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Investors are in the throes of an unbridled love affair with technology stocks, primarily fueled by the relentless exuberance surrounding artificial intelligence (AI) and its limitless potential. However, rather than zealously chasing after overbought stocks, the time may have come to explore some underappreciated and overlooked tech stocks. This pursuit might necessitate venturing beyond the realm of artificial intelligence.
One common technical barometer that traders often employ to identify oversold stocks is the relative strength indicator (RSI). While this momentum indicator generates short-term buy and sell signals, fundamental metrics also play a pivotal role in determining if a stock is undervalued or oversold. Here, we present three underappreciated tech stocks that not only offer immediate short-term gains but also possess a strong long-term investment thesis.
Apple’s Road to Redemption (AAPL)
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Apple (NASDAQ:AAPL) has endured a 5% decline in 2024, despite delivering a stellar double beat in its first-quarter earnings report. The lackluster market response could be attributed to investors’ lukewarm reception of Apple’s initial foray into AI with its Vision Pro headset. Lingering apprehensions concerning the company’s iPhone sales trajectory have only exacerbated the situation.
Granted, at 27.7x forward earnings, Apple does not exude bargain-bin appeal. However, as of the market close on Feb. 20, AAPL stock recorded an RSI of 35, signaling an impending move into technically oversold territory.
Yet, a prudent investor would do well to avert their eyes from the momentary downtrend and instead opt to zoom out. Over the last five years, Apple has yielded a staggering 326.16% return, dwarfing the S&P 500 index’s 79% growth over the same period. With its robust cash-generating prowess, Apple remains a formidable force with or without the iPhone, augmented by its upcoming AI-infused features. History bears testimony that the Vision Pro’s current iteration is likely its least impressive, with substantial room for improvement. Consequently, while AAPL stock may not be the most alluring trade presently, it promises to be an exceptional long-term investment.
Carrier Global’s Stealthy Ascent (CARR)
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Carrier Global (NYSE:CARR) finds itself treading the same downward path as the broader market, posting a 4.3% decline thus far this month. While the company did manage to eke out a marginal earnings beat, this achievement was offset by a slight revenue miss in its latest earnings report.
However, the real game-changer for CARR stock lies in the company’s streamlined business operations. Carrier finalized the divestiture of its commercial refrigeration business to Honeywell (NASDAQ:HON) in December 2023. This move marks the denouement of Carrier’s global access solutions security business. Furthermore, the company is poised to relinquish its industrial fire division. These strategic restructurings pave the way for the burgeoning prospects of Carrier’s high-margin residential heating and cooling segment.
Despite an RSI hovering around 42 and slipping below its 50-day simple moving average, Carrier’s projected 9% earnings growth presents a compelling case for investors to capitalize on the ongoing downturn.
Generac Holdings’ Resilient Trajectory (GNRC)
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Generac Holdings (NYSE:GNRC) weathered an oversold phase back in October 2023 and surged 40% from those lows. However, with its current RSI hovering around 41, the stock no longer exudes an oversold aura. Notwithstanding this, the erratic price action over the past few months betrays investor indecisiveness, with shares oscillating between $115 and $120 apiece.
Pragmatic investors should view this price volatility as an opportunity. The long-term investment thesis for GNRC stock remains robust, buttressed by the company’s projected 22% earnings growth and the “Moderate Buy” rating accorded by analysts, with 16 out of 29 analysts endorsing a “Strong Buy” rating.
A recent inclusion of Generac in a list of growth stocks to buy bolsters the case for this resilient company. While lower interest rates and an uptick in the housing market could certainly bolster its prospects, the indomitable demand for the company’s products during unforeseen natural calamities further bolsters its standing.
On the date of publication, Chris Markoch had a LONG position in AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Markoch, a freelance financial copywriter, has been covering the market for over five years and has been writing for InvestorPlace since 2019.
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