Americans only have a median savings of $8,000 across all of their checking, money market, savings, call accounts, and prepaid debit cards, according to the Federal Reserve's latest numbers. That amount only covers cash and doesn't include any stocks, which are still only held by 62% of all American adults, according to a Gallup survey.
If you're one of those Americans who only has $8,000 in the bank but don't own any stocks, you might consider entering the market today to maximize your long-term gains. After all, the S&P 500 has delivered average annual total returns of more than 10% since its inception in 1957, and it could maintain that momentum for the foreseeable future.
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But with the market now hovering near its all-time highs, investors might be reluctant to buy new stocks as many have high valuations. So today, I'll highlight three oft-overlooked tech stocks that still aren't too expensive relative to their long-term growth potential: DigitalOcean (DOCN 0.24%), Oracle (ORCL 1.55%), and Dell Technologies (DELL -1.01%).
1. DigitalOcean
DigitalOcean is a cloud infrastructure company that serves up cheaper "droplets" of servers for small businesses and independent developers. That unique strategy helped it carve out a niche in a market that was dominated by enterprise-oriented cloud giants like Amazon and Microsoft.
From 2018 to 2023, DigitalOcean's revenue grew at a compound annual growth rate (CAGR) of 28%. It also turned profitable in 2023. From 2023 to 2026, analysts expect its revenue and EPS to rise at a CAGR of 13% and 85%, respectively.
As DigitalOcean continued growing in the shadow of its larger cloud competitors, and it increased its exposure to the booming AI market by acquiring the start-up Paperspace in 2023 and adding its GPU-powered servers to its platform. It could have plenty of room to run as its niche market expands, but its stock still looks reasonably valued at 40 times forward earnings.
2. Oracle
Oracle is one of the world's largest database software companies. Over the past decade, it expanded its cloud-based infrastructure and software services to pivot away from its on-site applications. It also acquired a lot of companies -- including the cloud giant NetSuite and the healthcare IT leader Cerner -- to accelerate that evolution. From fiscal 2019 to fiscal 2024 (which ended in May 2024), Oracle's revenue and EPS grew at a CAGR of 6% and 5%, respectively.
But from fiscal 2024 to fiscal 2027, analysts expect its revenue and EPS to rise at a CAGR of 12% and 21%, respectively. That acceleration will likely be driven by the generative AI market, which is driving more companies to run their AI workloads on its Gen 2 cloud infrastructure platform. Its stock isn't too expensive at 29 times forward earnings, and it's committed to returning a lot of its free cash flows to its investors through dividends and buybacks. Its forward dividend yield of 0.8% isn't too impressive, but it's bought back more than a third of its shares over the past decade.
3. Dell
Dell was taken private back in 2013 after it "di-worsified" its business with too many messy acquisitions, but it returned to the public market as a more streamlined company in 2018. Today, it's still one of the world's largest producers of PCs and servers.
From fiscal 2019 to fiscal 2024 (which ended in February 2024), Dell's annual revenue actually declined. That drop was caused by its spin-off of Vmware in 2021 and a sluggish PC market. But from fiscal 2024 to fiscal 2027, analysts expect its revenue and EPS to rise at a CAGR of 8% and 24%, respectively, as the PC market stabilizes and its AI server business expands.
In its latest quarterly report, Dell COO Jeff Clarke called AI a "robust opportunity" for the company with "no signs of slowing down." So while Dell might be growing as rapidly as Nvidia or other more popular AI companies, it still looks like a dirt cheap play on that market at 12 times forward earnings. It also pays a forward yield of 1.3%.
