Tech stocks continue to hit all-time highs. The Nasdaq 100 has more than doubled from its COVID-19 lows and is up sevenfold over the past decade. Some investors, however, are nervous. After such a big move, the logic goes, surely a correction must be in the cards.
Valuations have climbed to previously unseen levels, causing analysts to make comparisons to the late 1990s tech bubble. As such, it might seem like an inopportune moment to invest in the technology industry. Fortunately, however, there are still some companies available at reasonable prices. The recent earnings season in particular led to many sell-offs in individual tech names, giving investors a window to buy certain tech shares at sensible levels.
With that in mind, here are five of the best tech stocks to buy for September:
— Amazon.com Inc. (ticker: AMZN)
— Aspen Technology Inc. (AZPN)
— Facebook Inc. (FB)
— Intel Corp. (INTC)
— International Business Machines Corp. (IBM)
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Amazon.com Inc. (AMZN)
Amazon.com had a fantastic 2020; its shares doubled during the pandemic. However, the momentum has come to a grinding halt in 2021. Amazon stock gained only 6.6% through August. The Nasdaq, by contrast, is up more than 20%. Amazon took a particularly big spill in July following a downbeat earnings report. While the company is still posting amazing growth, investor expectations were too high following last year.
A company like Amazon will have peaks and valleys, but the company’s long-term appeal remains evident. For investors who felt that they missed out on the firm last year, there’s a second chance. The stock still isn’t cheap on an earnings basis, but the valuation is more reasonable than it used to be. Amazon gives investors one-stop diversification, as the company dominates e-commerce, cloud computing and online advertising. It wouldn’t be surprising if Amazon stock catches back up with its Nasdaq peers this fall.
Aspen Technology Inc. (AZPN)
Aspen Technology is another company that sold off sharply following its recent earnings report. The firm, which makes software primarily for the oil and gas industry, has had a slow recovery from the pandemic. The price of oil infamously crashed below $0 per barrel at one point, and industry participants sharply curtailed their investments. However, the economic reopening has given oil a major boost. That’s visible at gas stations; the median price of gasoline has topped $3 per gallon in the U.S.
Other petroleum products, such as asphalt, jet fuel and petrochemicals, are seeing increasing demand as the economy picks back up. So oil and gas companies will have more room to invest. To that point, Aspen maintains its 2022 guidance in line with analyst estimates. Aspen’s software is essential for the industry, as oil and gas companies need to optimize every process to reduce pollution and improve their environmental, social and governance scores. Morningstar analyst Dan Romanoff has a $151 price target for Aspen, which would be a considerable gain from the current $130 price.
Facebook Inc. (FB)
Facebook shares have moved to new all highs this summer. That might leave investors to think it’s too late to buy into the social media giant. However, even after this run-up, shares are still selling for a reasonable 30 times forward earnings. Facebook continually trades at a discount to its peers because investors don’t appreciate the whole company. Yes, the legacy Facebook platform has lost its “cool” factor. But Facebook is far more than its namesake application. Instagram is turning into a leading e-commerce platform, WhatsApp is ubiquitous in Europe and emerging markets, and Messenger has a huge user base as well. Regulators keep bringing antitrust charges against Facebook. Counter-intuitively, that could be for the best. If Facebook ever spins off Instagram in particular, it would likely unlock a ton of shareholder value.
Intel Corp. (INTC)
Intel has been forgotten about. Yes, the stock is up 50% over the past five years, but that’s nothing compared to the gains from chief rivals Advanced Micro Devices Inc. ( AMD) and Nvidia Corp. ( NVDA). Admittedly, Intel has largely failed to capitalize on the current semiconductor boom. Nvidia has done a much better job leveraging current growth areas, such as cryptocurrency mining. Intel has had some execution issues on the technology side as well, giving AMD in particular an opening to take market share.
Still, at the end of the day, Intel spends $14 billion per year on research and development, which is multiples of AMD and Nvidia’s spend. Intel has had some missteps, but the company isn’t going anywhere. Meanwhile, its investments in areas such as self-driving vehicles and the Internet of Things give shares upside optionality. Morningstar’s Abhinav Davuluri puts Intel’s fair value at $65 per share. That represents meaningful upside from the current $54 share price.
International Business Machines Corp. (IBM)
As with Intel, many tech investors have left IBM for dead. However, Big Blue still has a lot to offer. The company remains the world’s largest information technology services provider. Much of the company’s business is tied to legacy products such as mainframes with declining demand. However, IBM has built a sizable cloud business, and it has several other areas, including artificial intelligence, that also hold promise.
IBM generates approximately $75 billion per year in revenues, so the company is much more durable than folks give it credit for. After a difficult 2020, IBM has also returned to revenue growth this year. Shares are selling for just 13 times forward earnings and pay a nearly 5% dividend. There’s an argument that IBM could enjoy a revival, as Microsoft Corp. ( MSFT) did a decade ago, as the cloud business grows in importance.
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5 of the Best Tech Stocks to Buy for September originally appeared on usnews.com
