of the platform’s users and potential users returned to their jobs.

Shares have fallen since the start of 2021 and are down 92% from their peak. But a funny thing happened on the way to Fiverr’s financial ruin.

The business has not stopped growing.

Sure, its after-tax earnings dipped into red-ink territory for a while, and its revenue growth slowed from its blistering pace in 2020. But Fiverr continued to build its business, step by step, undeterred. , while holding plenty of cash profits along the way. Fiverr sales grew 128% in three years, while free cash flow skyrocketed 1,400%.

Business is doing well, and analysts are starting to catch on. Core estimates for the next fiscal year are trending upward, and Fiverr’s share price is struggling to keep up. As a result, the stock trades at just 9.7 times forward earnings and 2.3 times sales today.

This small company has some big ambitions. In the long term, this leader of the gig economy hopes to disrupt the way people think about careers and work. The company has been around for a decade, but is still in the early days of an epic long-term growth story. I see a tremendous buying opportunity in Fiverr at its current modest valuation.

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Anders Bylund has positions in Fiverr International and Micron Technology. The Motley Fool has positions in and recommends Fiverr International. The Motley Fool has a disclosure policy.

2 Cheap Tech Stocks to Buy Right Now was originally published by The Motley Fool