In this article, we discuss the 10 oversold tech stocks to buy. To skip the detailed analysis of the technology services industry, go directly to the 5 Oversold Tech Stocks To Buy.
The technology sector has been booming so far in 2023, mostly due to the generative artificial intelligence segment. Artificial intelligence (AI) has been on the rise for the past few years, but companies are leaning towards investing in the sector more than ever in the current year. According to a survey by CNBC, when companies were asked which technologies they expected to allocate the most capital to over the next 12 months, 47.37% chose AI as their top choice. Other options included, cloud computing, and the Internet of Things (IoT). Nayur Khan, Partner at McKinsey says:
“We are at an inflection point with artificial intelligence. Generative AI has captured both mainstream and business imaginations. Organizations that are willing to continuously learn and adapt their processes, ways of working, and technology to industrialize ML will succeed in building the muscle needed to leverage AI at scale and unlock its value.”
While another Senior Partner, Delphine Nain Zurkiya adds:
“We often get asked by executives if generative AI is hype or a fundamental shift—the answer is both. From a scientific point of view, foundational models are not hype—they comprise a new class of AI that is elegant in its simplicity yet incredibly powerful in its ability to be tuned to perform many tasks in a human-like manner. From a business point of view, these technologies have the potential to fundamentally disrupt entire categories.”
The technology sector has been performing well for the past decade but it seems like 2022 just wasn’t its year. Between January to June 2022, the tech-heavy NASDAQ composite was down 29.5% and finished the year with a decline of 32.5%. It was the second-worst year for the NASDAQ composite since 2002. The first one was during the Great Recession of 2008 when it went down 40.5% for the full year. Nevertheless, we cannot single out the sector in 2022 because it was one of the worst years for the global economy and US equities. The only sectors that ended with positive returns in the year were energy and utilities. On top of that, the investments in the tech sector still managed to reach over $1 trillion in 2022, despite the tough economic conditions.
The biggest names in the tech industry have been enjoying the year so far even though the macroeconomic headwinds from the previous year still haven’t phased out. On May 30, NVIDIA Corporation (NASDAQ:NVDA) became the first chip company to touch the $1 trillion market cap milestone and is almost up 210% YTD at the time of writing on August 2. Other elites such as Meta Platforms, Inc. (NASDAQ:META), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT) have also experienced significant gains this year and are up nearly 153%, 50%, and 37% YTD, respectively. A lot of the growth of these companies can be attributed to investments during the COVID-19 pandemic. According to research, the companies that doubled down on their tech investment during the pandemic are now growing five times faster than the ones that didn’t.
Even though the NASDAQ Composite and NASDAQ-100 are up around 35% and 42% year-to-date at the time of writing on August 2, there are still some stocks that haven’t been doing well and you can check them out on our 15 Worst Performing NASDAQ Stocks In 2023 article. Some of the most oversold tech stocks include Euronet Worldwide, Inc. (NASDAQ:EEFT), TELUS International (Cda) Inc. (NYSE:TIXT), and Perficient, Inc. (NASDAQ:PRFT). To check out more oversold stocks like the ones mentioned in this article, you can go to 10 Oversold Energy Stocks You Can Buy, 10 Oversold NASDAQ Stocks to Buy, and 10 Oversold Financial Stocks to Buy.
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Our Methodology
For this article, we chose companies with a 14-day Relative Strength Index (RSI) of less than 35. The RSI of these companies was calculated before the market opening on August 2. The Relative Strength Index is a technical indicator that tracks momentum changes in stock prices. An RSI above 70 implies that a stock is overbought and below 30 implies that it is oversold. These levels can be adjusted if needed. The stocks in this article are listed in descending order of their RSI.
Note that, we only chose the stocks that are listed on NYSE and NASDAQ. We also avoided small-cap stocks due to their high volatility.
10 Oversold Tech Stocks to Buy
10. Cognex Corporation (NASDAQ:CGNX)
14-day RSI as of August 2: 34.10
Cognex Corporation (NASDAQ:CGNX) is an American industrial automation company focusing on machine vision technology that is used for the automation of manufacturing and distribution functions. The company is headquartered in Massachusetts and operates worldwide. Cognex Corporation (NASDAQ:CGNX) had a 14-day relative strength index of 34.10 before the market opening on August 2, making it our 10th most oversold tech stock.
