In an interview with CNBC on September 30, Dave Sekera, Chief Market Strategist at Morningstar, shared his insights on the current state of the technology sector and the broader market. According to Sekera, the technology sector as a whole is “priced to perfection” and is trading at a 6% premium to fair value.
However, Sekera believes several technology stocks have run up too far trading at over 20% premium to fair value, whereas their sales have been sluggish. Sekera advises taking profits off the table for companies who are trading at a premium to fair value. Sekera’s team is also concerned that the market is overestimating the long-term growth potential of some companies due to artificial intelligence (AI), however, he believes that some of these companies will not benefit enough from AI to justify their current valuation. Sekera recommends four-star rated stocks that are trading at a discount to fair value and suggests swapping out overvalued companies and overextended AI stocks for these companies. Sekera also discussed the broader market, noting that growth stocks have outperformed value stocks for a while. However, he believes that it’s time to look at small-cap and mid-cap value-oriented names and believes that these types of value stocks are due for a rotation.
Sekera notes that the overall US market is currently trading at a 3% premium to fair value. He believes that this rotation into value stocks and small-cap stocks will be driven by the expectation of slowing economic growth in the US and the easing of monetary policy by the Federal Reserve. Historically, small-cap stocks have performed well in these conditions, and value stocks have been left behind in the frenzy to buy AI-related stocks. Sekera expects value stocks to catch up, and he believes that now is a good time to invest in these undervalued stocks.
With the Fed’s dovish stance and the potential for further rate cuts, tech stocks may continue to be a safe haven for investors, with that in context, let’s take a look at the 10 oversold tech stocks to buy right now.
A close-up of a hand reaching out to touch a virtual animation, demonstrating the power of the company’s IoT technology.
Our Methodology
To compile our list of the 10 oversold tech stocks to buy right now, we used the Finviz and Yahoo stock screeners to find stocks that have fallen significantly on a YTD basis and have a forward P/E of less than 15, as of October 15. We then narrowed our choices to 10 stocks according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. The list is sorted in ascending order of their hedge fund sentiment, as of the second quarter.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 smallcap and largecap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Oversold Tech Stocks To Buy Right Now
10. Mitek Systems, Inc. (NASDAQ:MITK)
Number of Hedge Fund Investors: 11
Forward P/E Ratio as of October 15: 11.83
YTD Performance as of October 15: -31.06%
Mitek Systems, Inc. (NASDAQ:MITK) is a software company that specializes in providing mobile capture and identity verification solutions to various industries, including financial services, healthcare, and government. The company’s products and services enable businesses to automate and streamline their operations, improve customer experience, and reduce the risk of identity theft and other forms of fraud.
Mitek Systems, Inc. (NASDAQ:MITK) has a strong presence in the financial services sector, and its solutions are used by many top banks and financial institutions to verify identities, detect and prevent check fraud, and facilitate mobile banking and payments. Additionally, Mitek Systems, Inc.’s (NASDAQ:MITK) Check Fraud Defender (CFD) business, which provides a shared system for dealing with check fraud that works across banks, has been gaining traction, with several large banks already using the system.
Mitek Systems, Inc.’s (NASDAQ:MITK) deepfake protection product, which addresses a rapidly growing issue in the digital world, is expected to drive significant revenue growth for the company, and with its strong brand reputation and customer relationships in the financial services sector, Mitek Systems, Inc.’s (NASDAQ:MITK) is well-positioned to capitalize on this opportunity. Analysts have a consensus Buy rating on the stock, with a target price of $12.30, indicating a potential gain of 30.44% from its current price.
9. Digital Turbine, Inc. (NASDAQ:APPS)
Number of Hedge Fund Investors: 15
Forward P/E Ratio as of October 15: 9.03
YTD Performance as of October 15: -48.83%
Digital Turbine, Inc. (NASDAQ:APPS) is a software company that provides technology solutions to help mobile carriers, OEMs, and app publishers improve the distribution and monetization of applications on mobile devices. The company’s core offering, SingleTap, allows users to install apps directly from advertisements with a single click, bypassing multiple steps traditionally required.
Market conditions remain challenging for Digital Turbine, Inc. (NASDAQ:APPS) particularly due to soft US device sales. There is also intense competition in the mobile app distribution market, regulatory uncertainty, and the potential for further declines in device sales. However, the company is seeing growth in international markets, and its revenue per device improved. The company is also benefiting from growth in first-party traffic, which offers better results to customers and publishers and results in higher margins for the company.
Digital Turbine, Inc.’s (NASDAQ:APPS) exclusive relationship with Motorola to deliver premium apps and content directly to users’ devices, making their daily mobile interactions more personalized and streamlined, is also a significant milestone for the company, as it provides a global platform to showcase its innovative solutions and technology. This collaboration is expected to drive growth and revenue as it expands its reach and user base.
