We recently compiled a list of the 7 Cheap Technology Stocks To Buy Right Now. In this article, we are going to take a look at where Nextracker Inc. (NASDAQ:NXT) stands against the other cheap technology stocks.
Are Tech Stocks an Opportunity?
Before the Fed announced its September cut, analysts everywhere had clashing opinions with some supporting the 25 basis-point rate cut, and others supporting a massive 50. Even after the decision was announced, all of these analysts maintained their previous positions and continued supporting or opposing the 50 basis-point rate cut. A general advice to investors has been to remain calm and look for opportunities in stocks that could benefit from a lower interest rate environment.
Following the new interest rate announcement, Fed Chair Jerome Powell addressed reporters, affirming the Fed’s commitment to timely monetary policy adjustments. He clarified that the decision to cut rates was based on economic data and emphasized patience in navigating the current economic landscape characterized by high inflation and low unemployment. We covered this earlier in our 10 Worst Artificial Intelligence (AI) Stocks To Buy According to Financial Media article, here’s an excerpt from it:
“In response to a question about whether the rate cut was influenced by recent employment data or the high nominal level of the federal funds rate, he clarified that their policy position was established in July 2023, a period characterized by high inflation and low unemployment. He highlighted their patience in reducing the policy rate, noting that other central banks had already implemented multiple cuts while the Fed had refrained from such actions until now. This patience has reportedly paid off, as there is now greater confidence that inflation is trending sustainably toward the 2% target.
Powell indicated that the recent rate cut should not be interpreted as a new pace for future adjustments but rather as part of a recalibration of policy toward a more neutral level. He referred to the Summary of Economic Projections (S.E.P.) as a guide for understanding potential future cuts, emphasizing that economic developments could lead to adjustments in either direction.”
On September 23, RaeAnn Mitrione, Investment Management Partner at Callan Family Office, appeared in an interview on CNBC and highlighted significant market developments following the Fed’s unexpectedly larger-than-anticipated rate cut last week. This reduction has led to a notable outperformance of the tech sector compared to cyclical and industrial stocks, suggesting a positive market sentiment. Mitrione emphasized that the market is reacting favorably to lower interest rates, particularly benefiting the tech sector. She noted that this trend of broadening out in the market was evident even before the rate cut, with small-cap stocks performing well alongside cyclical sectors. The ongoing theme of AI is expected to continue driving growth within tech for the foreseeable future.
Pointing at a chart, Mitrione remarked that it is unusual to see rate cuts while markets are at record highs, raising questions about potential volatility ahead. Historically, even when rate cuts occur near market peaks, stocks often continue to rise. Much of this positive sentiment has been priced in due to prior indications of the rate cut. She explained that the economy remains strong, and the rate cut serves as a preventive measure rather than a reaction to economic weakness. This supportive environment could enhance consumer confidence and spending, further improving market performance.
As the Personal Consumption Expenditures (PCE) report is coming up on Friday, Mitrione discussed its significance as it informs the Fed’s inflation assessments. While there is a general understanding of the Fed’s direction based on recent economic projections, the focus has shifted more toward employment data. She anticipates that barring any unexpected figures from the PCE report, markets should continue their upward trajectory as rate cuts are likely to persist.
She also shared insights from her research since July 10th, focusing on small-cap stocks, value versus growth dynamics, and their implications for future performance. She observed that expectations regarding these sectors have largely been factored into current prices. Notably, since July 10th, there has been a 10% divergence between growth and value indexes; while growth has slightly declined, value stocks have risen by nearly 8%, with small caps seeing a 10% increase. With interest rates decreasing, small-cap companies are positioned to benefit significantly due to their higher levels of debt and greater exposure to floating rates compared to large-cap firms.
Overall, her analysis underscores a cautiously optimistic outlook for the markets as they navigate through these developments, particularly with tech stocks continuing to lead in performance amidst changing economic conditions. In that context, we’re bringing you a list of the 7 cheap technology stocks to buy right now.
Methodology
We used the Finviz stock screener to compile a list of 20 tech stocks with a forward P/E ratio under 20. We then selected the 7 cheapest stocks that were the most popular among elite hedge funds, and that analysts were bullish on. The stocks are ranked in ascending order of their average upside potential.
Note: The data is sourced as of September 20, 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An empty shelf of bifacial PV modules ready to be installed in a large-scale solar project.
Nextracker Inc. (NASDAQ:NXT)
Forward Price-to-Earnings Ratio: 12.42
Average Upside Potential: 69.12%
Number of Hedge Fund Holders: 39
Nextracker Inc. (NASDAQ:NXT) is a global leader in solar tracker technology, designing, manufacturing, and selling solar trackers that optimize the performance of solar panels by following the sun’s path throughout the day. Its trackers help solar power plants increase energy production and reduce costs.
Earlier this year, the company was selected to provide its NX Horizon-XTR tracker systems for the 1.17 GW Al Kahfah solar power project in Saudi Arabia. These tracker systems are designed to optimize energy output by following the sun’s movement to maximize energy production.
It will also support the project with local partners in Saudi Arabia by providing raw materials and manufacturing support for the trackers. This order brings the company’s total capacity of smart solar trackers in the Middle East, India, and Africa region to over 10 GW.
In the first fiscal quarter of 2025, Nextracker Inc. (NASDAQ:NXT) grew its revenue by 50.13% year-over-year. For the 6th consecutive quarter, it achieved double-digit year-over-year revenue growth. Demand was strong in both the US and international markets. The backlog increased sequentially to ~$4 billion. The company also introduced new products like agri PV solutions and NX low carbon tracker.
In FQ1 2025, management announced accepting orders for solar tracker solutions with 100% US domestic content, with production expected to begin in early calendar year 2025. The company acquired Ojjo and Solar Pile International. By combining tracker systems and foundations, it can offer a comprehensive solution for various soil conditions in utility-scale projects worldwide.
The company is a market leader with products that enhance utility-scale solar projects and give it a competitive edge. Nextracker Inc. (NASDAQ:NXT) is therefore well-positioned for success.
Overall NXT ranks 1st on our list of the cheap technology stocks to buy right now. While we acknowledge the potential of NXT as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NXT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.