There are plenty of affordable stocks on the market nowadays. Market makers latched on to skyrocketing inflation rates and other macroeconomic challenges, which made them back away from certain types of stock at top speed. Anything that looked even a little bit risky was often deemed unfit for investment, sending share prices to the bottom of Wall Street's bargain bin.
It's true that some of the deeply discounted stocks probably deserved a price correction. In other cases, nervous investors threw out top-quality businesses with the proverbial bathwater.
Let's look at a couple of tech stocks in the latter category, whose stock prices are incredibly low while their long-term business prospects still look stellar. They are cheap in distinctly different ways, but we're looking at two clear combinations of low-priced stocks and tremendous long-term business prospects. That adds up to a pair of no-brainer buys.
Roku
Media-streaming technology specialist Roku (ROKU 5.41%) is growing by leaps and bounds. The company grew its number of active user accounts by 16% over the last year while also generating 10% higher revenues per user over the same period.
Yet, investors have found reasons to back down from this exciting long-term growth story. Top-line growth has been relatively modest this year as consumers are buying fewer smart TV sets and media-streaming devices, and management's guidance suggested a weak holiday season. Specifically, digital ad sales are disappointingly soft amid the inflation-based slowdown in consumer spending.
As a result, the stock has fallen 89% from the highs of 2021. Roku shares currently trade at prices not seen since December 2018. It's as if the last four years never happened, and Roku has run out of business growth options. This is the end of the line, folks -- high time to sell every Roku share and never look back!
Yeah, right. We are actually looking at an incredible buying window here.
Roku's business has indeed evolved in recent years. Let's assume that Roku meets its revenue guidance of $800 million in the fourth quarter (though the company has a long history of setting the guidance bar low and exceeding it by a country mile). Full-year sales would then hit $3.06 billion, up from $2.76 billion last year and $743 million in 2018 -- the last time Roku shares traded this low.
Meanwhile, Roku's user count has nearly tripled in four years, and this growth was essentially based on smart TVs in North America. The company has only just begun to explore international expansion on a global scale, and its product portfolio is also developing into adjacent market opportunities.
The untapped growth potential in front of Roku is gigantic. The slowdown in 2022 will inevitably turn into a full-throated recovery when the inflation issue subsides. If you're not buying Roku stock at these thrifty share prices, you'll leave a lot of money on the table when the rebound comes.
Intel
Semiconductor giant Intel (INTC -0.38%) finds itself in a strange situation.
Archrival Advanced Micro Devices (AMD 2.44%) has been taking market share from Intel in important target markets such as data center processors and consumer-grade PC chips in recent years. The smaller chip designer's market value has been essentially equal to Intel's all year long. To a casual observer, it looks like AMD has outgrown its role as Intel's eternal challenger.
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But that's an illusion.
In reality, AMD remains the underdog and will stay in that position for years to come. AMD's growing slice of the data center sector, for example, still stands at a modest 17.5% of the annual revenue opportunity, far behind Intel's $4.2 billion data center revenues and 46% market share. Overall, Intel's top-line sales are triple the size of AMD's.
The balance of power tilts even further in Intel's direction when you consider each company's financial platform. Intel's balance sheet holds $22.6 billion of cash reserves, $5.8 billion in long-term investments, and $75.8 billion of net property, plant, and equipment (PP&E) infrastructure. AMD's cash equivalents add up to just $5.6 billion, with no long-term investments to speak of and a net PP&E balance of $2 billion.
And Intel is putting its unmatched financial assets to work.
AMD spun off its in-house manufacturing operations to private capital firms from Abu Dhabi in 2009, creating what is now known as GlobalFoundries. AMD relies exclusively on third-party manufacturing partners like GlobalFoundries. Meanwhile, Chipzilla invested $7.3 billion in capital expenses in the third quarter alone, building and upgrading its chipmaking facilities in places like Ohio, Arizona, and Germany. The company now sells semiconductor manufacturing services to other companies, aiming to become one of the world's largest chip foundries by the end of this decade.
Don't forget that Intel is running under relatively new management, and that the current team must unwind the mistakes made by the cost-cutting policies of the previous team. That takes time in an industry where new products go through a multiyear development pipeline before reaching store shelves. So Intel is a turnaround story in progress, but I believe in the innovation-oriented leadership under CEO Pat Gelsinger.
Intel's stock is down by 41% in 2022 and trades at the laughably low valuation of 9.2 times trailing earnings. The effective dividend yield has soared to 5%, which makes Intel a great income investment as well. What's not to love?
