$5,000 may not seem like a lot of money in the stock market, where individual shares of some companies can cost hundreds or thousands of dollars. However, at the end of the second quarter, the value of the average funded account increased Robinhood Markets was only $5,773, so smaller retail investors are still acquiring a lot of shares. That shouldn’t be too surprising, since Robinhood’s commission-free model and fractional share options make it much easier to build diversified portfolios with just a little cash.
If you have about $5,000 you want to invest, I recommend buying these three undervalued tech stocks today: MicroStrategy (NASDAQ:MSTR), Micron technology (NASDAQ:MU)And PK (NYSE: HPQ).
Image source: Getty Images.
The Bitcoin Game: MicroStrategy
MicroStrategy was once a slow-growing data software vendor that struggled to keep pace Microsoft And Salesforce. But four years ago the company switched gears and started hoarding Bitcoin.
On July 31, MicroStrategy owned a whopping 226,500 Bitcoins. These coins, which it purchased for a total of $8.3 billion (or an average cost of $36,821 per coin), are now worth $13.8 billion. That’s 37% of the company’s enterprise value, which at the time of writing is $37.2 billion.
Crypto bulls believe the value of MicroStrategy’s Bitcoin holdings will rise even further and offset slower growth in its software business. It is gradually expanding its higher-growth subscriptions to offset declining on-site licensing and support revenue.
Analysts expect MicroStrategy’s core software business to barely grow revenue in the coming years and suffer even more losses. They also expect it to take on more debt and issue more shares to finance further Bitcoin purchases.
The shares may look expensive, trading at 78x this year. But if we ignore the software business and focus only on Bitcoin holdings, it could be deeply undervalued if Bitcoin’s price soars to $100,000 or even $1 million over the next decade.
The AI Game: Micron Technology
Micron is one of the world’s top manufacturers of DRAM and NAND memory chips. It’s not the largest company in either market, but it generally produces denser and more energy-efficient chips than its top competitors, Samsung and SK Hynix.
The memory market is highly cyclical, and Micron’s sales cooled last year as PC shipments fell and the upgrade cycle for 5G smartphones ended. That’s why sales fell 49% in fiscal 2023 (ending September 2023) and became unprofitable.
Over the past year, however, Micron’s growth accelerated as the PC and smartphone markets stabilized and companies upgraded their servers to handle the latest AI applications. In fiscal year 2024, sales increased by 62% and it became profitable again.
Analysts expect revenue to rise 52% in fiscal 2025, while adjusted earnings per share will increase nearly sevenfold. Based on that outlook, Micron trades at just eleven times forward earnings – making it a lot cheaper than leading AI chip plays like Nvidia.
The PC plays: HP
HP is one of the world’s largest manufacturers of PCs and printers. The consumer-facing business saw a big growth spurt during the pandemic as more people upgraded their hardware to work from home, but some of that growth was offset by the disruption to the commercial-facing business. In fiscal 2022 and fiscal 2023 (which ended last October), HP’s revenues fell as consumer sales fell and macroeconomic headwinds hampered the recovery of commercial activity.
That pressure led HP to cut costs and buy back more shares to boost adjusted earnings per share — but that figure grew only 8% in fiscal 2022 and fell 18% in fiscal 2023. For fiscal 2024 Analysts expect sales to remain the same. while adjusted earnings per share are growing by only 3%. That outlook seems bleak, but at ten times forward earnings, HP shares appear undervalued, and the dividend offers an attractive forward yield of 3.1% at current share prices.
In the coming years, HP’s earnings growth should accelerate again as the company shrinks its workforce, streamlines its PC portfolio, launches more subscription-based services and rolls out new products for its fast-growing hybrid work, gaming, industrial graphics and 3D. printing markets. Therefore, buying shares of HP before the next growth cycle begins could be a smart move.
Should You Invest $1,000 in MicroStrategy Now?
Before you buy shares in MicroStrategy, consider the following:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and MicroStrategy wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $765,523!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns September 30, 2024
Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, HP, Microsoft, Nvidia and Salesforce. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.