We recently published a list of 10 Best Tech Stocks to Invest In On the Dip. In this article, we are going to take a look at where indie Semiconductor, Inc. (NASDAQ:INDI) stands against other best tech stocks to invest in on the dip.
How’s The Tech Sector Performing in Q3 2024?
Dan Romanoff, a senior equity research analyst at Morningstar provided insights into the current state of the technology sector, on October 1st, 2024. His analysis highlights significant challenges and opportunities for the industry. Romanoff mentioned that after a robust start to 2024, the tech sector experienced a slump in the third quarter. Despite this downturn, software and services companies have continued to report solid quarterly results, even as their stock prices have remained relatively flat. Semiconductor firms, while showing potential for recovery, are currently dragging down overall sector performance.
While discussing the sector-wise ranking of the US stock market based on the Q3 earning season, Romanoff pointed out that the technology sector has been the second-best-performing sector over the past year but ranks as the second-worst performer in the most recent quarter. Romanoff emphasizes that despite these fluctuations, there are positive long-term trends that could benefit the industry. He expressed confidence in several long-term growth drivers within technology, including cloud computing, artificial intelligence, and the expansion of semiconductor demand. He mentioned that these factors are expected to sustain growth in the sector even amidst short-term challenges.
Moreover, according to Romanoff, the Morningstar US Technology Index has risen by 32% over the past twelve months, outperforming the broader US equity market’s 24% gain. He notes that while the median US technology stock is fairly valued with a modest margin of safety, the sector trades at a slight premium on a market-weighted basis. He identifies semiconductors and hardware as being overvalued compared to software, which appears more attractive at present.
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Romanoff also pointed out that generative AI is a significant force within technology. Companies are increasingly integrating next-generation AI capabilities into their products and services. This trend is particularly evident among cloud providers and semiconductor manufacturers. Despite some recent stock pullbacks for Nvidia, Romanoff believes there are still substantial investment opportunities in generative AI beyond just major players. He mentioned that he sees 34% growth in Gen AI Networking equipment spending through 2028. Romanoff also pointed out that the usage of chips and networking gear has grown together from 2022 to 2024 and he expects the trend to continue till 2028.
Our Methodology
To curate the list of the 10 best tech stocks to invest in on the dip, we used the Finviz stock screener and CNN. Using the screener we shortlisted technology stocks that were down at least 25% on a year-t0-date basis, but analysts see a more than 25% upside. Once we had an aggregated list of the tech stocks fitting our criteria, next we cross-checked their analyst upside potential from CNN. Lastly, we ranked these stocks in the ascending order of the analyst upside potential. Please note that the data was collected on November 25, 2024.
Why do we care about what hedge funds do? 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).
A semiconductor chip with intricate circuitry, highlighting the company’s tech capabilities.
indie Semiconductor, Inc. (NASDAQ:INDI)
Share Price: $5.38
Year-To-Date Performance: -29.09%
Analyst Upside Potential: 48.70%
indie Semiconductor, Inc. (NASDAQ:INDI) specializes in creating automotive semiconductors and software solutions that enhance vehicle technology. It focuses on key high-growth areas including Advanced Driver Assistance Systems (ADAS), driver automation, in-cabin user experience, and electrification.
During the third quarter results for fiscal 2024, indie Semiconductor, Inc. (NASDAQ:INDI) announced securing design wins with major automotive manufacturers such as Porsche, General Motors, and several Chinese OEMs like BYD and Xiaomi. Management noted that China’s demand for integrated circuits (ICs) remains strong, particularly in the electric vehicle sector, indicating a healthy market presence.
The company also expanded its strategic backlog to $7.1 billion, up from $6.3 billion last year, driven primarily by momentum in Advanced Driver Assistance Systems (ADAS). ADAS programs now account for over 72% of this backlog, highlighting the company’s strong position in this critical market segment. Overall, the revenue for the quarter came in at $54 million up 3.1% subsequentially and surpassing management’s guideline.
As more and more automotive companies are testing and launching assisted driving technologies and autonomous vehicles, the demand for indie Semiconductor, Inc. (NASDAQ:INDI) technologies remains robust. Although, the stock has been down 29% on a year-to-date basis, analysts’ 12-month median price target points towards 49% upside from current levels. Management is also optimistic about the company’s future and is expecting fourth-quarter revenue to increase by more than 7% sequentially, projecting a midpoint revenue of $58 million. It is one of the best tech stocks to invest in on the dip.
Baron Opportunity Fund stated the following regarding Indie Semiconductor, Inc. (NASDAQ:INDI) in its Q3 2024 investor letter:
“Indie Semiconductor, Inc. (NASDAQ:INDI) is a fabless designer, developer, and marketer of automotive semiconductors for advanced driver assistance systems (ADAS) and connected car, user experience, and electrification applications. Indie’s stock fell during the quarter as it guided 2024 revenue growth below Street expectations, as auto production is expected to be incrementally worse, and excess inventory in the automotive supply chains of its customers has delayed indie’s new chips from ramping into high-volume programs. Despite these near-term headwinds, indie is outperforming peers who are seeing significant year-over-year sales declines. It has not suffered a program cancellation for any intact car programs, and it continues to win new sockets in future car platforms, positioning the company for strong growth over the medium and long term, supported by its $6.3 billion design win backlog, of which $4.6 billion is in ADAS applications. Indie has several large-volume programs set to ramp beginning in early 2025, including a marquee radar-related win, the biggest program in the company’s history, which we believe will drive a return to outsized growth in 2025 (indie doubled revenue each year from 2021 through 2023). We believe indie can continue to significantly outpace the broader industry and will approach $1 billion in revenue by the end of this decade, all supported by its contracted visibility, and its stock will re-rate as rapid growth returns.”
Overall, INDI ranks 9th on our list of best tech stocks to invest in on the dip. While we acknowledge the potential of INDI to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than INDI 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.