5 Tech Stocks Showing Tremendous Value To Buy Now

by: Richard Saintvilus

I have always found it to be a tremendous challenge to talk about value when it comes to the technology sector. It goes without saying that "value", by its definition should be applied in any market. However, when it comes to technology, investors tend to be more pre-occupied with growth as opposed to valuation. For these stocks, this can be both good and bad. While they may climb based on expectations and projected growth, justification will be required should these numbers disappoint. It then all comes full circle to the underlying "fair value" of the equity.

This is where I am today with a few stocks in my portfolio. Some of which I will admit have grown somewhat overvalued but I'm not ready to liquidate just set. There are also others that I feel are extremely undervalued (relative to their peers) and I'm hoping that the market eventually realizes the same. But nevertheless, regardless of your model of valuation, growth is an enviable quality in any sector. And these stocks have the potential for providing growth while also offering justification for their valuation.

Oracle (ORCL)

Oracle is one of those companies that fit into that category. It presents tremendous value while also offering the potential for growth. In its latest quarter, the company reported a profit of 54 cents per share while analysts were projecting profits of 57 cents. The bright side of the report was that new software sales rose slightly - 2% year-over-year to $2 billion. Management also added that it expects hard revenue declines of 5% and 15% while also projecting new software sales growth of flat to 10% - another disappointment as analysts were forecasting growth of 7%. I am willing to concede that was not one of its best reports. As a longtime shareholder, I have seen better and the company understands this. But it was also far from horrible.

Oracle realizes that it cannot rest on its laurels because the competition for its current business as well as those heading for the cloud is growing fierce - particularly from IBM and Microsoft. But managing the competition is nothing new for the company. Yet, it would seem that the market would have understood this and not have overreacted to its recent report. But nevertheless, the stock has since then rebounded from its recent lows and now sits comfortably at $30. With a P/E of 16, I can no longer say that the stock is still cheap, but I am not ready to say that it should not be acquired either considering how expansive the cloud market is projected to be.

Intel (INTC)

As much as Wall Street seems to be discounting Intel, it is hard for me to do the same. With a P/E of 11 and trading at $26 per share, the stock is relatively cheap and value investors should seize an opportunity at current levels. Although several threats remain, it is clear that the company is not yet ready to give up its reign as the top chip on the market. For this reason, I have set a $35 price target and feel that the company should be able to attain that mark by the end of this year.

The truth is, even as sexier chip names like Qualcomm (NASDAQ:QCOM) and Texas Instruments (NYSE:TXN) move to the forefront of the mobile race, Intel is still dominant. But it is clear that the company is not yet ready to make it a foregone conclusion that the race is over. As with anything worth pursuing, for investors, patience is going to be required here before the company can show significant strides in its attempt to secure market share in the mobile market. But Intel has ample resources to devote to this market and establish its own standing and prove that it can be relevant. It also helps that the company pays a handsome dividend for those willing to wait to be proven right.

Cisco (CSCO)

It is a good time to be a Cisco investor. As disappointing as the past couple of years have been, there are certainly plenty of reasons to suspect that the worst is behind the company and it deserves a tremendous amount of credit for what it has been able to accomplish in a relatively short period of time. There are still challenges that lie ahead, but I now have several reasons to expect a continued rise not only in the company's execution but also in its share price.

In its latest quarter, which ended January 28, Cisco reported net income that climbed 44% and arrived at $2.2 billion, or 40 cents per share. This compares with earnings of $1.5 billion, or 27 cents per share year-over-year. If you factor out that the costs associated with stock-based compensation as well as some acquisition-related amortization, the company actually earned 47 cents per share - 4 cents per share above analysts' expectations based on polls by FactSet. Revenue was $11.5 billion, up 11% from $10.4 billion a year ago and compares favorably to the $11.2 that was projected. Its results clearly demonstrate the company is keen in improving its margins as the metric improved a full point from the previous year while also exceeding analyst estimates.

If Cisco can wisely reinvest its capital to create more innovative ways to compete, I feel investors, patient or not, will be rewarded handsomely. Because at its current valuation, I see an opportunity for those who are looking for value and are willing to be patient to realize some significant gains. As the future of "the cloud" continues to emerge, companies will develop a need for their networks to sustain high speed data, multimedia, various e-commerce as well as its telepresence conferencing products. I remain optimistic that there is no company better positioned to service these needs than Cisco. And based on the metrics above, Cisco should be trading at $30 by the end of the year.

Microsoft (MSFT)

Software giant Microsoft wants to party like it's 1999 - or just before the tech bubble burst. The company's stock price has surged since the start of the year and there are no signs of slowing down. It seems as if that the company is starting to matter once again in the tech space. Currently the stock is trading at $32 while sitting at its 52-week high - which included a climbed of 30 percent so far on the year. And yet, it still looks incredibly cheap as it sports a relatively low P/E of 11. I can't help but interpret this low P/E as a sign of gross disrespect by Wall Street.

The company has plenty of positives to inspire an entry at current levels - not the least of which has to do with its raved reviews for the anticipated release of its Windows8 OS. Growth has always been my primary investment motivation and something that Microsoft has failed to produce over the past several years. But regardless of how one feels about the company and its prospect of competing with Apple and Google, the fact remains that Microsoft still has a business with very good returns on capital and excellent cash flow. And it also helps that it pays an excellent dividend.

The company faces a daunting task of trying to battle how it is perceived by analysts as well as its own investors. But I think the best way to assess Microsoft and its value is on its own performance rather than on what the competition is doing. And for the most part, the competition specifically from Apple is the source of Microsoft's less than favorable appeal by the investment community. However, it's now time to give credit to the company where credit is due. And as the company's share price continues its ascent, I want to argue that investors should try to catch its rise before it gets too high.

Hewlett-Packard (HPQ)

One of the challenges for Hewlett Packard continues to be with how it is perceived - particularly regarding its PC division. Why can't it restore its relevance in that regard? There is no question that there is still a market for PCs - this is even though the tablet and smart phone crave have just started to take off. But it is hard to fathom that the enterprise will begin to substitute workstations for tablets. During Microsoft's recent earnings announcement the market realized that is clearly not the case. It is clear that people will buy any platform that offers something different - this is regardless if that "difference" is practical.

Hewlett Packard is by no means a market darling, but it does continue to show that it can compete effectively with names such as EMC (EMC) as well as Cisco - names that are considered dominant within their core markets. For HP, printing and imaging also continue to show positive signs as it continues to dominate Lexmark (NYSE:LXK). However, since its earnings announcement, the stock has been on a moderate decline as it seems that some investors have opted for greener pastures while HP continues to work to get its house in order. It's hard to argue with such a move. The numbers were not great and there are likely better investment plays out there. But it is also hard to ignore the value that HP has now become while trading at $25 with a P/E of 8.

Disclosure: I am long CSCO, ORCL, MSFT, INTC, HPQ.