In the grueling correction, only a handful of tech stocks have had the heft to buck the trend, such as Facebook Inc (FB).
But even for companies that have missed their earnings or revenue expectations in a minor way, like Netflix, Inc. (NFLX), investors have been unforgiving.
Of course, it’s impossible to tell how long this will take. But then again, there are certain things that should remain positive for investors when looking at tech stocks.
Let’s face it, there are a variety of megatrends that should power growth for the long haul, including mobile, cloud computing, big data and the Internet of Things (IoT). Oh, and valuations are at cheap levels.
OK then, what are some of the tech stocks that look very attractive now? Well, here are four that are definitely worth a consideration:
Tech Stocks Picks: NetSuite Inc (N)
When it comes to cloud computing, NetSuite Inc (N) is one of the pioneers — the company got its start back in the late 1990s.
Essentially, the focus is on providing enterprise resource planning, such as with core functions like inventory, payroll and the financials. But over the years, N has broadened its platform to include capabilities like ecommerce, customer relationship management and revenue recognition. There are also various industry-specific customizations, such as for retail, services, distribution and manufacturing.
Growth has remained strong, and it looks like the ramp will continue for some time. The guidance for the current year is for revenues being up 28% to 31%, at $950 million to $970 million.
Keep in mind that the market potential for N is still in the early phases. After all, the company’s applications span from small businesses to the Fortune 500, which include millions of organizations.
Tech Stocks Picks: Ooma Inc (OOMA)
As has been the case with most IPOs within the tech stocks category, Ooma Inc (OOMA) has had a horrible ride. Since its debut in the summer, the stock has been cut in half.
Despite this, the core business has remained strong. Consider that the company offers a cloud-based phone service that is affordable and provides high-quality communications. For the most part, the focus is on consumers and small business owners.
Yet the company has also continued to invest heavily in R&D, which has resulted in a much richer feature set. To this end, there are integrations with the Apple Inc. (AAPL) Watch, Alphabet Inc’s (GOOG, GOOGL) Android Wear, Nest and Amazon.com Inc.’s (AMZN) Echo. Then there is the popular Talkatone app, which allows for free calls and texting.
And yes, Ooma’s financials are strong, with revenues up about 28% to $23.5 million in the latest quarter. But the valuation on the stock is also at dirt-cheap levels. After stripping out the cash, the price-to-sales ratio is at a mere 0.55X. By comparison, rival RingCentral Inc (RNG) sports a multiple of 5.5X.
Tech Stocks Picks: Everyday Health Inc (EVDY)
Everyday Health Inc (EVDY) has put together a set of strong digital and mobile assets that are focused on the healthcare industry. But as for the company’s stock, it has been mostly in critical condition lately. Since the summer, EVDY has lost a grueling 67% of its value.
And granted, there are legitimate issues with the core business, especially with the sales organization. The fact is that it has underperformed and EVDY has since taken actions to get things back on track.
Despite this, the company still has strong positions in key parts of the healthcare ecosystem, whether in terms of CRM, content sites and apps, ad targeting tools and databases (which, by the way, include 700,000 U.S. physicians). These assets all span consumer health, insurance and hospitals.
There are also secular tailwinds that should benefit EVDY. For example, the pharma industry needs to find ways to reach its potential customers — and this means focusing much more on digital platforms. Keep in mind that the annual spend is a whopping $15 billion.
And what about the valuation on EVDY stock? Yes, it’s definitely low, with the forward price-to-earnings ratio at a lowly 6X. WebMD Health (WBMD), on the other hand, has a multiple of 31X.
Tech Stocks Picks: Apple Inc. (AAPL)
The gloom and doom has been pervasive with Apple. It’s as if there is no hope for this company! Even worse, Alphabet recently vaulted to a higher market cap than AAPL’s for a while.
But it really does look like the pessimism is overblown. Even though the iPhone is trailing off, there will likely be the launch of model No. 7 in the fourth quarter, which should help get sales back into gear. Besides, there still remains lots of opportunity in the Chinese market.
Yet there could be even more catalysts. With $216 billion in the bank, AAPL is in an ideal position to get aggressive with acquisitions, especially since valuations much cheaper now. Just some of the interesting targets include Twitter Inc (TWTR), GoPro Inc (GRPO) and perhaps even Tesla Motors Inc (TSLA). In other words, AAPL dealmaking can be a quick way to place a stake in a big market opportunity.
But the company also has some interesting products that could be long-term winners, such as the Apple Watch, payments and perhaps even video streaming.
However, it’s the valuation on AAPL stock that is the most interesting thing right now. After excluding the cash from the balance sheet, the forward price-to-earnings ratio is at a rock-bottom 6X. This is not only a steep discount to other megacap tech stocks, like Facebook and Alphabet, but even mature, slow-growth operators like Procter & Gamble Co (PG), which has a multiple of 20X, and General Electric (GE), which trades at 16X.
Yes, I think InvestorPlace.com’s Charles Sizemore has said it best: “At current prices, Apple is quite possibly the most obvious buy I’ve ever seen in my lifetime. The Apple stock price is so cheap right now, it is actually ridiculous … as in stark-raving mad lunatic ridiculous.”
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.