3 Top Tech Stocks to Buy in April

Many tech stocks have fallen recently as a better-than-expected March inflation report dampened hopes for aggressive rate cuts throughout the year. The escalating conflict in the Middle East and other geopolitical challenges are also likely making many tech investors wonder if it's time to “sell in May and get out.”

While that may be a smart strategy, there are still plenty of promising tech and tech-related stocks that are worth buying rather than selling in April.Three of them are: AT&T (T 0.00%), taiwan semiconductor manufacturing (TSM -1.88%)and palo alto networks (PANW 0.53%).

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1.AT&T

Back in 2021 and 2022, AT&T abandoned its ill-advised dreams of becoming a media giant and spun off DirecTV, Time Warner, and many of its smaller media assets. Through these sales, AT&T streamlined its core business, raised more cash to reduce debt, and freed up more resources to expand its faster-growing 5G and fiber segments.

A slimmed-down AT&T added 2.9 million postpaid wireless subscribers in 2022 and another 1.7 million postpaid subscribers in 2023. The optical fiber sector also recorded a net increase of more than 1.2 million people in 2022, and more than 1.1 million people in 2023. Strong growth in these two sectors offset this. Continued decline in the business wireline sector.

AT&T's 2023 sales rose only 1%, but free cash flow (FCF) rose 19% to $16.8 billion, easily covering the $8.1 billion in dividends. Therefore, the high forward yield of 6.9% should remain safe, and the downside should be limited.

AT&T's adjusted EPS fell 6% for the year, and analysts expect it to decline another 8% in 2024 as it ramps up infrastructure spending, but at a forward P/E ratio of 7x, the stock is very cheap. It looks like. The stock likely won't skyrocket anytime soon, but it could be a safe place for income investors to park their cash as interest rates peak.

2.TSMC

TSMC is the world's largest and most advanced contract chip manufacturer.Like fabless chip manufacturers Nvidia, AMDand apple Every company relies on TSMC to make the smallest, most dense chips.

In 2023, TSMC's revenue decreased by 4.5% in Taiwan dollar (TWD) terms (9% in USD terms), gross profit margin contracted, and EPS decreased by 17.5%. This slowdown was caused by the end of the 5G upgrade cycle for smartphones, weak demand for new PCs in the post-pandemic market, and macro headwinds for the data center sector.

However, analysts expect TSMC's sales and EPS to increase by 24% and 20%, respectively, in NT dollars in 2024. This growth is likely to be driven by the expansion of the AI ​​market, stabilization of the smartphone and PC markets, and mass production of the latest 3-nanometer chips. The company's stock is reasonably valued at 20 times forward earnings, and it pays a respectable forward dividend yield of 1.8%.

TSMC still faces competition from: intelis trying to catch up in the race to produce smaller, denser chips, raising concerns about a potential conflict between China and Taiwan. However, I believe TSMC can stay ahead of Intel in this race, and I think concerns about a possible Chinese invasion are overblown.

3. Palo Alto Networks

Palo Alto Networks is one of the world's largest cybersecurity companies. The company operates three ecosystems. Strata, a next-generation firewall and onsite network security tool; Prisma, a cloud-based service; and Cortex, an AI-powered threat detection tool. Prisma and Cortex, which the company collectively refers to as its next-generation security (NGS) services, are driving much of the company's growth.

Palo Alto's sales grew 25% in fiscal 2023 (ending last July), but it expects growth in fiscal 2024 to be only 15% to 16%. The company blames the slowdown on macro headwinds that have made it difficult to acquire new customers. We consolidate many of our customers into a single unified platform (through free trials and deferred revenue deals) to reduce dependence on smaller cybersecurity companies. Analysts still expect adjusted earnings to rise 24% for the full year.

Palo Alto's sales slowdown disappointed many investors, but the company's growth should accelerate again as the macro environment warms, the company completes its integration strategy, and squeezes more revenue out of existing customers.

Palo Alto stock may seem a little expensive at a forward P/E of 44 times, but it's still cheaper than comparable cybersecurity companies, including: cloud strike and Z scaler, are trading at 76x and 53x forward P/E, respectively. Therefore, this undervalued market leader may still play a good role in the cybersecurity field in the long term.