Many tech stocks underperformed in 2022 as rising interest rates and other macro headwinds roiled the market. However, many of these stocks also rebounded in 2023 on expectations of lower interest rates and a more stable macro environment.
That bullishness will continue into 2024 as the PC market recovers, the smartphone market stabilizes, and the artificial intelligence (AI) market expands.I personally believe intel (INTC -0.28%), HP (HPQ -0.30%)and micron (MU -0.64%) All of these tailwinds will drive stocks higher and outperform the S&P 500 over the next 12 months.
Intel is the largest manufacturer of x86 central processing units (CPUs) for PCs and data centers. It experienced rapid growth during the pandemic as consumers bought new PCs for remote work, online classes, and gaming. Data centers have also upgraded their servers with new chips to keep up with the increased usage of cloud-based services.
But as the pandemic subsided and macro headwinds prompted companies to rein in spending, Intel suffered a severe underperformance over the past two years.Intel also fell behind. taiwan semiconductor manufacturing (TSMC) (TSM -0.67%) Processes are racing to produce smaller, denser chips. So, the small rival AMD (AMD -0.91%) The company, which outsourced production to TSMC, was ahead of Intel with more power-efficient chips. That’s why Intel’s revenue has declined year-over-year for seven consecutive quarters.
While this situation may seem bleak, Intel’s revenue actually increased sequentially over the past two quarters as the PC market gradually stabilized. Intel also believes its foundries will be able to catch up to TSMC in the process race in the near future, which would widen the competitive moat against AMD.
Analysts expect these tailwinds to boost Intel’s revenue and adjusted earnings by 13% and 99%, respectively, in 2024. Intel’s stock price may not seem cheap at 30 times next year’s earnings, but rising profits should quickly compress future valuations as the PC market heats up again.
HP, one of the world’s largest manufacturers of PCs and printers, has experienced similar boom-and-bust cycles as Intel. The company’s revenue has declined year-over-year for the sixth straight quarter as consumer PC and printer sales declined after the pandemic and macroeconomic headwinds suppressed commercial hardware sales.
However, HP’s personal systems (PC and workstation) sales continued to grow over the past two quarters. Sales of the company’s printers also increased continuously from the previous quarter.
This stabilization suggests the company has finally reached a cyclical trough, with analysts predicting sales growth of 2% and adjusted earnings per share in fiscal 2024 (ending October 2024). (EPS) is expected to increase by 5%. While these growth rates may seem low, the company’s stock price is very cheap at 8x forward P/E and it pays an attractive forward yield of 3.7%.
Looking ahead, the company will lay off 7% to 10% of its workforce by the end of 2025, streamline its PC portfolio, and launch new products for the growing hybrid work, gaming, industrial graphics, and 3D printing markets. is scheduled to be released. . The company also plans to expand gross profit by rolling out new subscription services. These ambitious plans could breathe new life into HP’s aging business and make the stock attractive again to long-term investors.
Micron is one of the world’s largest manufacturers of DRAM and NAND memory chips. The end of his 5G upgrade cycle for smartphones, a slowdown in the PC market, and other macro challenges in the market all hurt the company’s growth over the past year.
However, in the first quarter of fiscal 2024 (ending Nov. 30), Micron’s revenue increased 16% year over year, finally ending five consecutive quarters of revenue declines. It expects sales growth to accelerate to 44% in the second quarter, a clear sign that the economic slowdown is over.
Micron attributes this recovery to the expansion of the generative AI market, strong growth in the automotive chip market, and stabilization of the smartphone market. Analysts expect full-year sales to rise 32% as the company’s net loss narrows significantly. In 2025, he expects sales to increase by 41% as the company returns to profitability.
Micron trades at just 14x next year’s P/E, suggesting the market has not yet fully priced in its cyclical recovery. The stock could rise further in 2024, as many investors see brighter days ahead for the memory chip maker.
Leo Sun has no position in any stocks mentioned. The Motley Fool has roles in and recommends Advanced Micro Devices, HP, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: Long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.