In the first quarter of 2023, Cognex Corporation (NASDAQ:CGNX) was held by 23 hedge fund holders with a combined stake value of $313.511 million. Fundsmith LLP was the company’s most prominent hedge fund holder, owning over 2 million shares worth $102.062 million.
Cognex Corporation (NASDAQ:CGNX)’s first quarter 2023 revenue declined by 28.8% year-over-year due to lower consumer spending and weak demand. However, AI is a major tailwind for the company which can benefit Cognex Corporation (NASDAQ:CGNX) in the long term. The company plans to announce its second quarter 2023 result before the market opens on August 3 and expects revenue between the range of $225 million and $245 million.
Euronet Worldwide, Inc. (NASDAQ:EEFT), TELUS International (Cda) Inc. (NYSE:TIXT), and Perficient, Inc. (NASDAQ:PRFT) are some of the most oversold tech stocks to buy along with Cognex Corporation (NASDAQ:CGNX).
RGA Investment Advisors made the following comment about Cognex Corporation (NASDAQ:CGNX) in its Q4 2022 investor letter:
“This question as to whether anything has structurally changed is as applicable to e-commerce as it is to 2022’s most talked about economic datapoint: the CPI. Before the pandemic, people would speak about “secular stagnation” and the strong disinflationary forces that kept the economy from experiencing a robust post-Great Financial Crisis recovery. Today, we are far more likely to hear about stagflation than “secular stagnation”, yet the economy is growing faster today than it was in the past. We must therefore ask ourselves, what are the biggest changes from before the pandemic to now that would change our economic outlook from disinflation to inflation. The largest change is what people now call “The Great Resignation” whereby Boomers who entered the workforce in the 1970s finally retiring en masse.[3] This can have consequences for wages, though we would caution against fearing a wage price spiral as underinvestment in efficiency due to an overabundance of labor during the past decade can finally commence with lower levels of fear for labor unions and politicians alike. In fact, investments in productivity might even be encouraged now with fears of inflation front-and-center. As we have pointed out several times in the past, Cognex Corporation (NASDAQ:CGNX) stands to benefit considerably from this change.”
9. Juniper Networks, Inc. (NYSE:JNPR)
14-day RSI as of August 2: 33.88
Juniper Networks, Inc. (NYSE:JNPR) manufactures and sells computer networking devices such as routers, switches, security products, and cloud-native software applications among other things. It is also one of our 10 most oversold S&P 500 stocks.
Juniper Networks, Inc. (NYSE:JNPR) announced its Q2 results on July 27, generating revenue of $1.43 billion, registering a 12.6% year-over-year increase and outperforming analyst estimates by $20 million. The company’s EPS of $0.58 was 4 cents above the Wall Street forecasts.
At the time of writing on August 2, Juniper Networks, Inc. (NYSE:JNPR) has a dividend yield of 3.14%, compared to the 1.37% sector average. The company has announced to pay a dividend of $0.22 per share on September 22 with August 31 as its ex-date.
8. Calix, Inc. (NYSE:CALX)
14-day RSI as of August 2: 33.78
Calix, Inc. (NYSE:CALX) is an application software company providing cloud and software platforms to telecommunication companies. The company was held by 28 hedge funds in the first quarter of 2023 compared to 25 in the previous quarter. Schonfeld Strategic Advisors was the most significant stakeholder of Calix, Inc. (NYSE:CALX) in Q1 with 570,600 shares worth $30.578 million.
Calix, Inc. (NYSE:CALX) has been covered by 6 analysts in the last three months with 5 Buy and 1 Hold rating. The average price target for the company is $79.00 which shows a 78.81% upside to the company’s stock price of $44.18 at the time of the August 1 market close. At the time, Calix, Inc. (NYSE:CALX) has been trading near its 52-week low of $41.74.
Calix, Inc. (NYSE:CALX) posted its Q2 results on July 19, reporting a non-GAAP EPS of $0.36 and revenue of $261 million, exceeding Wall Street expectations by $0.05 and $3.89 million, respectively. The company also experienced revenue growth of over 29% year-over-year.
