The tech sector has been a reliable place to find stock ideas that outperform the market. This sector is heavily weighted in the S&P 500 and the Nasdaq Composite. It’s filled with hypergrowth companies that can still scale higher after exceeding $1 trillion market caps.
Investors can find plenty of tech stocks with high revenue growth, but it’s also important to look for profitable companies. Some promising tech stocks lose their spark after losses pile up and overshadow revenue growth. It’s especially difficult to hold onto tech stocks with decelerating revenue and no path to profitability.
It’s possible to outperform the market by pinpointing the best tech stocks. These corporations have rising revenue and profits. They also have captivating growth opportunities that point to more gains in the future. Investors may want to look at these promising tech stocks that can surge higher within a few years.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) has consistently outperformed the stock market for several years and has a Strong Buy rating from Wall Street analysts. The average price target projects a 12% gain from current levels. Long-term momentum is part of the reason why Wall Street analysts are bullish. Shares have gained 21% year-to-date and are up 229% over the past five years.
However, there’s more to Microsoft’s rise than investors’ enthusiasm. The company has delivered several earnings reports that indicate rising revenue and profit margins. Q3 FY24 results revealed that Microsoft grew its revenue by 17% year over year while net income jumped by 20% year over year.
Microsoft Cloud made up more than half of the company’s total revenue. Due to artificial intelligence tailwinds, it’s set to grow in subsequent quarters. Microsoft is also gaining market share in the booming industry with Copilot. AI initiatives and the company’s success in various verticals like gaming and business software can translate into more gains for long-term investors.
Oracle (ORCL)
Oracle (NYSE:ORCL) is picking up traction as its cloud platform delivers impressive growth for the company. Cloud revenue grew by 20% year-over-year in Q4 FY24 to reach $5.3 billion. That’s more than one-third of the firm’s total revenue. Remaining performance obligations sprang up by 44% year-over-year, suggesting that more revenue growth is in the pipeline.
Shares should rally as the high-growth cloud segment makes up a higher percentage of Oracle’s total revenue. The corporation also offers a 1.12% yield for investors as they wait for long-term catalysts to materialize. Oracle has delivered a 37% year-to-date return for investors, up 148% over the past five years. The stock trades at a 38.5 P/E ratio and is approaching a $400 billion market cap.
Demand for Oracle’s large AI language models should result in more gains in the future. In Q3 and Q4, Oracle signed its largest sales contracts in the company’s history, which should get investors excited.
Qualcomm (QCOM)
Qualcomm (NASDAQ:QCOM) is one of the few tech stocks that benefit from AI tailwinds and presents reasonably priced growth. The stock trades at a 28 P/E ratio and offers a 1.62% yield for its investors. Revenue growth has been down in previous quarters but increased by 1% year-over-year in Q2 FY24. Although not much, Qualcomm makes up for low revenue growth with a 37% year-over-year improvement in net income.
Artificial intelligence should reignite sales growth and generate higher returns for investors. In the Q2 FY24 press release, CEO Cristiano Amon cited the company’s “leading on-device AI capabilities across multiple product categories” as a catalyst for future growth. If Qualcomm continues to report revenue growth and build its growth rate to a more respectable percentage, the stock can gain more momentum.
Wall Street analysts are mixed about the stock and have rated it as a Moderate Buy. The highest price target of $270 per share implies that shares can gain an additional 29% from current levels.
Alphabet (GOOG, GOOGL)
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) offers a reasonable valuation and solid long-term growth prospects. The leading online advertiser trades at a 29 P/E ratio and provides a 0.43% yield. The stock has accumulated 33% in year-to-date gains and is up 228% over the past five years.
Recent financial results suggest that the rally isn’t over. Alphabet’s revenue increased by 15% year-over-year in the first quarter. Net income catapulted by 57% year-over-year, resulting in a 29.4% net profit margin.
While Alphabet is mainly known for its ads, it also has a vibrant cloud computing business. Google Cloud makes up more than 10% of the company’s total revenue, and it’s growing at a faster pace than ad revenue. Due to artificial intelligence tailwinds, cloud revenue should receive a boost for several years.
Wall Street analysts are on board with the company’s growth prospects and have rated the stock as a Strong Buy. The average price target suggests an 8% upside from current levels.
HubSpot (HUBS)
HubSpot (NYSE:HUBS) still presents a promising opportunity after fading acquisition talks. Although the news popped the balloon — the stock is down by 11% year-to-date — shares have been up by 171% over the past five years. HubSpot’s subscription model and financial results suggest that the stock will soon be on the upswing.
The customer relationship management software provider reported 23% revenue growth in the first quarter. Subscription revenue is more than 97% of the company’s total revenue. GAAP net income came in at $5.9 million compared to a net loss of $36.6 million in the same quarter last year.
HubSpot CEO Yamini Rangan mentioned that more customers are “consolidating on HubSpot because it is easy to use, easy to scale and delivers fast time to value.” As existing customers upgrade their accounts and new customers join, HubSpot has opportunities to generate more revenue. While squashed acquisition rumors sting right now, they may turn out well for shareholders in the long run.
The Trade Desk (TTD)
The Trade Desk (NASDAQ:TTD) is an advertising firm that specializes in connected TV ads. Revenue has been growing rapidly for several years, and that trend continued in the first quarter of 2024. That quarter featured 28% year-over-year revenue growth, which is an acceleration from last year’s 21% year-over-year growth rate. Net income came to $32 million in the quarter, which was more than three times higher than Q1 2023 net income.
The stock has been a solid outperformer. Shares are up by 43% year-to-date and have gained 329% over the past five years. Jeff Green, co-founder and CEO of The Trade Desk, mentioned that significant AI advances in its Korai platform should lead to higher value for advertisers. It’s one of The Trade Desk’s initiatives that should boost market share.
Wall Street analysts are certainly on board. The stock is rated a Strong Buy with a projected 6% upside from current levels.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) thrives in numerous verticals. It’s the leader in e-commerce and cloud computing, and its advertising segment is rapidly growing. Amazon’s various segments resulted in 13% year-over-year revenue growth in Q1 2024. Net income more than tripled year-over-year as the company logged double-digit revenue growth rates in domestic and international markets.
Amazon Web Services stood out with 17% year-over-year revenue growth. This segment stands to benefit from AI tailwinds and closed out the quarter with $25.0 billion in revenue. Advertising revenue was another highlight and surged by 24% year-over-year. Ads made up almost 10% of the company’s Q1 2024 revenue.
These results helped shares rally by 29% year-to-date. The stock has almost doubled over the past five years, and Wall Street analysts believe that the company has more to offer. The average price target implies a 16% upside from current levels. 44 analysts cover the stock, and all of them have rated the stock as a Buy.
On this date of publication, Marc Guberti held long positions in MSFT, GOOG, and AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