Digital Turbine, Inc.’s (NASDAQ:APPS) stock could go higher if the company’s revenue growth stabilizes and its margins improve. The company’s alternative app distribution business could also be a tailwind for the company. Analysts have a consensus Buy rating on the stock, with a target price of $3.83, indicating a potential gain of 14.56% from its current price.
8. STMicroelectronics N.V. (NYSE:STM)
Number of Hedge Fund Investors: 16
Forward P/E Ratio as of October 15: 10.55
YTD Performance as of October 15: -43.49%
STMicroelectronics N.V. (NYSE:STM) is a global leader in semiconductor solutions for automotive, industrial, and consumer markets. The company is known for its innovation in integrated circuits and sensors.
STMicroelectronics N.V. (NYSE:STM) is well-positioned to capitalize on the long-term growth prospects of the electric vehicle (EV) market and the increasing electrification and digitalization of cars. The company’s specialized SiC semiconductors are in high demand for EVs, and the EV market is expected to grow at a 6.6% CAGR from 2024 to 2029. Additionally, the increasing connectivity of products in the Industrial segment is expected to drive growth in the Internet of Things (IoT) market.
The company’s financials have been impacted by the current industry normalization and weak end markets, but its long-term track record shows good revenue growth at an 8.0% CAGR from 2014 to current trailing revenues as of Q2. STMicroelectronics N.V. (NYSE:STM) has also spent a significant amount of capital to expand its manufacturing capacity, with capital expenditures trailing at $4.07 billion.
Despite the current uncertainty and short-term headwinds, STMicroelectronics N.V.’s (NYSE:STM) long-term earnings outlook is strong. The company’s specialized products, commitment to growth, and attractive valuation make it a compelling investment opportunity. As the industry normalizes and demand recovers, STMicroelectronics N.V. (NYSE:STM) is well-positioned to capitalize on the growth prospects of the EV and IoT markets. With a consensus Buy rating from industry analysts, the stock has a target price of $39.19, which represents a 35.90% upside potential from its current level.
7. TTEC Holdings, Inc. (NASDAQ:TTEC)
Number of Hedge Fund Investors: 19
Forward P/E Ratio as of October 15: 4.49
YTD Performance as of October 15: -73.14%
TTEC Holdings, Inc. (NASDAQ:TTEC) provides customer experience solutions and services through the business process outsourcing (BPO) model. The company partners with firms to manage customer interactions across multiple channels.
TTEC Holdings, Inc. (NASDAQ:TTEC) offers a range of services including digital transformation, customer engagement, and technology innovation. The company’s services are designed to help clients improve their customer relationships, enhance their brand reputation, and increase their revenue growth.
TTEC Holdings, Inc. (NASDAQ:TTEC) operates through two synergistic business segments, TTEC Digital and TTEC Engage, which complement each other and create a holistic approach to customer experience (CX) management. TTEC Digital provides cutting-edge technology solutions such as cloud-based contact center-as-a-service (CCaaS), AI, and CRM platforms, while TTEC Engage specializes in delivering customer experience (CX) services. This blend of digital transformation technology and operational CX services makes TTEC Holdings, Inc. (NASDAQ:TTEC) well-positioned to capitalize on a massive and expanding total addressable market (TAM) valued at approximately $640 billion as of 2020.
TTEC Holdings, Inc. (NASDAQ:TTEC) has also expanded its artificial intelligence (AI) offerings by integrating the latest advancements in generative AI into its CX solutions. This combination allows the company to offer clients immediate AI-driven CX solutions and leverage AI to enhance customer interactions. TTEC Holdings, Inc.’s (NASDAQ:TTEC) innovative and service offerings differentiate it in the competitive CX market and can potentially lead to improved market share and revenue growth. Industry analysts have a consensus Buy rating on the stock, with a target price of $6.09, indicating a potential gain of 10.54% from its current price.
6. 8×8, Inc. (NASDAQ:EGHT)
Number of Hedge Fund Investors: 19
Forward P/E Ratio as of October 15: 6.40
YTD Performance as of October 15: -44.18%
8×8, Inc. (NASDAQ:EGHT) is a provider of Unified Communications as a Service (UCaaS), Contact Center as a Service (CCaaS), and Communications Platform as a Service (CPaaS) on a single integrated platform. The company’s technology partner ecosystem enables seamless integration of plugin solutions onto its core platform.
