Speculative tech stocks are again gaining attention after an increasing hope that the economy is getting back on track after a tumultuous year.
One major silver lining is that interest rate hikes have slowed. There are also indications that the Federal Reserve will soon end its rate increase policy. However, in the short term, tech stock valuations are expected to continue facing inflation and interest rate challenges. Despite these obstacles, there is growing optimism that the economy is slowly on the brink of a turnaround. And some options are already doing very well.
As a result, the time is ripe to look at speculative tech stocks again in the hopes of picking a winner.
Over the past ten years, brief underperformance in the technology sector has consistently presented lucrative buying opportunities in the long run. Currently, tech stocks have again shifted towards outperformance, as observed in 2023.
So, with the right research, investors stand to make a lot of money from investing in the best speculative tech stocks out there. Keeping this in mind, here are three speculative tech stocks to buy that are worth considering:
Diversification is an essential element of a successful investment portfolio. Investing in a Singapore-based tech conglomerate like Sea (NYSE:SE) is a prime example of how you can turbocharger your portfolio with speculative tech stocks.
Sea, a conglomerate headquartered in Singapore, operates three key businesses: digital entertainment, e-commerce (which includes digital payments), and financial services. The primary reason for Sea’s appeal as a tech stock investment lies in its potential for market expansion opportunities.
The focus of the tech conglomerate is Southeast Asia. The company’s three key business lines are doing exceptionally well in the region. Shopee is the largest e-commerce platform in Southeast Asia, SeaMoney is considered Sea’s payments arm, and Garena distributes game titles across Southeast Asian countries and Taiwan.
Southeast Asia boasts a thriving digital economy, with over 400 million internet users. It represents a promising emerging market with internet penetration rates exceeding 70% in all countries except Laos, Myanmar, and Timor-Leste.
However, in 2023, the internet penetration rate in the United States stands at around 92%, a notable increase from approximately 75% in 2012. As one of the world’s largest online markets, the country boasted almost 299 million internet users in 2022.
At the same time, it is also delivering on key metrics. Sea reported revenue of $3.45 billion in the quarter that ended December 2022, up 7% year on year, and a net income of $426.8 million, up 169% year on year. The company’s operating income saw a significant boost of 218% to $520.53 million. It was the fourth quarter in a row that the e-commerce company outperformed analyst estimates.
All things considered, the growth story is far from over for this one. That makes Sea one of the best speculative tech stocks out there.
While this move comes as the company starts to reduce its recruitment drive initiated during the early stages of the pandemic, it is not the sole reason to invest in the company.
A more comprehensive understanding of the organization’s strategy, performance, and long-term prospects should be considered when making investment decisions. Despite the layoffs, there are plenty of fundamental reasons why Salesforce is moving in the right direction.
Salesforce is taking steps in the right direction by decreasing costs and positioning itself for future growth. Its strategic plans, including downsizing its office space footprint and implementing more hybrid work policies, show its commitment to increasing efficiency and agility while remaining competitive in the software industry.
However, it’s important to note that Salesforce’s high valuation compared to its peers may deter value investors. The current price-to-earnings ratio of 916.9 times is significantly higher than the industry median of 27.20, making it a potentially risky investment. If market sentiment towards the company changes, it could lead to pullbacks in the stock price.
Despite these risks, Salesforce’s growth prospects and industry-leading position in the cloud computing sector continue to make it an attractive investment for some. The company’s recent announcement of share buybacks is a positive sign for investors and could help support the stock price in the future.
Salesforce’s strategic plans and strong cash flow position it for future success. However, its premium valuation should be considered when making investment decisions, as it may pose a risk to some investors. For more on that and other aspects of the stock, check out this excellent piece from David Moadel.
Adobe (NASDAQ:ADBE) is a software company that creates applications for creative content, marketing, and e-commerce. Last year was a challenging one for the company. As tech valuations suffered, so did Adobe.
In addition, Adobe’s revenue growth is slowing and is expected to rise by only 9% in fiscal 2023, excluding the potential impact of its $20 billion acquisition of Figma. Regulators in the E.U., U.K., and U.S. Department of Justice are putting the proposed takeover under the scanner.
They are concerned that Adobe’s dominance in the creativity software would gain an unfair advantage. Figma’s breakneck growth suggests it could become a much larger piece of Adobe’s pie and significantly boost its long-term revenue growth, even though it accounts for only about 2% of Adobe’s fiscal 2022 revenue.
Despite regulatory concerns about its proposed acquisition of Figma, Adobe’s Digital Media segment, which includes its Creative Cloud services, continues to perform well.
In Q1 of fiscal 2023, the segment’s revenue grew 9% (14% in constant currency terms) to $3.4 billion, representing 73% of the company’s total revenue. Adobe expects the segment to add $1.7 billion in net new ARR in fiscal 2023. However, Adobe’s gross margin dipped to 87.8%, attributed to macro and currency headwinds. Nonetheless, Adobe expects adjusted EPS to grow by 12%-14% in fiscal 2024.
Overall, Adobe is in a good position whether the mega-deal goes through or not. If you are researching speculative tech stocks, ADBE is a reasonable pick. The fact that the stock is down over 15% over the last 12 months only adds to its appeal.
On the publication date, Faizan Farooque did not hold (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.