You probably know who the big tech players are by now. But how big can they really get? Today we’ll explore some lesser-known tech names that show a promising future.
Amidst the AI frenzy, the tech sector has performed extraordinarily well this year. However, with the likes of NVDA and MSFT commanding the space, it’s becoming increasingly harder to find good deals. For now, it’s most wise to seek out attractively priced smaller stocks with growth potential.
Let’s make the smart play and secure these growing tech tickers that the analysts love…
Sprout Social Inc (SPT)
Sprout Social (SPT) is an excellent stock to buy for its robust social media platform that appeals to younger audiences. With a steadily growing customer base of over 30,000 in 100 countries, SPT has consistently achieved revenue growth, exceeding 35% for three consecutive years. SPT’s annual recurring revenue (ARR) has grown significantly by 35% since Q1 2020, driven by a substantial increase in its customer base. SPT’s positive performance has led to increased guidance, as the company expects revenue to continue growing through 2023 and beyond.
SPT’s stock is down slightly year-to-date by 2.21%, has a beta score of 0.88, and has positive TTM (trailing twelve-month) asset growth of 14.47%. At its last earnings call, SPT surprised Wall Street analysts’ projections on both EPS and revenue, most notably reporting $0.06 per share vs. -0.01 per share as expected, a +925.31% surprise. Expected to report $78.7 million for the current fiscal quarter, SPT shows year-over-year revenue growth (+30.97%), net profit margin (+19.78%), and EPS (+100%). SPT’s 10-day average volume is roughly 685 thousand shares. Trading near the middle of its 52-week range, SPT has an average price target of $60, with a high of $78 and a low of $46, representing a potential price upside of over 41%. SPT has 11 buy ratings and two hold ratings.
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PubMatic Inc (PUBM)
PubMatic (PUBM) is a promising stock to consider as it aims to become the leading company on the sell side of the advertising ecosystem, complementing The Trade Desk’s dominance on the buy side. While PUBM’s revenue growth has slowed recently, some encouraging signs exist. In the first quarter of 2023, ad impressions (or views) increased by an impressive 42% year-over-year to 46.5 trillion, following remarkable growth from 2021 to 2022. These positive factors emphasize PUBM’s potential.
PUBM, trading near the middle of its existing range, is impressively up year-to-date by 49.80% and comes with a safe 0.85 beta and a PEG (price/earnings/growth) ratio of 0.4x, with positive TTM asset growth of 16.05%. PUBM is projected to post $59.8 million in sales for the current quarter; at its last call, it beat analysts’ predictions for EPS by a 115% margin, reporting $0.02 per share vs. the $-0.13 expected. PUBM also surprised on revenue by 8.57%, reporting $55.41 million vs. $51.04 million as predicted. With a free cash flow of $29.41 million, PUBM has a median price target of $18, with a high of $26 and a low of $14; this indicates a potential 35.5% jump from current pricing. PUBM has eight buy ratings and two hold ratings.
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Endava PLC (DAVA)
Endava (DAVA) is a compelling choice; It excels in helping other businesses modernize their technology for the sake of agility and relevance. With a remarkable track record, DAVA shows revenue growth of 32% from 2018 to 2022, driven by customer acquisitions and a retention rate of almost 90%. DAVA experienced a rapid increase in sales from its most prominent clients. While diversifying its customer base, DAVA is also pursuing a market opportunity that could be valued in the trillions by 2026. With significant further growth potential, DAVA presents itself as an enticing long-term prospect.
DAVA is down year-to-date by 22.95% and is trading near the bottom of its 52-week range, leaving some room for an opportunity to “buy the dip.” Expected to report $188.5 million in sales at $0.45 per share for the current quarter, DAVA most recently beat analysts’ estimates on both EPS and revenue by margins of 10.98% and 0.98%, respectively. With TTM asset growth of 16.83%, DAVA also shows year-over-year growth in critical areas such as revenue (+20.28%), net income (+21.17%), EPS (+20%), and operating income (+18.44%). DAVA has $99.19 million in free cash flow and a modest 10-day average volume of around 327 thousand shares. From analysts, DAVA has an average price target of $72.50, with a high of $103.91 and a low of $55.77, suggesting an upside potential of over 76%. DAVA has six buy ratings and one hold rating.
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