10 Tech Stocks Poised for Growth: Morningstar’s Undervalued Picks
Technology stocks continue to be a dynamic sector, offering investors significant growth potential through innovation and the development of new products and services. In the past year, the Morningstar US Technology Index has risen 30.16%, outperforming the broader Morningstar US Market Index, which gained 23.92%. While the tech sector appears slightly overvalued as a whole, at around 5% above fair value, Morningstar analysts have identified several companies that are currently undervalued and present compelling investment opportunities. Data is as of February 19, 2025.
The following companies, with either wide or narrow Morningstar Economic Moat Ratings, are considered the most undervalued based on Morningstar’s fair value estimates. The data provided is current as of February 19, 2025.
- Sensata Technologies (ST)
- NICE Ltd. (NICE)
- Sabre Corporation (SABR)
- Endava (DAVA)
- Taiwan Semiconductor Manufacturing Company (TSM)
- ON Semiconductor (ON)
- Adobe Inc. (ADBE)
- Fidelity National Information Services Inc. (FIS)
- Manhattan Associates (MANH)
- NXP Semiconductors NV (NXPI)
Below is a detailed look at each stock, including insights from Morningstar analysts.
Sensata Technologies
- Morningstar Price/Fair Value: 0.59
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Narrow
- Industry: Scientific & Technical Instruments
Sensata Technologies, trading 41% below its $51 fair value estimate, is a global supplier of sensors for transportation and industrial applications. Morningstar views Sensata as a differentiated supplier, positioned to benefit from trends toward electrification, efficiency, and connectivity, offering opportunities for growth in a changing market. The firm’s ability to increase revenue content in vehicles demonstrates its design expertise. A narrow economic moat rating is supported by its strong industry position.
Analyst William Kerwin notes that “Sensata’s ability to grow its dollar content in vehicles demonstrates intangible assets in sensor design, as it works closely with OEMs and Tier 1 suppliers to build its products into new sockets.”
NICE Ltd.
- Morningstar Price/Fair Value: 0.62
- Morningstar Uncertainty Rating: Medium
- Morningstar Economic Moat Rating: Narrow
- Industry: Software – Application
NICE, an enterprise software company focused on customer engagement and financial crime and compliance markets, is trading 38% below Morningstar’s fair value estimate and is a stock they consider worth $290 per share. The company’s cloud solutions, particularly its flagship customer engagement product CXone, are key to enabling omnichannel interactions. The company’s growth is driven by the increase in cloud adoption and the growth of the financial services industry.
According to analyst Rob Hales, “With only 15% to 20% of contact center agents in the cloud, including minimal from the enterprise market, the residual opportunity is significant. Consequently, we expect strong midterm growth as customers transition to the cloud.”
Sabre Corporation
- Morningstar Price/Fair Value: 0.70
- Morningstar Uncertainty Rating: Very High
- Morningstar Economic Moat Rating: Narrow
- Industry: Software – Infrastructure
Sabre Corporation, trading 30% below its fair value estimate, maintains its position in the global distribution system (GDS) industry. Their GDS boasts network and technology that integrates GDS content into back-office operations and IT solutions to maintain the accuracy of information. The company maintains a narrow moat rating.
Analyst Dan Wasiolek states, “Sabre’s GDS enjoys a network advantage, which is the source of its narrow moat rating.”
Endava
- Morningstar Price/Fair Value: 0.73
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Narrow
- Industry: Software – Infrastructure
Endava, a next-generation IT services company, is trading at a 27% discount to its $42 fair value estimate; the software infrastructure company earns a narrow economic moat rating. Endava specializes in digital transformation and engineering services, with a concentration in the financial services sector.
Analyst Rob Hales states, “Endava’s core strategy is to land and expand, which means securing big clients and growing revenue in those relationships by increasingly providing these clients more services.”
Taiwan Semiconductor Manufacturing Company
- Morningstar Price/Fair Value: 0.74
- Morningstar Uncertainty Rating: Medium
- Morningstar Economic Moat Rating: Wide
- Industry: Semiconductors
Taiwan Semiconductor Manufacturing (TSMC), the world’s largest dedicated chip foundry with over 60% market share, earns a wide economic moat rating. TSMC benefits from the shift from integrated device manufacturers to fabless designers and the growth of the AI, Internet of Things, and high-performance computing application sectors. The stock appears 26% undervalued relative to the fair value estimate of $273.
Analyst Phelix Lee points out that “The rise of fabless semiconductor firms has been maintaining the growth of foundries, which has in turn encouraged increased competition.”
ON Semiconductor
- Morningstar Price/Fair Value: 0.77
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Narrow
- Industry: Semiconductors
ON Semiconductor, focuses on power semiconductors and sensors, particularly for automotive and industrial markets. The stock looks 23% undervalued relative to a $72 fair value estimate.
Analyst William Kerwin believes that “Onsemi is a power chipmaker aligning itself to the differentiated parts of its portfolio in order to accelerate growth and margin expansion.”
Adobe
- Morningstar Price/Fair Value: 0.77
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Wide
- Industry: Software – Application
Adobe, a leader in content creation and digital marketing software, holds a wide economic moat rating. Adobe’s growth is driven by organic development and acquisitions. Adobe’s digital experience segment benefits from the cross-selling opportunity from Creative Cloud. Shares of the stock look 23% undervalued relative to a $590 fair value estimate.
Analyst Dan Romanoff states, “The company is introducing and leveraging features across its various cloud offerings (like Sensei artificial intelligence) to drive a more cohesive experience…”
Fidelity National Information Services
- Morningstar Price/Fair Value: 0.79
- Morningstar Uncertainty Rating: Medium
- Morningstar Economic Moat Rating: Narrow
- Industry: Information Technology Services
Fidelity National Information Services, or FIS, provides core processing and ancillary services to banks. The firm earns a narrow economic moat rating. The shares of its stock look 21% undervalued relative to our $88 fair value estimate.
Analyst Brett Horn notes, “Overall, if Worldpay had to be divested, we would have preferred a clean break.”
Manhattan Associates
- Morningstar Price/Fair Value: 0.80
- Morningstar Uncertainty Rating: Medium
- Morningstar Economic Moat Rating: Wide
- Industry: Software – Application
Manhattan Associates is a leader in warehouse management systems software, which is a highly in-demand niche. The company is trading at a 20% discount to its fair value estimate and has a wide economic moat rating. Manhattan Associates provides software that helps users manage their supply chains and their omnichannel operations.
Analyst Dan Romanoff states, “Manhattan Associates provides software that helps users manage their supply chains, inventory, and omnichannel operations.”
NXP Semiconductors
- Morningstar Price/Fair Value: 0.82
- Morningstar Uncertainty Rating: Medium
- Morningstar Economic Moat Rating: Wide
- Industry: Semiconductors
NXP Semiconductors is a leading supplier of high-performance mixed-signal products, particularly for the automotive market. The strength of NXP helps it earn a wide economic moat rating. The stock is 18% undervalued relative to our fair value estimate of $300.
According to strategist Brian Colello, NXP is “well positioned to benefit from safer, greener, smarter cars in the years ahead.”
Disclaimer: The author or authors do not own shares in any securities mentioned in this article.
