IBM is about as hated by tech investors as a company can get. That also sets it up as a contrarian’s dream for lurking upside. IBM is acquiring Red Hat to become a hypercloud leader. With efforts such as Watson, artificial intelligence and other critical initiatives, it hopes to replace its declining revenues from the old-school IT services the company has been known for decades as the leader. Just don’t look for any real growth for the time being, and the company is constantly pointed out as needing a new CEO (like about three or four years ago). This stock has tanked since its peak above $200 back in early 2013, and it has been so bad that even Warren Buffett
Western Digital Corp. (NASDAQ: WDC) was trading around $36. It has a market cap of $10.6 billion and a 52-week range of $33.83 to $36.80. The consensus target price is $53.91, and the stock is valued at 9.58 times expected earnings. It has a price to free cash flow ratio of 14.78
Western Digital may be perceived as in the same boat as Seagate in storage and hard drives. It dates back to 1970, but the company leveraged up and acquired SanDisk for flash memory, and it comes with a 5.5% dividend yield that some investors may worry about, particularly as earnings are expected to decline. That said, the company has had many swings up and down, and its stock is down so far from its highs that value investors just might not be able to avoid the stock, even if they might be stepping into what could be a value trap.
Intel Corp. (NASDAQ: INTC) was last seen trading near $46, in a 52-week range of $42.36 to $59.59. It has a market cap of $209.2 billion and a consensus target price of $52.72. The stock is valued at 10.26 times expected earnings and 29.90 times free cash flow.
Intel is the king of processors for PCs, and even with the world’s continuing change the company has managed to stay relevant. Growth comes from servers and the Internet of Things, and that traditional processor business is a cash cow for Intel. With decades of leadership, Intel hardly needs much background and introduction data, now that revenue is running around $70 billion. Still, growth has petered out, even after having made acquisitions in recent years, and the Dow Jones industrial average component comes with a 2.7% dividend yield. It is one of the most shorted Dow stocks as well.
Broadcom Inc. (NASDAQ: AVGO) was trading above $278 but fell 8% to under $260 after earnings and guidance. It had a consensus target price of $316.61, but that target will be coming down. The 52-week range is $197.46 to $323.20, and the market cap is $110.4 billion. The stock is valued at 10.62 times expected earnings and 19.97 times free cash flow. Does a poor earnings report hurt for new value investors looking for bargains? No, not if they are looking at a long ball that will eventually get the China trade and overall semiconductor weakness out of the system.
Broadcom is now the blended company of Avago and the former Broadcom, and the company recently changed its model by acquiring CA Technologies for around $19 billion. The deal greatly changes the company, but it did just get a “working order” from Apple that the company actually was allowed to mention. With a relocation to the United States, it now also pays close to a 3.8% dividend yield. Analysts are still targeting revenue and earnings growth in the years ahead.