Chartwell Investment Partners, an affiliate of Carillon Tower Advisers, made the following comment about Calix, Inc. (NYSE:CALX) in its Q3 2022 investor letter:
“Another strong performer during Q3 was Calix, Inc. (NYSE:CALX). Calix stock rebounded sharply in the quarter after reporting stellar earnings. They offer next-gen fiber broadband solutions to telecommunication companies primarily for rural markets. The broadband buildout in rural markets is still in the early innings, and the company’s subscription model offers great visibility going forward.”
7. ExlService Holdings, Inc. (NASDAQ:EXLS)
14-day RSI as of August 2: 31.57
Headquartered in New York, ExlService Holdings, Inc. (NASDAQ:EXLS) is a global analytics and digital solutions company. The company provides its services to multiple sectors including healthcare, media, and retail along with a few others.
For the second quarter of 2023, ExlService Holdings, Inc. (NASDAQ:EXLS) reported a non-GAAP EPS of $1.82 and revenue of $405 million. The company also upped its guidance for FY 2023. It expects its revenue to be between $1.605 billion to $1.625 billion from the previous range of $1.595 billion to $1.620 billion. ExlService Holdings, Inc. (NASDAQ:EXLS)’s EPS guidance lies between the range of $6.90 to $7.05, compared to the prior guidance of $6.75 to $6.90.
On July 13, ExlService Holdings, Inc. (NASDAQ:EXLS) announced a five-for-one forward stock split of its common stock. The post-split basis trading began on August 2.
6. Zebra Technologies Corporation (NASDAQ:ZBRA)
14-day RSI as of August 2: 30.39
Zebra Technologies Corporation (NASDAQ:ZBRA) is a tech company focusing on smart data capture. Its products include RFID printers, barcode printers, real-time locating systems, and scanners among others. It was founded in 1969 and is headquartered in Lincolnshire, Illinois.
In Q1 2023, Zebra Technologies Corporation (NASDAQ:ZBRA) stock was held by 26 hedge funds, in line with the previous quarter. Ariel Investments was the largest stakeholder in the company with 476,385 shares worth $151.490 million.
On August 2, Baird analyst Richard Eastman maintained an Outperform rating on Zebra Technologies Corporation (NASDAQ:ZBRA) and lowered his price target from $322 to $283. The analyst showed concerns regarding the duration of the depressed demand recovery. Nevertheless, the firm expects the demand recovery to materialize at the beginning of 2024. Zebra Technologies Corporation (NASDAQ:ZBRA) is trading at a stock price of $240.57 at the time of writing on August 2.
It is important to note that at the time of the calculation of RSI, the Zebra Technologies Corporation (NASDAQ:ZBRA)’s last close in the 14 days was recorded at $254.77 on August 1, and its stock price fell by almost $14 in the first two hours of trading on August 2. With a 14-day RSI of 30.39, Zebra Technologies Corporation (NASDAQ:ZBRA) is the 6th most oversold tech stock to buy. Other oversold tech stocks include Euronet Worldwide, Inc. (NASDAQ:EEFT), TELUS International (Cda) Inc. (NYSE:TIXT), and Perficient, Inc. (NASDAQ:PRFT).
Ariel Investment made the following comment about Zebra Technologies Corporation (NASDAQ:ZBRA) in its Q3 2022 investor letter:
“We also bought shares of two companies held in other Ariel portfolios, leading global manufacturer of power generation equipment Generac Holdings, Inc. (GNRC) and bar-code manufacturer Zebra Technologies Corporation (NASDAQ:ZBRA).
Meanwhile, ZBRA’s brand strength, distribution network and commitment to innovation enable it to take share, earn industry-leading profitability and penetrate new markets. A recent pullback in stock price provided an attractive entry point. Shares have come under pressure due to investor concerns around inflation and supply chain disruptions. At current valuation levels, we think investors are underappreciating ZBRA’s alignment with the global effort to improve supply chain efficiency. At the same time, the company is leveraging the wide moat in its core business to expand into faster growing markets including warehouse robotics and machine vision. Meanwhile ZBRA continues to deliver prodigious free cash flow which we believe will continue to be deployed towards both growth and share repurchases.”
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Disclosure. None. 10 Oversold Tech Stocks To Buy is originally published on Insider Monkey.
