In this article, we discuss 10 under-the-radar tech stocks to buy now. If you want to see our detailed analysis of these stocks, check out 5 Under-The-Radar Tech Stocks to Buy Now.
Dan Ives, a technology and software analyst at Wedbush Securities, is a well-known tech bull. On August 23, he said in an interview to Business Insider that despite the economy cooling down, the Federal Reserve may remain on its aggressive course of rate hikes to control inflation. Many Wall Street analysts from major firms like Goldman Sachs and Bank of America believe that the S&P 500’s 17.4% jump from mid-June to mid-August was a bear market rally which will die down eventually.
Regardless of these risks, Dan Ives is “firmly” bullish on tech heading in the second half of 2022. He believes artificial intelligence and cybersecurity will see long-term growth, and in some years, the current challenges of the technology sector will be just a hiccup. The tech space posted better than anticipated Q2 earnings, and enterprise spending remains exceptionally resilient. This bolsters Ives’ confidence that the summer tech rally can continue in the fall too. Ives told Business Insider:
“Tech stocks overcorrected on the downside going into earnings. The Street was expecting Armageddon, and it was much better than feared.”
On August 24, Bloomberg reported that elite hedge funds were piling into mega-cap US tech stocks like Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and NVIDIA Corporation (NASDAQ:NVDA). Mega-cap tech stocks have gained 10% in the June quarter, compared to a 9% rise in the S&P 500 Index. However, investors who seek out growth fundamentals apart from mega-caps but still prefer strong investment opportunities, should check out under-the-radar tech stocks.
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Our Methodology
We selected companies that usually don’t get much limelight and attention but provide strong growth opportunities and robust balance sheets. These stocks have been awarded positive analyst ratings recently. The list is ranked according to the hedge fund sentiment around the securities, which was gauged from Insider Monkey’s Q2 2022 database of around 900 elite hedge funds.
Under-The-Radar Tech Stocks to Buy Now
10. Backblaze, Inc. (NASDAQ:BLZE)
Number of Hedge Fund Holders: 4
Backblaze, Inc. (NASDAQ:BLZE) is a California-based cloud storage company that provides cloud services to store and protect data in the United States and internationally. The company posted a Q2 non-GAAP loss per share of $0.23, beating market consensus by $0.07. The revenue of $20.69 million outperformed estimates by $0.39 million. Backblaze, Inc. (NASDAQ:BLZE) expects a Q3 revenue of $21.4 million to $21.8 million, versus a Wall Street consensus of $21.36 million.
On August 10, B. Riley analyst Zach Cummins maintained a Buy recommendation on Backblaze, Inc. (NASDAQ:BLZE) but lowered the price target on the shares to $12.50 from $16.50 following the Q2 beat. The analyst is motivated by the management’s “strong execution since going public and the sustained demand for low-cost cloud storage solutions, particularly in a recessionary environment”. He cited compressed multiples for the slashed target.
According to Insider Monkey’s Q2 data, Backblaze, Inc. (NASDAQ:BLZE) was part of 4 hedge fund portfolios, compared to 3 funds in the last quarter. David Atterbury’s Whetstone Capital Advisors is the leading stakeholder of the company, with 208,427 shares worth over $1 million.
9. Workiva Inc. (NYSE:WK)
Number of Hedge Fund Holders: 13
Workiva Inc. (NYSE:WK) is an American cloud-based company that offers compliance and regulatory reporting solutions worldwide. The Workiva platform provides data linking, data integrations, full audit trail services, and customer relationship management systems. It serves public and private enterprises, government agencies, and higher-education institutions.
Workiva Inc. (NYSE:WK) posted its Q2 results on August 9, reporting a non-GAAP loss per share of $0.17, which beat expectations by $0.09. Its revenue of $131.5 million grew 24.5% year over year and outperformed estimates by $5.45 million. The company had 642 customers with an annual contract value of more than $150,000, a 28% increase from the 500 customers in the prior-year quarter.
On August 10, Baird analyst Rob Oliver raised the price target on Workiva Inc. (NYSE:WK) to $105 from $100 and maintained an Outperform rating on the shares.
According to Insider Monkey’s data, 13 hedge funds were bullish on Workiva Inc. (NYSE:WK) at the end of the second quarter of 2022, compared to 17 funds in the earlier quarter. Praesidium Investment Management Company is the leading position holder in Workiva Inc. (NYSE:WK), with 1.11 million shares worth $73.4 million.
In addition to Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and NVIDIA Corporation (NASDAQ:NVDA), Workiva Inc. (NYSE:WK) is one of the tech stocks that hedge funds are monitoring amid a potential tech rally.
Here is what Artisan Small Cap Fund has to say about Workiva Inc. (NYSE:WK) in its Q4 2021 investor letter:
“Workiva is a leading provider of cloud software for financial reporting with approximately 70% of its business tied to SEC reporting through its core Wdesk offering. Over the past decade, the SEC has phased in requirements for companies to file their financials using an XBRL data tagging format. XBRL is a standard for tagging business and financial reports to increase the transparency and accessibility of business information by using a uniform format. This regulatory change has enabled Workiva to disrupt and capture significant market share from traditional printing vendors including RR Donnelly & Merrill. In late 2019, the company completed a multi-year investment cycle which enabled it to debut a new, modern technology platform allowing the company to incubate new ideas, see new regulations and introduce use cases in a matter of weeks/months instead of multiple years, with FERC reporting being a good example of this most recently. In addition to the rollout of these new use cases, we believe the company can expand its international footprint. Business outside of North America is small (~8% of revenue in 2020), and its recent investments to expand its international sales presence should position it ahead of a European mandate requiring 5,000 companies to begin using XBRL tagging starting in January 2022 (vs. ~500 companies who have adopted Wdesk in EMEA today). Finally, the company also has the potential to benefit from the ramp-up of ESG regulatory reporting longer term. The company has spent over a decade building an engine for SEC reporting and can repurpose this platform for compiling metrics including GHG emissions, labor requirements, conflict minerals and other ESG-related KPIs.”
