The rout in technology stocks continues with the Nasdaq Composite index recently falling 3% in a single trading session and experiencing its worst selloff in nearly two years. With interest rates expected to be lowered starting this September, investors are shifting capital into small-cap stocks and value names that are likely to benefit from a reduction in borrowing costs.
While the decline in tech stocks is jarring, it’s important to remember that it is opening up opportunities for investors to buy shares of great companies at discounted prices. Some leading tech stocks have fallen 20% or more since the start of July, making now a great time to take a position. Some of the largest technology stocks are also attractively valued, trading at 20 times future earnings estimates or less, which is historically low.
Here are three tech stocks to buy on the dip: July 2024.
Meta Platforms (META)
The stock of Meta Platforms (NASDAQ:META) is down 10% in the last month, making now an opportune time to buy shares. While the company’s stock has been hurt by the rotation out of mega-cap tech names, it has also declined after launching a new version of its Llama artificial intelligence (AI) model that’s being made available free of charge. Called “Llama 3.1,” the new technology is the largest and most advanced AI model yet from Meta Platforms.
As was the case with all previous versions of Llama, the newest model is “open source,” which means it can be accessed by people around the world for free. While that might sound good, analysts and many investors had wanted Meta to take the same approach as its competitors and charge money for access to its AI. META stock fell more than 5% on news that Llama 3.1 is being released in an open source version.
However, in the grand scheme of things, the free version of the newest AI model is a minor controversy. Like the rotation into small-cap stocks, it will pass in due course. In the meantime, investors might want to buy-the-dip in Meta stock before the company reports its second-quarter financial results on July 31.
Spotify Technology (SPOT)
Audio streaming giant Spotify Technology (NYSE:SPOT) got a big bounce after its recent second-quarter financial results blew past Wall Street forecasts. However, the share price has pulled back after hitting a 52-week high of $346.23 per share. This presents an opportunity for investors to take a position before the stock recovers and continues its march higher. Analysts have been upgrading the stock since its Q2 print.
Investment bank Goldman Sachs (NYSE:GS) recently raised its rating on SPOT stock to “buy” from “neutral” and lifted its 12-month price target on the shares to $425 from $320. The new price target implies 27% upside from current levels. Many other analysts lifted their ratings and price targets on Spotify stock after the audio streamer announced a record profit for this year’s second quarter.
Analysts note that Spotify is succeeding with its cost-cutting initiatives and new pricing model. The stock of Spotify has risen 78% so far this year.
Dell Technologies (DELL)
Dell Technologies (NYSE:DELL) stock has fallen nearly 20% in the last month, making both the share price and valuation extremely attractive. Currently, DELL stock is trading at 23 times future earnings estimates, which is reasonable for a tech concern of its size. The stock also pays a quarterly dividend of 45 cents per share, giving it a yield of 1.57%. The decline in the company’s share price is due to two issues.
The first is the rotation out of tech stocks. The second is concerns about the profitability of the company’s high-efficiency servers that run AI models. Both these issues are small potatoes though when it comes to the growth catalysts that are swirling around Dell stock. The company has a huge opportunity with AI. It should also benefit from a global refresh cycle of personal computers (PCs), which remains the company’s bread and butter.
There are also rumors that Dell Technologies’ stock will be added to the S&P 500 index, which could provide another tailwind for the share price. Over the last 12 months, DELL stock has gained 109%.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.