After a terrific rally over the past 18 months, equities have been volatile in the past several weeks. For instance, September was the S&P 500’s worst performance since March 2020 and the beginning of the pandemic. Meanwhile, the Nasdaq 100 Index fell off its summer highs during the month. Many tech stocks saw even steeper declines. And so far, October has witnessed a number of choppy and down days.
Inflation continues to rise and the Federal Reserve might take imminent measures for a tighter monetary policy. Therefore, we could expect the volatility in broader markets to continue in the short run. Yet, many investors regard the current market decline as a golden opportunity to grab some tech bargains at reasonable prices.
Well before the novel coronavirus became part of our daily lives, tech stocks had been among the most lucrative stocks to buy. The sector accelerates innovation and can even trigger brand new paradigms, so these picks usually embody significant upside potential and represent a vital component of any portfolio.
With that in mind, here are seven of the best tech stocks for growth investors to buy in October. As they expand into their large addressable markets, these names have strong momentum that could help them outperform in the coming months.
- Asana (NYSE:ASAN)
- Bill.com (NYSE:BILL)
- Fastly (NYSE:FSLY)
- Ping Identity (NYSE:PING)
- SPDR S&P Semiconductor ETF (NYSEARCA:XSD)
- Texas Instruments (NASDAQ:TXN)
- Upstart (NASDAQ:UPST)
Tech Stocks to Buy: Asana (ASAN)
52-week range: $20.57 – $124.85
Based in San Francisco, California, Asana provides a project and workflow management platform that enables teams to communicate, plan marketing campaigns and manage internal company affairs.
The company announced second-quarter fiscal 2022 results in early September. Total revenue grew 72% year-over-year (YOY), hitting $89.5 million. Additionally, the non-GAAP net loss came in at $39.8 million, or 23 cents per share, compared to a non-GAAP net loss of $26.3 million (or 34 cents per share) in the prior-year period. Cash and equivalents ended the quarter at $270.3 million.
But that’s not all. For this pick of the tech stocks, the number of clients paying above $50,000 grew 111% during Q2, suggesting that the company’s platform is gaining significant traction among large organizations. CEO and co-founder Dustin Moskovitz recently purchased 750,000 shares of ASAN stock as well, bringing his total purchases to $217 million over the past three months. On the results, Moskovitz commented:
“In the second quarter we accelerated total revenue growth, continued to report strong customer growth and increased dollar-based net retention rates across the board.”
ASAN stock hovers above $110 as of this writing and is up more than 280% this year. Moreover, accelerating top-line growth suggests that Asana could see further gains once market sentiment rotates back to growth stocks. However, ASAN stock trades at a hefty 57 times current sales. Potential investors would find better value around $95 or lower.
52-week range: $89.19 – $301.99
Also based in California, this next pick of the tech stocks offers a cloud-based software, automating complex back-office financial operations for small and midsize businesses (SMBs). Bill.com’s artificial-intelligence (AI)-enabled financial software platform is used for connecting with both customers and suppliers.
This firm generates revenue through subscription and transaction fees. It also acquired business expense management company DivvyPay (also known as Divvy) in early June. Plus, its recent acquisition of Invoice2Go is expected to create more opportunities for cross-selling and growth as well.
BILL announced Q4 fiscal 2021 results back in late August. For the period, revenue surged 86% YOY to $78.3 million, beating estimates. Non-GAAP net loss came in at $5.8 million also, or 7 cents per diluted share (although the loss would have been even less without the Divvy acquisition). Lastly, cash and equivalents ended the quarter at $1.8 billion. On the results, CEO René Lacerte commented:
“We delivered record growth in fiscal 2021 as we helped SMBs across the country automate their financial operations and make billions of dollars in payments.”
Including the impact of acquisitions, management guidance forecasts revenue growth of 100% to 102%, or $476 million to $480 million in revenue for the new fiscal year. That significantly beats analyst consensus.
BILL stock currently hovers at around $290, up 114% year-to-date (YTD) and almost 153% over the past year. But shares are trading at a sky-high level of 97 times current sales according to Seeking Alpha. Long-term investors may need to wait for a price dip to take a long position.
Tech Stocks to Buy: Fastly (FSLY)
52-week range: $33.87 – $133.19
Like Asana, this next pick of the tech stocks is also based in San Francisco, California. Fastly operates a real-time content delivery network (CDN). Essentially, through its streaming media, e-commerce, security and private CDN services, enterprise clients can provide faster and more reliable online content.
Management released Q2 results back in early August. For the quarter, revenue increased 14% YOY to $85 million. Additionally, the non-GAAP net loss came in at $17 million, or 15 cents per diluted share. That’s compared to a net income of $2 million (2 cents income per diluted share) a year ago. Finally, cash and equivalents ended the quarter at around $1 billion.
Fastly operates an edge computing infrastructure-as-a-service (IaaS) platform, capable of moving many terabytes of data per second. According to IBM (NYSE:IBM), edge computing “brings enterprise applications closer to data sources such as IoT devices or local edge servers. This proximity to data at its source can deliver strong business benefits: faster insights, improved response times and better bandwidth availability.”
In particular, the growth of the metaverse is expected to provide significant tailwinds for edge-computing solutions. After all, it requires a vast amount of data transfer to create a virtual world that users can interact with in real-time. Long-term, FSLY stock investors are excited about developments in the metaverse space.
Amazon (NASDAQ:AMZN) had stopped using Fastly’s services shortly after an outage in early June. Yet, it returned to the platform in August, implying that Q3 earnings could impress Wall Street. Following the quarterly announcement, CEO Joshua Bixby noted the following:
“During the second quarter, we also managed through a significant outage that impacted our Q2 results and will have an impact on our Q3 and full year outlook.”