8. DigitalOcean Holdings, Inc. (NYSE:DOCN)
Number of Hedge Fund Holders: 18
DigitalOcean Holdings, Inc. (NYSE:DOCN) is a New York-based company that operates a cloud computing platform in North America, Europe, Asia, and internationally. The company’s platform offers cloud infrastructure and tools for developers, start-ups, and small and mid-sized businesses. On August 8, DigitalOcean Holdings, Inc. (NYSE:DOCN) posted a Q2 non-GAAP EPS of $0.20, beating estimates by $0.10. For FY 2022, the company expects a total revenue of $564 million to $568 million, versus a consensus of $566.32 million. The non-GAAP operating margin is projected to be 15% to 16%, and free cash flow will range from 9%-10% of revenue.
On August 23, DigitalOcean Holdings, Inc. (NYSE:DOCN) has made a deal to acquire Cloudways for $350 million in cash, which is a managed cloud hosting and SaaS provider for SMBs. The transaction will boost revenue growth and raise high spend customers by 18%. DigitalOcean Holdings, Inc. (NYSE:DOCN) and Cloudways will serve over 124,000 customers, who pay more than $50 per month, representing approximately 84% of the pro forma company’s total revenue.
Oppenheimer analyst Timothy Horan on August 9 maintained an Outperform rating on DigitalOcean Holdings, Inc. (NYSE:DOCN) but lowered the price target on the stock to $65 from $80. The analyst observed that the company posted a Q2 revenue of $133.9 million, a 160bps miss at +29% year-over-year versus 36% in the preceding quarter. He believes the coming quarter will be notably ahead of guidance. However, a soft macro, with half the revenue from international SMBs, adds to uncertainty in the next year.
According to Insider Monkey’s Q2 data, 18 hedge funds were long DigitalOcean Holdings, Inc. (NYSE:DOCN), compared to 26 funds in the last quarter. Richard Driehaus’ Driehaus Capital is the biggest stakeholder of the company, with 779,219 shares worth $32.2 million.
7. Duolingo, Inc. (NASDAQ:DUOL)
Number of Hedge Fund Holders: 18
Duolingo, Inc. (NASDAQ:DUOL) is a Pennsylvania-based company operating a language-learning website and mobile app in the United States and China. On August 4, Duolingo, Inc. (NASDAQ:DUOL) reported a Q2 GAAP loss per share of $0.38, beating market estimates by $0.14. The company posted a revenue of $88.39 million, up 50.3% on a year over year basis, outperforming Wall Street consensus by $2.68 million. Duolingo, Inc. (NASDAQ:DUOL) reported that total bookings were $97.5 million, an increase of 51% from the prior year quarter, and paid subscribers came in at 3.3 million at June end, an increase of 71% YoY. Monthly active users grew 31% YoY to 49.5 million and daily active users grew 44% to 13.2 million.
Barclays analyst Mario Lu raised the price target on Duolingo, Inc. (NASDAQ:DUOL) on August 5 to $102 from $95 and kept an Equal Weight rating on the shares. The company posted “another strong beat and raise” quarter, the analyst told investors in a research note.
According to Insider Monkey’s data, Duolingo, Inc. (NASDAQ:DUOL) was part of 18 hedge fund portfolios at the end of Q2 2022, up from 14 funds in the prior quarter. Henry Ellenbogen’s Durable Capital Partners is the leading stakeholder of the company, with 3.7 million shares worth $330.6 million.
6. Payoneer Global Inc. (NASDAQ:PAYO)
Number of Hedge Fund Holders: 21
Payoneer Global Inc. (NASDAQ:PAYO) is a New York-based provider of payment solutions that assist marketplaces, platforms, and online merchants worldwide. The company offers multiple services such as cross-border payments, multi-currency accounts, physical and virtual Mastercard cards, tax, and compliance and risk. Payoneer Global Inc. (NASDAQ:PAYO) posted a Q2 beat and raised its 2022 guidance, driven by an improving business outlook in Ukraine and higher interest income due to a rising rate backdrop. The company now expects the full-year revenue to fall between $580 million-$590 million, up from its earlier range of $550 million-$560 million and topping the $563 million Wall Street consensus.
Goldman Sachs analyst Will Nance on July 14 upgraded Payoneer Global Inc. (NASDAQ:PAYO) to Buy from Neutral with a price target of $6.50, up from $5.50, representing 44% upside. The analyst said he was “constructive” on Payoneer Global Inc. (NASDAQ:PAYO)’s exposure to “broad-based” e-commerce growth over the coming years, as well as its ongoing investments in B2B solutions.
According to Insider Monkey’s data, 21 hedge funds were long Payoneer Global Inc. (NASDAQ:PAYO) at the end of Q2 2022, compared to 27 in the prior quarter. Jasper Ridge Partners held the leading position in the company, with roughly 12 million shares worth $47 million.
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Disclosure: None. 10 Under-The-Radar Tech Stocks to Buy Now is originally published on Insider Monkey.