Considering a $8,000 investment for potential gains beyond 2025? These Three Stocks Might Be Worthy of Your Consideration.
Considering you're interested in diversifying your investments, it might be worth exploring some tech stocks that are currently underappreciated by the market. Three such stocks that could potentially offer decent returns in the long term are DigitalOcean, Oracle, and Dell Technologies.
Let's delve deeper into these stocks:
1. DigitalOcean (DOCN)
DigitalOcean, a cloud infrastructure company, caters to smaller businesses and independent developers with its cheaper server solutions. This unique strategy helped it carve out a niche in an otherwise enterprise-dominated market. Despite rising valuations, DigitalOcean's stock still appears reasonably priced, considering its growth potential and exposure to the booming AI market.
From 2018 to 2023, DigitalOcean's revenue grew at a compound annual growth rate (CAGR) of 28%, making it profitable in 2023. Analysts anticipate a further revenue and EPS growth of 13% and 85%, respectively, from 2023 to 2026.
Even as it expanded its AI market dominance by acquiring Paperspace and integrating GPU-powered servers, DigitalOcean’s stock still trades at a reasonable 40x forward earnings. This undervalued status makes it an attractive long-term investment option.
2. Oracle (ORCL)
Oracle, one of the world's largest database software companies, ventured into cloud-based infrastructure and software services to broaden its offerings. It also acquired several companies, including NetSuite and Cerner, to pivot its business towards cloud infrastructure and software.
From fiscal 2019 to 2024 (which ended in May 2024), Oracle’s revenue and EPS grew at a CAGR of 6% and 5%, respectively. However, the company expects a significant acceleration in its revenue and EPS growth from fiscal 2024 to fiscal 2027 (ending in 2027), driven by the generative AI market.
Oracle’s stock appears undervalued, trading at 29x forward earnings. Furthermore, the company is dedicated to returning a substantial portion of its free cash flow to its investors through dividends and share buybacks. The company’s forward dividend yield isn’t particularly impressive at 0.8%, but it has returned more than a third of its shares in the last decade.
3. Dell Technologies (Not Specifically Mentioned)
Dell, the world's largest producer of PCs and servers, went private in 2013 due to poor business decisions. The company returned to public markets as a more streamlined entity in 2018, focusing on its core strengths.
From fiscal 2019 to 2024 (which ended in February 2024), Dell’s annual revenue decreased, mainly due to the spin-off of Vmware and a challenging PC market. However, analysts anticipate a revenue and EPS growth of 8% and 24%, respectively, from fiscal 2024 to 2027, as the PC market stabilizes and the AI server business expands.
Dell COO Jeff Clarke views the AI market as a potential "robust opportunity" with substantial growth potential, indicating it could be a viable long-term investment. At 12x forward earnings, Dell’s stock is perceived as undervalued, and it pays a forward dividend yield of 1.3%.
In conclusion, although these three stocks come with varying levels of risk, each taps into the tech sector's long-term growth potential and AI market opportunities. Before making any investment decisions, it's essential to perform thorough research, consult with financial advisors, and carefully consider personal risk tolerance and overall investment strategy.
Investing in tech stocks like DigitalOcean, Oracle, and Dell Technologies can provide opportunities for growth, particularly in the booming AI market. DigitalOcean's reasonably priced stock, despite its growth potential and exposure to AI, could yield decent returns in the long term.
Oracle's stock, trading at a lower multiple, looks undervalued, especially considering the company's dedication to returning cash to investors and its anticipated growth driven by the generative AI market.