FSLY stock currently hovers at $43. The stock has plunged 50% YTD and nearly 66% over the past year. However, October now looks like an opportune time to grab some shares, given the top-line momentum and depressed valuation. The stock is trading at under 15 times current sales.
Ping Identity (PING)
52-week range: $19.97 – $37.23
This next pick of the tech stocks breaks a trend on our list — it’s not headquartered in California. Based in Denver, Colorado, Ping Identity provides identity-verification solutions that enable secure access to services, applications or websites. Its AI-based platform makes authentication and security control decisions. What’s more, some 60% of the Fortune 100 organizations utilize Ping’s services, including most of the largest U.S. banks.
Ping Identity released Q2 results in early August. Revenue grew 34% YOY to $78.9 million for the period. About 93% of that revenue was subscription-based. Further, non-GAAP net income came in at $9.6 million, or 11 cents per diluted share. That’s compared to roughly $6.4 million (8 cents per diluted share) in the prior-year quarter. Lastly, cash and equivalents ended the quarter at $104.3 million. On the results, CEO Andre Durand remarked the following:
“Results were bolstered by sustained improvement in the demand environment, which drove substantial growth in ARR and revenue that give us confidence for strong execution during the remainder of 2021.”
All told, cybersecurity shares are currently enjoying a sustainable double-digit growth trend. Due to a growing need to move data into the cloud, third-party security solutions providers have seen surging demand for their services.
Right now, PING stock hovers at about $26. It is down 9% YTD and 26% over the past year. But it also supports a reasonable valuation for a growth stock that has already reached profitability. Shares trade at 7.71 times current sales. Interested investors could consider buying the dips.
Tech Stocks to Buy: SPDR S&P Semiconductor ETF (XSD)
52-week range: $129.54 – $209.54
Dividend yield: 0.12%
Expense ratio: 0.35% per year
Our next choice on this list of tech stocks is actually not a company but an exchange-traded fund (ETF). The SPDR S&P Semiconductor ETF provides access to 40 semiconductor stocks across a range of market capitalizations. This equal-weighted fund tracks the S&P Semiconductor Select Industry Index.
XSD started trading back in early 2006. Of the fund’s 40 stocks, the top ten holdings account for approximately 30% of its $1.1 billion in assets under management. Some of the top names on the roster include energy group SunPower (NASDAQ:SPWR); Ambarella (NASDAQ:AMBA) (which focuses on advanced imaging solutions), chip name Marvell Technology (NASDAQ:MRVL), analog and mixed-signal semiconductor products supplier Semtech (NASDAQ:SMTC) and low-power programmable solution provider Lattice Semiconductor (NASDAQ:LSCC).
Currently, XSD itself is up about 16% YTD. Moreover, over there past 12 months, it has gained 42%. All told, potential investors could consider buying the dips here.
Texas Instruments (TXN)
52-week range: $141.33 – $200.92
Dividend yield: 2.44%
As one of the largest producers of analog chips worldwide, Texas Instruments needs little introduction. The company is a top player in digital signal processors used in wireless communications and microcontrollers used in various electronics applications.
Texas Instruments released Q2 results in late July. For the period, revenue increased roughly 41% YOY to about $4.6 billion. Net income came in at $1.9 billion as well, or $2.05 per diluted share, up from a net income of 1.4 billion ($1.48 per diluted share) a year ago. The company generated free cash flow of $6.5 billion. Lastly, cash and equivalents ended the quarter at $3.7 billion. On the metrics, CEO Rich Templeton commented the following:
“We returned $3.9 billion to owners in the past 12 months through dividends and stock repurchases. Over the same period, our dividend represented 56% of free cash flow, underscoring its sustainability.”
Texas Instruments has been riding the global momentum for semiconductor chips recently. Semiconductor products that detect real-world input are essential for the Internet of Things (IoT), the automotive industry, remote monitoring devices and more. Demand for these chips has also skyrocketed during the pandemic because more and more companies are utilizing remote workflows that require connected devices.
Meanwhile, the recent semiconductor shortage has led to soaring prices as well, helping analog chip makers see lucrative returns. Texas Instruments is projected to increase earnings by 36% this year. The TXN stock price currently hovers at around $188, up roughly 14% YTD. All told, this pick of the tech stocks has a moderate valuation, trading at less than 24 times forward earnings and less than 11 times current sales.
Tech Stocks to Buy: Upstart (UPST)
52-week range: $22.61 – $346.54
Last up on this list of tech stocks is another California-based company. Upstart operates an AI-based platform for consumer loan decisions. The company partners with banks to offer personal loans using non-traditional variables — such as education and employment — to predict creditworthiness. According to management, it offers banks a better choice than relying on FICO scores.
Like other picks in this article, Upstart released Q2 results back in mid-August. Total revenue surged a whopping 1,018% YOY to $194 million for the period. Adjusted net income came in at $58.5 million, or 62 cents per diluted share. A year ago, the company reported an adjusted net loss of $3.7 million. Finally, cash and equivalents ended the quarter at almost $618 million. On the results, CEO Dave Girouard noted the following:
“Lending is the center beam of revenue and profits in financial services and artificial intelligence may be the most transformational change to come to this industry in its 5,000 year history.”
Many on Wall Street regard Upstart as a potential financial technology (fintech) disruptor. Its AI-based lending algorithms use various data points to help banks make better decisions. What’s more, Upstart claims that its technology approves loans at the same rate as FICO but boasts 75% fewer defaults.
So, it’s not surprising that Upstart’s banking partners have quickly increased to 25. Full-year revenue guidance of $750 million represents 221% YOY growth. Plus, UPST stock hit an all-time high of $346.54 in late September. Shares currently hover around $340 and have gained more than 730% so far this year. The stock trades at about 34 times current sales.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.