3 Small-Cap Tech Stocks to Buy

Apple (NASDAQ:AAPL) made a huge splash this week as it debuted its “new iPad.” Tech investors the world over know about how great AAPL stock is — shares are up 33% year-to-date and have soared over 500% in the last five years.

But if you think Apple is the only tech stock worth holding, think again. I have three up-and-coming tech stocks you should add to your portfolio.

Infospace

InfoSpace (NASDAQ:INSP) is a “two-fer” stock. The small Internet search provider is best known for its dogpile.com search engine. The company’s search results are interesting, because the company uses a “metasearch” technology that essentially searches all of the major search engines — including Google (NASDAQ:GOOG), Yahoo! (NASDAQ:YAHOO) and Microsoft (NASDAQ:MSFT) search engine Bing—and then compiles the most comprehensive results.

And recently, InfoSpace acquired TaxACT, one of the top three online tax providers. More and more people are finding that it’s cheaper and easier to “do it yourself” when it comes to preparing taxes, and the acquisition should serve as a nice boost to InfoSpace’s growth. The transaction is expected to be immediately accretive to InfoSpace earnings per share, and first-year return on shareholder capital is expected to exceed 16%.

The company’s earnings have been solid, with sales climbing 34% to $66.6 million in the fourth quarter. During the same period, Infospace’s non-GAAP earnings rose 136% to $23.6 million or 50 cents per share, while its GAAP earnings came in at 13 cents per share. The analyst community was expecting sales of $59.9 million and GAAP earnings of 11 cents per share, so the company posted an 11.2% sales surprise and an 18.2% earnings surprise.

Looking forward, the analyst community is expecting 80.5% in annual first-quarter sales growth and 483.3% earnings growth.

Rackspace

Rackspace Hosting  (NYSE:RAX) is the world leader in hosting and cloud computing services. Cloud computing is essentially Web-based storage as a service, rather than a product — similar to a utility company. If you use popular online products like Facebook, YouTube or Gmail, you’ve already been a “cloud” user.

The company boasts a full 47 of the Fortune 100 as customers, and there are countless other up-and-comers who are using Rackspace in order to get started on building the next big Internet idea — names like Muzic.com, LivingSocial, Threadless.com and TweetPhoto.

In the fourth quarter, the company’s sales rose 31.6% to $283 million. During the same period, Rackspace’s earnings rose 80% to $25 million or 18 cents per share. The analyst community was expecting sales of $281 million and earnings of 18 cents per share, so the company posted a 0.7% sales surprise and a 12.5% earnings surprise.

Looking forward, the analyst community is expecting 30.3% in annual first-quarter sales growth and 70.6% earnings growth. In the past month, the analyst community has revised their consensus earnings estimate 50.6% higher.

Typically, such aggressive analyst earnings revisions precede future earnings surprises.

Tessco

Tessco Technologies (NASDAQ:TESS) is a company that wants to be the vital link between the wireless communications industry and the Internet. As smartphones ramp up data usage, the majority of Internet access is now via mobile devices. And Tessco is a one-stop shop for all the systems that power wireless infrastructure — ranging all the way from large network components to build a wireless tower to mobile accessories like cellphone chargers.

The company has had three consecutive record quarters, and in its latest quarter, the company’s sales rose 34.8% to $226.3 million compared with $167.9 million in the same quarter a year ago. During the same period, Tessco Technologies’ sales rose 55.3% to $4.8 million or 59 cents per share, slightly beating analyst estimates.

Looking forward, the analyst community is anticipating 40.6% sales growth and 76.2% earnings growth.

This stock has potential, but be warned that it is thinly traded and as such can see wild price swings on little or no news. If you are looking to buy Tessco, never place a market order — use only a limit order to protect yourself.


Article printed from InvestorPlace Media, https://investorplace.com/2012/03/3-small-cap-tech-stocks-to-buy-rax-tess-insp/.

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