8×8, Inc.’s (NASDAQ:EGHT) investment in artificial intelligence (AI) is expected to drive revenue growth and offset the impact of AI bots replacing human agents. The company’s latest AI-based product offerings have seen revenue increase by more than 40% year-over-year, and management has highlighted a revenue opportunity of between $100 to $150 million if they succeed in selling at least five of their nine products to their existing customer base.
8×8, Inc.’s (NASDAQ:EGHT) strong position in the UCaaS and CCaaS space, combined with its fully integrated platform and access to the best solutions on the market through its technology partner ecosystem, sets it apart from its competitors. Despite facing challenges from increased competition and a weak macroeconomic environment, the company’s ability to differentiate itself through its technology and strong financial position makes it an attractive investment opportunity. Analysts have a consensus Buy rating on the stock, with a target price of $3.57, indicating a potential gain of 52.29% from its current price.
5. Concentrix Corporation (NASDAQ:CNXC)
Number of Hedge Fund Investors: 25
Forward P/E Ratio as of October 15: 3.92
YTD Performance as of October 15: -49.88%
Concentrix Corporation (NASDAQ:CNXC) is a global technology and services company that offers customer experience (CX) solutions to various industries, including technology, retail, banking, communications, and healthcare. The company’s revenue model is tied to the hours billed for services or transaction volumes processed for its clients. Concentrix Corporation (NASDAQ:CNXC) has a strong foothold in the market, with a diverse range of clients across different sectors. The company’s global operations span across North America, EMEA, APAC, and LATAM
Concentrix Corporation’s (NASDAQ:CNXC) CX solutions are in high demand, and its ability to offer a range of services, including process automation and data analytics, sets it apart from its competitors. Furthermore, the company’s global presence and diverse customer base provide a solid foundation for long-term growth.
In Q2, Concentrix Corporation (NASDAQ:CNXC) reported a 47.4% year-over-year revenue growth, exceeding expectations. This growth has been driven by the acquisition of Webhelp in Q4 2023, which has expanded the company’s customer base and increased its revenue potential. Additionally, the company’s adjusted free cash flow was $200 million in Q2, and management has reaffirmed its goal of reaching $700 million in adjusted free cash flow for the full year.
Concentrix Corporation’s (NASDAQ:CNXC) investment in technology and generative AI is also a positive development. The company’s AI initiatives in knowledge management, customer support, and automation are expected to drive efficiency and improve the company’s competitive position in the market. Additionally, the company’s patent for its AI platform, GILES, which automates coding and testing, is a significant achievement and demonstrates the company’s commitment to innovation.
Concentrix Corporation’s (NASDAQ:CNXC) strong financial performance, solid position in the customer experience industry, and investment in technology and AI make it an attractive investment opportunity. Industry analysts are bullish on the company’s stock price and have a consensus Buy rating at a target price of $76.83, which implies a 39.66% increase from its current level.
4. Bumble Inc. (NASDAQ:BMBL)
Number of Hedge Fund Investors: 26
Forward P/E Ratio as of October 15: 9.13
YTD Performance as of October 15: -54.14%
Bumble Inc. (NASDAQ:BMBL) is a leading online dating and social networking company, famous for empowering women to make the first move.
Despite strong user engagement, Bumble Inc. (NASDAQ:BMBL) has seen its stock drop significantly in 2024 due to challenges in user growth and monetization. The company continues to expand its offerings and improve its platform to increase revenue and user retention.
Additionally, Bumble Inc.’s (NASDAQ:BMBL) efforts to improve its business, including its focus on user experience improvements, marketing strategy adjustments, and revenue model revisions, are likely to drive long-term growth. Bumble Inc.’s (NASDAQ:BMBL) strong free cash flow generation and potential for share buybacks also present a compelling investment opportunity. The company has a history of generating significant free cash flow, with a trailing free cash flow of $0.87 per share. This provides a strong foundation for share buybacks, which could be highly accretive at current levels. Analysts forecast that the company’s earnings will rise by 100% in the current year.
3. Xerox Holdings Corporation (NASDAQ:XRX)
Number of Hedge Fund Investors: 28
Forward P/E Ratio as of October 15: 5.81
YTD Performance as of October 15: -44.52%
Xerox Holdings Corporation (NASDAQ:XRX) operates as a holding company, with its subsidiaries providing printers, scanners, supplies, and accessories.
Xerox Holdings Corporation (NASDAQ:XRX), once a household name in printing and copying technology, has struggled in recent years as the demand for physical document solutions has declined. However, the company is making efforts to pivot towards IT services and software solutions. Xerox Holdings Corporation (NASDAQ:XRX) is also exploring new business opportunities, including AI and 3D printing technologies.
The recent trend toward a return to the office can lead to increased use of the company’s products, and the need for cybersecurity, which is expected to grow over time. Xerox Holdings Corporation (NASDAQ:XRX) has developed many important technologies in the past, and it continues to spend on research and development, getting patents that could be important in the future.
