Whenever market volatility spikes, you can bet that a number of tech stocks are getting hit pretty hard. The recent market correction has been no exception, taking a number of tech shares into the abyss.
But the fortuitous flip side is that there are a number of interesting and more attractively valued tech stocks to buy now as a result.
For the most part, investors can still bank on strong mega-trends — cloud computing, big data, mobile, social and cybersecurity — with broad applications that are become must-haves for companies and consumers. Investors with an eye for the long-term should be targeting tech stocks in those areas regardless of whether these stocks are on discount.
But which tech stocks should you be gobbling up?
Check out this list of six high-potential tech stocks to buy now and give your portfolio a hefty boost down the road.
Explosive Tech Stocks to Buy: Everyday Health Inc (EVDY)
Everyday Health (EVDY), which operates a variety of health and medical websites for consumers and professionals, has had a tough time since its initial public offering in late March 2014. So far, EVDY stock is off by about 35% from its first day of trading.
Despite this, Everyday Health has continued to grow at a nice pace – and the company is even profitable! For example, during EVDY’s latest quarter:
- Revenues increased 32% year-over-year to $54.8 million.
- Net income jumped from $600,000 in the red to $1.7 million in the black.
- Adjusted EBITDA soared 48% to $10.2 million.
A key to the growth has been a focus on engaging content, like mobile apps, interactive websites and videos. Yet EVDY has also been smart with acquisitions, as seen with its deal for Tea Leaves Health, which operates a cloud platform for marketing and analytics for hospital systems. EVDY believes the category is underserved concerning new technologies and should be a strong long-term growth opportunity.
EVDY was hit because of uncertainty regarding increased government regulation of biotechs and other pharma companies, but even if we see more restrictions, these companies still will have to engage with customers on digital platforms.
Meanwhile, Everyday Health is downright cheap, trading at just 9 times next year’s estimated earnings.
Explosive Tech Stocks to Buy: FireEye Inc (FEYE)
Security stocks haven’t been so secure lately. Just look at FireEye (FEYE), which is off more than 40% since mid-June.
But FEYE stock does look attractive at current levels.
The cybersecurity industry is likely to grow for the long haul. According to analysts at Bank of America (BAC), the market is forecast to climb from $15 billion in 2015 to $19.5 billion by 2018.
FireEye is nicely positioned to benefit, offering a comprehensive suite of security applications that cover key threat vectors such as web, email, file storage and networks.
FEYE also has an elite consulting group that focuses on dealing with security breaches. This division has been called in to handle high-profile situations at companies including Sony (SNE), Anthem (ANTM), Home Depot (HD) and Michaels (MIK).
In terms of growth, there are no signs of slowing down. For the latest quarter, revenues for FEYE surged by 56% YOY to $147.2 million, and cash flows came to $39.1 million — up from a loss of $61.9 million in the same period a year ago.
And in light of the recent drop-off, FEYE stock is trading at much more reasonable levels, with a price-to-sales multiple of 9.5 that compares well to Palo Alto Networks (PANW) at 15.5X and CyberArk Software (CYBR) at 12X.
Explosive Tech Stocks to Buy: Ooma Inc (OOMA)
Ooma (OOMA) operates an Internet-based platform that allows for services such as phone and mobile communications, and it also offers an appliance that provides ongoing updates, better security and higher quality.
Ooma has won various accolades for its platform. For example, the company has snagged PC Magazine’s Business Choice Award for best phone service for small businesses in back-to-back years.
Ooma has been able to crank out strong growth as well. In fiscal Q2, the company posted a 27% increase in revenues to $21.1 million. During this period, the user base went from 556,000 to 717,000.
The mobile strategy has been gaining momentum. At the heart of it is the Talkatone app, which allows for free calling and texting and boasts more than 1.5 million users. As evidenced by Facebook’s (FB) $19 billion acquisition of WhatsApp, the messaging category is red-hot.
Ooma also is leveraging its technology in the market for the Internet of Things, in areas such as home security and Automation. The company has recently struck a deal with Alphabet’s (GOOG, GOOGL) Nest, which is the developer of smart thermostats.
OOMA stock also trades at a bargain 1.5x P/S, which is loads cheaper than key rival RingCentral (RNG) at 5X.
Explosive Tech Stocks to Buy: WageWorks Inc (WAGE)
WageWorks (WAGE) operates a cloud-platform that provides employees with so-called Consumer-Directed Benefits or CDBs. These include tax-advantaged offerings like flexible spending accounts, health savings accounts and health reimbursement arrangements.
Such plans, though, are often complicated and may not have substantial participation — and that’s where WageWorks makes a difference,
WAGE offers a wide assortment of educational, content, interactive tools and mobile apps to get employees to sign up. This not only means more benefits; it also helps companies attract and retain employees. Employers also often enjoy lucrative tax breaks because of the reduction in payroll taxes.
Over the past few years, WageWorks has leveraged its system into other categories, such as commuter services, wellness plans and COBRA benefits.
The result is a mighty growth ramp for WageWorks. Revenues have shot up from $136 million in 2011 to $268 million as of last year. In the latest quarter, revenues surged by 41% to $82.8 million and adjusted EBITDA came to $22.2 million, up about 27% on a YOY basis.
Unlike the other tech stocks to buy on this list, WAGE isn’t necessarily cheap, trading at 32 times forward estimates. But with its strong platform, diverse product offerings and continued growth, WageWorks at least appears to deserve that premium multiple.
Explosive Tech Stocks to Buy: Apigee Corp (APIC)
Apigee (APIC) develops the infrastructure that allows companies to develop APIs (application programming interfaces). This type of technology makes it possible to allow third parties to access data in real-time as well as to perform functions.
Example: When you use Yelp (YELP) and check out a map, you are actually accessing the Google Map API. This is all handled seamlessly and securely.
While this sounds kind of prosaic, investors should realize that APIs are critical and affect all the major growth areas in technology, such as mobile, cloud computing, big data and IoT.
However, Apigee is more than just a development tool. For example, the platform also provides predictive analytics and insights. Apigee also has the ability to integrate with older systems, and the technology is definitely robust, handling hundreds of billions of API calls.
The growth at Apigee is something to crow about, too In fiscal Q4, for instance, APIC reported a 51% spike in revenues to $18.7 million.
To keep up the momentum, Apigee is also entering the small- to medium-size business market. The company launched its offering in Q4.
APIC trades at about 4 times sales, which is reasonable for a company with a strong set of technologies and oodles of growth potential.
Explosive Tech Stocks to Buy: Fitbit Inc (FIT)
Among the IPOs for tech stocks this year, Fitbit (FIT) is one of the few strong performers.
Fitbit has pioneered the massive market for fitness trackers and remains the dominant player. FIT also has shown it can battle the mighty Apple (AAPL).
FIT has six trackers that range in price from $59.95 to $249.95. Features include online dashboards, mobile apps, sensors, GPS, data analytics and social tools to help customers lose weight and get better sleep.
Fitbit also features a thriving ecosystem, driven by the company’s APIs, which power more than 50 million requests per day.
Growth has been simply … well, explosive. In the latest quarter, revenues spiked by 253% to $400 million and adjusted EBITDA came to $86.2 million. For the period, FIT sold about 4.5 million devices, up from 1.72 million in the same period a year ago.
And there still should be much more room for growth. International Data Corporation says the wearables market is the fastest-growing market in global consumer electronics. In 2014, shipments came to 19.6 million and they are forecast to hit 126.1 million by 2019, representing about $27.9 billion in revenues.
In the short-term, expect momentum to accelerate, especially during the upcoming Christmas season.
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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