We often talk about the dangers of investing in battered tech stocks, and all tech stocks in general.
If a fast-climbing tech stock all of a sudden reports a slight miss on earnings, or if there’s a hint of competition in the space, Wall Street can start dumping shares at a moment’s notice. That’s typically because expectations for such companies are usually overly enthusiastic.
And when tech stocks are really beaten down, it’s often a sign that the business is broken, or that technology has moved on. In the fast-paced tech world, that’s a hard hurdle to overcome.
However, on rare occasions, selloffs in tech stocks produce some high-profit opportunities. That’s especially the case if the stocks in question are still growing at a nice pace, or have “necessary” products, or still have a massive market opportunity to address.
Today, we’ll explore three such tech stocks that have taken a licking, but should get back to ticking sooner than later.
Tech Stocks to Buy off the Bottom: Coupons.com Inc (COUP)
Year-to-Date Return (as of 5/21): -27%
Coupons.com Inc (NYSE:COUP) operates a platform that allows retailers to provide discounts and promotions to customers via the web, mobile devices and social networks.
The company boasts relationships with more than 2,000 brands as well as roughly 30,000 third-party websites. But another key asset is the Coupons.com site itself, which attracts more than 17 million unique visitors per month.
So … why the lousy performance from COUP stock?
Well, growth has slowed, with the most recent quarter’s revenues hitting $55.6 million — up just 7% year-over-year. But this could prove to be a temporary hurdle. Remember: COUP focuses mostly on large customers — the kinds of companies that are slow to make decisions and implement new programs. So revenues can be choppy, but in this case, that’s a good thing if you’re looking for the bright side.
And COUP does continue to show strength in landing new deals, and the company boasted “continued momentum” in its Retailer IQ targeting and analytics program.
Coupons.com also is getting traction with its mobile offerings as consumers increasingly shop via their phones and tablets. Programs like Apple Inc.’s (NASDAQ:AAPL) Apple Pay certainly help.
If nothing else, COUP stock still could be a bargain play on the mobile megatrend in e-commerce.
Tech Stocks to Buy off the Bottom: Control4 Corp (CTRL)
Year-to-Date Return: -41%
Control4 Corp (NASDAQ:CTRL) is a top developer of software technologies for home automation, allowing consumers to easily control lighting, temperature, security, communications and entertainment. Control4’s offerings are available across a network of over 3,300 integrators, retailers and distributors across more than 90 countries.
All that hasn’t meant squat for CTRL stock, which is off by more than 40% this year. And like COUP, the concern has been growth; revenues in the latest quarter managed to grow just 1% to $32.1 million.
Still, this looks more like an opportunity than a warning.
The drop-off in demand doesn’t appear to be from a lack of interest from customers or more intense competition. No, Control4 is in the process of transitioning to a new product line … and that has been accompanied by a backlog of shipments that held sales back.
Still, management has indicated that it is solving its issues and will get back on track. In the meantime, they announced the company would buy back $20 million in CTRL stock — seemingly paltry until you consider the company’s only worth $223 million by market capitalization.
In fact, Control4 has $82.7 million in the bank, and when you subtract that from the market cap, you see that CTRL stock is trading right at its revenues.
That seems like a pretty good deal in light of Control4’s huge market opportunity in home technologies. There are about 118 million homes in the U.S. — but the install base for CTRL was about 180,000 as of last year.
Tech Stocks to Buy off the Bottom: Care.com Inc (CRCM)
Year-to-Date Return: -26%
Care.com Inc (NYSE:CRCM) has gotten little care from investors, and … well, that’s kind of a head-scratcher, as CRCM is growing at a nice pace and is a clear leader in its field.
Care.com operates an online and mobile marketplace that helps people find and manage child, senior and special needs care. In all, the network includes over 14.1 million members.
But CRCM has also added various other services, including payments, ecommerce, tax preparation and workplace offerings.
Q1 saw revenues jump 39% to $35.1 million, and while that translated to a loss of $12 million, that was down from the $15.5 million in red ink spilled in the year-ago period. What’s more, Care.com expects to reach breakeven by the middle of next year.
Of course, CRCM is targeting a massive market opportunity. In fact, the company says it represents about 42 million households in the U.S. More importantly, as the population gets older, there will certainly be more demand for services from CRCM.
The valuation on CRCM stock also is attractive, trading right at its revenues after you exclude the $63 million in cash from the bank.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
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