The company has a strong plan in place to grow earnings and revenues, and it continues to develop and patent new technologies. Moreover, management is making comprehensive strategic changes to its operating model. The company expects stronger revenue growth in the second half of 2024, driven by equipment orders and new product launches. The company is also focusing on expanding its offerings in the A4 and A3 categories, while also exploring new segments in the production market.
2. Five9, Inc. (NASDAQ:FIVN)
Number of Hedge Fund Investors: 34
Forward P/E Ratio as of October 15: 11.93
YTD Performance as of October 15: -61.61%
Five9, Inc. (NASDAQ:FIVN) provides cloud contact center software (CCaaS) for businesses seeking to enhance customer engagement. The company’s Intelligent CX Platform facilitates seamless communication across various channels, such as phone, email, and social media. Five9, Inc. (NASDAQ:FIVN) has over 2,500 customers and over 1,400 partners globally.
Five9, Inc. (NASDAQ:FIVN) is improving the customer experience through automation and AI. The company’s AI and automation solutions are anticipated to significantly contribute to its future growth and profitability. Management highlighted that these offerings have higher gross margins compared to its traditional contact center software and are expected to drive future revenue growth. Five9, Inc.’s (NASDAQ:FIVN) ability to provide a comprehensive suite of contact center software solutions, including AI and automation, sets it apart in the market and is expected to fuel its growth and profitability.
On October 10, Five9, Inc. (Nasdaq:FIVN) announced its expanded availability in India with the addition of two new data centers in Delhi and Mumbai. This expansion allows the company to better support local and multi-national enterprises in the region, enabling them to power their customer experience strategies more effectively. Additionally, the company has obtained a Department of Telecommunications (DOT) Unified License (Virtual Network Operator) (UL VNO) in India, which enables the company to provide access services, national long-distance, and international long-distance services in the country. This license also allows Five9, Inc. (Nasdaq:FIVN) to partner with local carriers and internet service providers (ISPs) to offer telephony and network connectivity services.
Recently, Five9, Inc. (NASDAQ:FIVN) secured a major client, which is projected to add $50 million in annual recurring revenue (ARR) over the next few years. The increasing demand for AI-powered contact center solutions is a significant catalyst for Five9, Inc. (NASDAQ:FIVN) growth. The AI contact center market is projected to reach $14.6 billion by 2032, and Five9, Inc. (NASDAQ:FIVN) is well-positioned to capture a significant share of this growing market. The company is anticipated to experience 10.18% earnings growth this year. Industry analysts have reached a consensus on the stock’s Buy rating, with an average target price of $51.96 that suggests a 53.99%% upside potential from its current levels.
1. ZoomInfo Technologies Inc. (NASDAQ:ZI)
Number of Hedge Fund Investors: 43
Forward P/E Ratio as of October 15: 10.70
YTD Performance as of October 15: -44.40%
ZoomInfo Technologies Inc. (NASDAQ:ZI) is a leading provider of business intelligence software, specializing in sales and marketing data.
ZoomInfo Technologies Inc.’s (NASDAQ:ZI) sales and marketing platform, Copilot, provides users with real-time data and insights to improve their sales and marketing efforts. This AI-powered tool is designed to enhance the capabilities of sales and marketing professionals, offering a competitive advantage. As businesses increasingly adopt AI to optimize their sales and marketing efforts, Copilot positions ZoomInfo Technologies Inc. (NASDAQ:ZI) at the forefront of this trend. The tool aims to boost the productivity and effectiveness of sales teams, which can, in turn, lead to greater adoption and utilization of the company’s platform.
Copilot has been adopted by the majority of the company’s existing customers, and users are showing material improvements in engagement and utilization rates. This indicates that the product is functioning effectively and has the potential to contribute to the company’s revenue growth.
ZoomInfo Technologies Inc.’s (NASDAQ:ZI) is facing challenges in the small and medium-sized business (SMB) segment, the company has shown signs of stabilization and growth in its upmarket segment. In Q2, ZoomInfo Technologies Inc.’s (NASDAQ:ZI) reported a total revenue decline of 5.6% year-over-year, driven by poor performance in the SMB segment. However, the company also saw encouraging signs of demand stabilization, with customer growth metrics turning positive after multiple quarters of decline.
ZoomInfo Technologies Inc.’s (NASDAQ:ZI) signs of stabilization and growth in its upmarket segment, make it an attractive investment opportunity for those looking for a potential growth stock.
While we acknowledge the potential of ZoomInfo Technologies Inc. (NASDAQ:ZI) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ZI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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