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10 tech value stocks that at least 75% of analysts rate as a 'buy' right now

Dow Jones2022-02-19

MW 10 tech value stocks that at least 75% of analysts rate as a 'buy' right now

By Philip van Doorn

A high-conviction list includes Alphabet, Micron Technology and PayPal

So far, 2022 is a year of value stocks. But some tech stocks fit that definition.

Below is a high-conviction list of technology stocks among the S&P 500 that have low valuations to earnings estimates and high free cash flow yields. They're all highly rated by analysts.

Value's comeback

Growth stocks -- those of companies increasing sales rapidly that tend to trade high relative to earnings estimates -- were at the forefront of the bull market, which has arguably ended as investors prepare for an expected cycle of interest-rate increases by the Federal Reserve to combat high inflation.

The $24 billion iShares S&P 500 Value ETF $(IVE)$ tracks the S&P 500 Value Index, which includes a subset of the full S&P 500, scored by price-to-earnings, price-to-book-value and price-to-sales ratios.

IVE has pulled back 2% this year through Feb. 11, compared with a 12% decline for the $35 billion iShares S&P 500 Growth ETF $(IVW)$.

A 10-year chart for the ETFs tells a different story:

Growth has shined over the past decade, which has mainly been a period of rapid growth for technology companies, reflected in high valuations to earnings.

But maybe things really are different now. It has been 40 years since inflation has been this high, and the Federal Reserve's expected policy change can alter the stock market's dynamics for years.

This year's decline in stock prices -- especially the 11% pullback for the S&P 500 information technology sector -- has moved some companies into the value camp, as you can see in the following screen.

Read:This never-before-seen evidence shows value stocks outperforming growth rivals for a lot longer than anyone knew

Tech value stock screen

Analysts at Jefferies did their own screen for value stocks among the entire S&P 500 and discussed their results in a report to clients on Feb. 11. The Jefferies screen made use of the firm's own ratings and estimates.

The Jefferies analysts confined their list to stocks their own firm rated "buy" and which also met these criteria:

For a tech value screen using consensus estimates among analysts of brokerage firms polled by FactSet, we incorporated the above for the 76 companies in the S&P 500 information technology sector and expanded the list by adding tech-oriented companies that have been placed in other sectors by S&P Dow Jones Indices. These include video game developers, Google holding company Alphabet Inc. $(GOOGL)$(GOOGL), Facebook holding company Meta Platforms Inc. (FB) and Amazon.com Inc. $(AMZN)$. This brought our initial S&P 500 tech list to 83 companies.

The average forward P/E ratio for this group of 83 companies was 28.1, while the average forward FCF yield was 4.54%. Among the 83 companies, 10 rated "buy" or equivalent by at least 75% of the analysts also met the P/E and FCF yield criteria.

Here they are, sorted by ascending forward P/E ratios:

CompanyTickerForward P/EForward FCF yieldTotal return -- 2022 through Feb. 11Total return -- 2021
Micron Technology Inc.MU8.956.17%-3.6%24%
Fiserv Inc.MISVF14.876.78%-6.2%-9%
Fidelity National Information Services Inc.FIS15.127.11%2.5%-22%
Global Payments Inc.GPN15.137.06%8.5%-37%
Broadcom Inc.AVGO16.985.72%-13.8%56%
Corning Inc.GLW17.525.02%12.5%6%
Analog Devices Inc.ADI19.924.67%-12.4%21%
Alphabet Inc. Class AGOOGL22.504.72%-7.3%65%
Teledyne Technologies Inc.TDY23.304.77%-3.5%11%
PayPal Holdings Inc.PYPL23.805.19%-38.9%-19%
Source: FactSet

You can click on the tickers for more about each company.

Then read Tomi Kilgore's detailed guide to the wealth of information available for free on the MarketWatch quote page.

In case you are wondering, Apple Inc. $(AAPL)$ just missed the cut. The stocks's forward P/E was 26.9, but its forward FCF yield was "only" 4.08%.

Here's the list again, in the same order, with a summary of analysts' opinions:

CompanyTickerShare "buy" ratingsClosing price -- Feb. 11Consensus price targetImplied 12-month upside potential
Micron Technology Inc.MU87%$89.76$113.1826%
Fiserv Inc.FISV76%$97.40$129.0032%
Fidelity National Information Services Inc.FIS76%$111.92$143.5928%
Global Payments Inc.GPN86%$146.70$185.7627%
Broadcom Inc.AVGO84%$573.42$697.4122%
Corning Inc.GLW75%$41.87$47.3813%
Analog Devices Inc.ADI77%$153.90$210.5537%
Alphabet Inc. Class AGOOGL96%$2,685.65$3,479.8630%
Teledyne Technologies Inc.TDY78%$421.44$533.2527%
PayPal Holdings Inc.PYPL76%$115.29$188.4763%
Source: FactSet

Don't miss:Oil is the hottest sector, and Wall Street analysts see upside of up to 48% for favored stocks

-Philip van Doorn

 

$(END)$ Dow Jones Newswires

February 19, 2022 09:10 ET (14:10 GMT)

Copyright (c) 2022 Dow Jones & Company, Inc.

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