After a terrible market meltdown in March, US stock indices roared back and made new highs all the way. With the economy in general still in the dumps by COVID-19, it is the digital economy that is largely responsible for the rally.
Given how quickly many stocks have recovered, some investors are now hitting the pause button. But if you’ve just jumped on board the market gain or if you want to add to existing stocks, think three of our Fool.com employees Anaplan (NYSE: PLAN), Intel (NASDAQ: INTC), en Super Micro computer (NASDAQ: SMCI) are top tech stocks to buy in the month of September.
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Nicholas Rossolillo (Anaplan): While many technological stocks have gained momentum in recent months during the pandemic, not all have gone so well. Faced with a money crisis, many organizations have decided which IT services are absolutely necessary and which can be purchased later. For Anaplan, some of the deals it worked on in early 2020 were categorized as the latest, and the cloud software outfit predicted a sharp slowdown in growth – from 37% in the first quarter to an expected rate of 22% for the second quarter (the period ended 31 July 2020).
Actual results were ultimately much better, with Q2 total revenue increasing 26%, including a 32% increase in subscription sales to $ 97.1 million. Custom business losses were also reduced to negative 9% compared to almost negative 20% a year ago, as the small business remains more efficient as it adds more users. Full-year guidance was also put in place again, requiring at least 22% growth after Anaplan’s excellent debut year as a public company in 2019.
Although its trajectory has been delayed compared to last year, Anaplan is still attracting new customers and adding new users to the companies that have already subscribed to their service. As the world tries to sort out the clutter that is in 2020, the ability to connect digital data with people across an organization – especially considering the era of telecommuting we live in now – is more important than ever. And as companies move out of “damage management” mode, Anaplan’s connected planning platform resonates again. The stock began to rebound to steep heights that were reached in early 2020 on the better-than-expected outlook.
I will admit that I gambled a bit when I first bought Anaplan a few months ago, after they reported their sharp delay in pandemic. My hunch was and remains this cloud-based software company will repeat its mojo as companies become increasingly comfortable operating in a digital first world (and discover that they need some help to get their distributed teams of employees to work together in this new environment). And although Anaplan competes against heavy weights in the sector as well Oracle (NYSE: ORCL), sop (NYSE: SAP), en IBM (NYSE: IBM) in the sandbox for resource planning for companies, the executive team has extensive experience in the sector. Stock prices assume recent quarterly results to be repeated for a while and trade for 15 times expected one-year pre-sale. But premium prices are standard for high growth and large potential tech companies like these. After convincing fears in the second quarter, I will seek to add to my position of Anaplan.
This giant of chipmaker will not be this cheap much longer
Anders Bylund (Intel): Semiconductor giant Intel has a rough time in 2020. On top of the COVID-19 pandemic, the company is struggling to work through the next-generation production process. Critics see this situation as a prime opportunity for arch-rivals Advanced micro-devices (NASDAQ: AMD) to set Intel market share across the server, desktop and notebook markets. Intel’s share has fallen by 22% in the last three months, while AMD’s shares have risen by 64%, and the S&P 500 market barometer has risen by 13%.
This is not the end of Intel’s deep road. The company is working to create the delayed 7-nanometer manufacturing process with a new transistor technology that promises to boost the performance of the existing 10-nm platform by as much as 20%. Intel is exploring emerging markets, such as virtualized 5G radio systems and self-driving automotive systems. In addition, Intel’s board of directors placed a tremendous vote of confidence in the current strategy when they restarted the break-even share program with a $ 10 billion authorization. Intel believes that its own stock is now a huge investment, and I agree with that.
It is not often that you buy a market-leading industry legend with temporary problems, but a clear path back to future growth, with the minus rating of 9 times subsequent revenue. But that’s exactly what you get today in Intel shares.
A cheap stock that comes back from a past scandal
Billy Duberstein (Super Micro Computer): With so many FAANG and software stocks recently going gangbusters, I’m going a little more obscure into the hardware world with Super Micro Computer as my top buy for September.
Super Micro Computer is a $ 1.3 billion market capitalization company that manufactures server and storage systems for a diverse customer base worldwide. Of course, this is not a very fast-growing company, but the offerings of Super Micro should be in demand in the coming years, as companies need advanced, custom servers for cloud, artificial intelligence, and 5G / edge solutions.
Supporting the resilience of Super Micro Computer is its broad customer base and history of profitability. The company had more than 850 different direct customers in 2019, with even more addressed through indirect resellers. In addition, the company has been profitable every year since its inception in 1993. The company also has a focus on “green” energy-saving solutions, which helps customers save money on an overall cost-of-ownership basis.
What’s interesting about Super Micro in September is that, although the stock has recovered strongly from March sales, it also returned to its recent earnings report and is currently around 20% below recent highs. Supervision of Super Micro Computer in September was somewhat soft, and the company also incurred some additional one-time costs for reorganizing the previous accounting scandal of 2017, which some investors may have soured.
On the positive side, however, those past accounting problems are now firmly behind the company. As for the soft guidance, it seems to be more of a break after very strong buying in the first few quarters of 2020, as customers worry about supply disruptions.
In addition, Super Micro announced a $ 30 million share repurchase program that it did not have before. Super Micro Computer has about $ 200 million in net cash on its balance sheet and is profitable, so it definitely has the capacity to buy back shares. Moreover, the stock seems terribly cheap at the moment; it trades about 16 times back into 12-month earnings, but these earnings also include a bunch of one-time charges to remedy the accounting problems of the past. Based on adjusted (non-GAAP) net income of $ 2.95 over the past 12 months, Super Micro only trades at approximately 8.8 times adjusted earnings. If you deposit the excess cash, the stock is even cheaper from a business value perspective.
The big tech trends of the coming decades will require many server and storage solutions. If you combine the appreciation of Super Micro’s bargain basement with these tailwinds, the stock looks incredibly attractive as we move to September, especially compared to the rest of the technology sector.
