Tech stocks have offered high returns for long-term investors. Most of the stocks in the Magnificent Seven are tech companies. The corporations in this cohort heavily influence how indices and funds perform.
You don’t have to invest in the Magnificent Seven to generate good returns. Other tech stocks are gaining momentum and can become profitable long-term opportunities. At one point, each corporation in the Magnificent Seven group was obscure and relatively unknown.
You don’t have to fish for companies with market caps under $1 billion to generate sizable returns. Investing in profitable companies with expanding profit margins, competitive moats, and promising growth catalysts can lead to promising long-term returns. These are some of the tech stocks that seem poised for stardom.
Synopsys (SNPS)
Synopsys (NASDAQ:SNPS) is the next up-and-coming semiconductor stock. It’s far from a small company thanks to its $87 billion market cap, but its revenue and earnings growth suggest the stock can comfortably surge past a $100 billion market cap this year.
Synopsys has done plenty of surging. Shares are up by 48% over the past year and have gained 390% over the past five years. The company’s silicon chips are in various devices, appliances, and other tech. The corporation has been in business for more than 35 years and generates more than $5 billion in annual revenue.
Revenue growth remains strong even though the company has been around for a while. Q1 FY24 earnings showcased 21% year-over-year revenue growth while quarterly GAAP earnings per diluted share exceeded the high end of guidance to reach $2.89 per share. Net income increased by 65.4% year-over-year to help the company secure a net profit margin of 27.2%. The upcoming acquisition of Ansys (NASDAQ:ANSS) will allow Synopsys to gain more market share and generate higher revenue and earnings growth rates.
Crowdstrike (CRWD)
Crowdstrike (NASDAQ:CRWD) is a leading cybersecurity firm that continues to grow while competitors cite headwinds. Revenue increased by 33% year-over-year as annual recurring revenue reached $3.44 billion. The company’s net income is surging higher and reached $53.7 million. The firm reported a net loss of $47.5 million in the same period last year.
Cybersecurity is an essential service that corporations can’t avoid. Hacking is a lucrative industry and a cyberattack can bring a corporation to a halt. Hackers can shut down websites, steal customer data, access sensitive resources, and wreak havoc on enterprises. Corporations set aside large portions of their budget for cybersecurity platforms, and some clients spend millions of dollars each year for optimal protection.
Crowdstrike is a top beneficiary of the rising demand for cybersecurity solutions. The stock has more than doubled over the past year and has surged by 400% over the past five years. The stock has a high valuation which is its only fault. Long-term investors will have a good chance of weathering the high valuation since the company’s net profit margins are rising significantly.
Intuit (INTU)
Intuit (NASDAQ:INTU) is a fintech company that owns popular software products like Quickbooks, Turbotax, and Mailchimp. The company also owns CreditKarma which makes it easier for people to borrow money. Shares are up by 46% over the past year and have gained 148% over the past five years.
Profit margin expansion can help the gains keep on coming. Revenue increased by 11% year-over-year in the second quarter of fiscal 2024 while net income more than doubled year-over-year. Intuit’s net profit margin reached 10.4% which is higher than the company’s normal mid-single-digit range. Intuit’s P/E ratio of 66 will look more attractive as earnings growth continues to outpace revenue growth.
Most Wall Street analysts agree with that conclusion. The stock is rated as a “Strong Buy” and has an average price target that suggests a 9% upside. The highest price target of $775 suggests Intuit shares can rally by an additional 19% from current levels.
On this date of publication, Marc Guberti held a long position in SNPS. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.
