After a terrible market meltdown in March, U.S. stock indices have come roaring back and are making new all-time highs. With the economy overall still down in the dumps due to COVID-19, it's the digital economy that's largely responsible for the rally.
Given how quickly many stocks have recovered, some investors are now hitting the pause button. But whether you're just now jumping aboard the market recovery or looking to add to existing stocks, three of our Fool.com contributors think Anaplan (PLAN), Intel (INTC -0.30%), and Super Micro Computer (SMCI 2.59%) are top tech stocks to buy in the month of September.
Using data to optimize decision making
Nicholas Rossolillo (Anaplan): While many tech stocks have gotten a boost in recent months during the pandemic, not all have fared so well. Faced with a cash crunch, many organizations have had to decide which IT services are absolutely necessary and which can be purchased later. For Anaplan, some of the deals it was working on early in 2020 were reportedly getting categorized as the latter, and the cloud software outfit forecast a sharp slowdown in growth -- from 37% in the first quarter down to a forecasted 22% rate for the second quarter (the period ended July 31, 2020).
Actual results ended up being far better, with Q2 total revenue increasing 26%, including a 32% increase in subscription sales to $97.1 million. Adjusted operating losses also narrowed to negative 9% compared to nearly negative 20% a year ago, as the small firm continues to get more efficient as it adds more users. Full-year guidance was also put back into place, which calls for at least 22% growth after Anaplan's excellent debut year as a public company in 2019.
Though its trajectory has slowed compared to last year, Anaplan is still picking up new customers and adding new users at the companies already subscribed to its service. As the world tries to sort through the mess that is 2020, the ability to connect digital data with people across an organization -- especially given the remote work era we now live in -- is more important than ever. And as businesses move out of "damage control" mode, Anaplan's connected planning platform is again resonating. The stock began to rally back toward all-time highs last reached in early 2020 on the better-than-expected outlook.
I'll admit I gambled a little when I first purchased Anaplan a few months ago after it reported its sharp pandemic-fueled slowdown. My hunch was and remains this cloud-based software company will regain its mojo as businesses get increasingly comfortable operating in a digital-first world (and discover they need some help getting their dispersed teams of employees to work together in this new environment). And though Anaplan competes against industry heavyweights like Oracle (ORCL -1.62%), SAP (SAP -0.64%), and IBM (IBM -0.22%) in the enterprise resource-planning sandbox, the executive team has extensive experience in the industry. Share prices assume recent quarterly results will be repeated for some time and trade for 15 times expected one-year forward sales. But premium pricing is standard for high-growth and big-potential tech names like this. After assuaging fears in the second quarter, I'll be looking to add to my Anaplan position.
This chipmaking giant won't be this cheap much longer
Anders Bylund (Intel): Semiconductor giant Intel is having a rough time in 2020. On top of the COVID-19 pandemic, the company is struggling to make its next-generation manufacturing process work. Critics see this situation as a prime opportunity for arch rival Advanced Micro Devices (AMD 1.31%) to steal market share from Intel across the server, desktop, and notebook markets. Intel's stock has fallen 22% over the last three months, while AMD's shares rose by 64%, and the S&P 500 market barometer increased by 13%.
This is not the end of Intel's storied road. The company is working around the delayed 7-nanometer manufacturing process with a new transistor-making technology that promises to boost the performance of the existing 10-nm platform by as much as 20%. Intel is exploring brand new markets, such as virtualized 5G radio systems and self-driving car systems. And above all else, Intel's board of directors posted a huge vote of confidence in the current strategy when they restarted the paused stock-buyback program with a $10 billion authorization. Intel believes that its own stock is a great investment right now, and I agree.
It's not often you get to buy a market-leading industry legend with temporary trouble but a clear path back to future growth, at the minuscule valuation of 9 times trailing earnings. But that's exactly what you get in Intel shares today.
A cheap stock rebounding from a past scandal
Billy Duberstein (Super Micro Computer): With a lot of the FAANG and software stocks going gangbusters recently, I'm going to go 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 cap company that makes server and storage systems for a diverse customer base worldwide. Admittedly, this isn't a high-flying growth business, but Super Micro's offerings should be in demand for years to come as enterprises need advanced, customized servers for cloud, artificial intelligence, and 5G/edge solutions.
Underpinning Super Micro Computer's resilience is its wide customer base and history of profitability. The company had over 850 different direct customers in 2019, with even more addressed through indirect resellers. In addition, the company has been profitable every year since its founding in 1993. The company also has a focus on "green" energy-efficient storage solutions, which helps customers save money on a total-cost-of-ownership basis.
What's interesting about Super Micro in September is that while the stock has recovered strongly from the March sell-off, it also pulled back after its recent earnings report and is currently about 20% below recent highs. Super Micro Computer's September quarter guidance was a bit soft, and the company also took some extra one-time charges for the remediation of the prior accounting scandal from 2017, which may have soured some investors.
Yet on the positive side, those past accounting troubles are now firmly behind the company going forward. As to the soft guidance, it appears to be more of a pause after very strong buying in the first couple of quarters of 2020 as customers worried about supply disruptions.
What's more, Super Micro announced a $30 million share-repurchase program, which it didn't 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 awfully cheap at this moment; it trades at about 16 times trailing 12-month earnings, but those earnings also include a bunch of one-time charges to remediate the accounting troubles from the past. Based on adjusted (non-GAAP) net income of $2.95 over the past 12 months, Super Micro is only trading at about 8.8 times adjusted earnings. When you factor in its excess cash, the stock is even cheaper from an enterprise value perspective.
The big tech trends of the next decade will require lots of server and storage solutions. When you combine Super Micro's bargain-basement valuation with these tailwinds, the stock looks awfully attractive as we head into September, especially compared with the rest of the technology sector.