12 Tech Stocks With Biggest Upside

Published on December 21, 2022 at 1:37 pm by Usman Kabir in Hedge Funds, News

In this article, we discuss the 12 tech stocks with the biggest upside. If you want to read about some more tech stocks with the biggest upside, go directly to 5 Tech Stocks With Biggest Upside.

Technology stocks are one of the hottest areas of the stock market and investors eagerly follow the latest developments in the space as it has a track record of providing quick returns and the potential for explosive growth in the future. The technology sector consists of businesses that sell goods and services in electronics, computers, software, artificial intelligence, and other industries relevant to information technology. The IT market includes services such as computer networking, broadcasting, systems design services, and information distribution technologies.

The tech sector has always been a market leader for years, but there are growing concerns about the future. Prominent stocks like Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:FB) have all had a below par year, falling 50%, 28%, and 66% year-to-date respectively. Todd Sohn, the director and technical strategist at Strategas, noted in a recent report that tech could take a backseat over value offerings for the next couple of years.

Investors who are concerned about investing in big tech can look towards the upside potential that these firms offer, as well as analyst predictions about their deeper value, for 2023 analysis. Per experts, the tech field has expanded beyond the next great idea or application, and is now more concentrated towards service-oriented businesses that provide valuable products with recession-proof credentials. Tech investors should look for more boring investments in the space instead of flashy ones like crypto that are more about hype than substance.

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Our Methodology

The companies that have upcoming growth catalysts and operate in the tech sector were selected for the list. Special importance was assigned to outlining the basic business fundamentals and analyst ratings for each firm to provide readers with some context so they can make more informed investment choices. Data from around 900 elite hedge funds tracked by Insider Monkey in the third quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.

Tech Stocks With Biggest Upside

12. Photronics, Inc. (NASDAQ:PLAB)

Number of Hedge Fund Holders: 21

Phototronics, Inc. (NASDAQ:PLAB) engages in the manufacture and sale of photomask products and services in the United States, Taiwan, Korea, Europe, China, and internationally. On December 8, Photronics SEMiC revealed that its undisclosed sales in November rose 43.97% to NT$286,387,000 from NT$198,919,000, according to a statement filed to the Taiwan Stock Exchange.

Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Millennium Management is a leading shareholder in Phototronics, Inc. (NASDAQ:PLAB) with 1.2 million shares worth more than $17.8 million.

In its Q2 2022 investor letter, Meridian Funds, an asset management firm, highlighted a few stocks and Phototronics, Inc. (NASDAQ:PLAB) was one of them. Here is what the fund said:

“Photronics, Inc. (NASDAQ:PLAB) is a semiconductor capital equipment company and a leader in photomasks, a critical component in the manufacturing of semiconductors and flat panel displays. The company’s earnings declined from a peak in 2015 due in part to a long-term trend within the semiconductor industry away from ASICs to FPGAs, which, to put it simply, allowed more semiconductor functionality to be made with fewer photomasks. Earnings also were pressured by significant investments made by Photronics to build out capacity in China, which took time to ramp up to profitability. We invested in the company in the second quarter of 2021 due to our thesis that 1) increased semiconductor content in a wide variety of products would revitalize the ASIC market; 2) it’s China investments would pay off, partially helped by an emerging trend toward localization of semiconductor production; and 3) Photronics is a well-managed industry leader with a strong balance sheet and improving return on capital. Despite macroeconomic worries about the semiconductor industry, the company’s stock advanced on news that it had exceeded earnings forecasts for the fourth consecutive quarter, with projections for 2022 earnings per share rising to $1.90 per share, up from less than $1 at the time of our investment. We added to our position in Photronics during the quarter when the strong results were initially not recognized. We believe current secular trends should remain intact for several years, however, we are conscious of the potential for near-term macro-driven volatility.”

11. SoFi Technologies, Inc. (NASDAQ:SOFI)

Number of Hedge Fund Holders: 25

SoFi Technologies, Inc. (NASDAQ:SOFI) provides digital financial services. It operates through three segments: Lending, Technology Platform, and Financial Services. On November 23, Mizuho analyst Dan Dolev maintained a Buy rating on SoFi Technologies, Inc. (NASDAQ:SOFI) stock and lowered the price target to $6 from $7, noting that the impact on 2023 sales and profits should be less dramatic for the firm than peers.

Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Silver Lake Partners is a leading shareholder in SoFi Technologies, Inc. (NASDAQ:SOFI) with 31.2 million shares worth more than $152 million.

In its Q4 2021 investor letter, Altron Capital Management, an asset management firm, highlighted a few stocks and SoFi Technologies, Inc. (NASDAQ:SOFI) was one of them. Here is what the fund said:

“We have been building our position in SoFi Technologies, Inc. (NASDAQ:SOFI) over the last two quarters but have not yet written about our thesis until now. SoFi is an online financial technology company that started off refinancing student loans. This segment remains a big part of the company’s business, but they have more recently expanded their products to offer an entire suite of financial services including personal banking, investing, and credit. While their collection of products is still evolving and not yet complete, we believe the company is in the early stages of its inflection. The company nearly doubled its member count over the past year and is growing 50%+ despite its loan refinancing business taking a hit due to the COVID-related loan moratorium. Furthermore, the company is close to obtaining a bank charter through its acquisition of Golden Pacific Bancorp, a community bank based in Sacramento. A bank charter would allow SoFi to take in its customer deposits, lowering its cost of capital and expanding the company’s breadth of financial offerings.

While SoFi is not the only online banking platform out there, we believe it could take a decent share of the financial services market. Banking is a notoriously sticky business, as the inconvenience and hassle of switching banks prevent consumers from jumping to competitors regardless of cost. This is one of the reasons that traditional banks are one of the few businesses to have truly been disrupted by technology. We think SoFi is well on its way to changing that and creating a new paradigm for the future of consumer banking and financial services. (read more)

10. Asana, Inc. (NYSE:ASAN)

Number of Hedge Fund Holders: 26

Asana, Inc. (NYSE:ASAN) operates a work management platform for individuals, team leads, and executives in the United States and internationally. In early December, Asana revealed that its time tracking feature in the work management products will track and report on estimated and actual time spent on tasks. Asana’s Updated portfolio view will help resize and reorder columns in the portfolio list, similar to the Project grid. The new feature is expected to further cement the place of the firm as a leading workforce software provider.

On December 2, DA Davidson analyst Robert Simmons maintained a Neutral rating on Asana, Inc. (NYSE:ASAN) stock and lowered the price target to $18 from $20, noting that the company posted its smallest revenue beat in the past nine quarters and also provided commentary suggesting that Financial Year 2024 growth estimates may have been too high.

Among the hedge funds being tracked by Insider Monkey, Singapore-based firm Himension Capital is a leading shareholder in Asana, Inc. (NYSE:ASAN) with 7.5 million shares worth more than $167.5 million.

In its Q3 2022 investor letter, Diamond Hill Capital, an asset management firm, highlighted a few stocks and Asana, Inc. (NYSE:ASAN) was one of them. Here is what the fund said:

“Work management software company Asana, Inc. (NYSE:ASAN) has, in our view, a relatively undifferentiated and discretionary software product within a software category that will likely be meaningfully smaller than anticipated. Additionally, Asana’s operating losses continue to widen as its revenues have begun decelerating.”

9. Avnet, Inc. (NASDAQ:AVT)

Number of Hedge Fund Holders: 27

Avnet, Inc. (NASDAQ:AVT) is a technology solutions company that markets, sells, and distributes electronic components. Some of the major electronic products of Avnet are Amplifiers, Connectors, Batteries, Circuit protection, Displays, Embedded Boards and Systems and Cables & wires. The company has been paying a dividend to shareholders consistently for the past eight years. These payouts have also registered constant growth during this time. The stock offers investors a healthy mix of growth and value for a balanced portfolio.

At the end of the third quarter of 2022, 27 hedge funds in the database of Insider Monkey held stakes worth $610 million in Avnet, Inc. (NASDAQ:AVT), compared to 27 in the previous quarter worth $765.6 million.

8. Pure Storage, Inc. (NYSE:PSTG)

Number of Hedge Fund Holders: 35

Pure Storage, Inc. (NYSE:PSTG) provides data storage technologies, products, and services in the United States and internationally. On October 24, Pure Storage’s Chief Visionary Officer, John Colgrove, said that the firm’s backup as a service product and key part of its flash blade is being built out of Bengaluru. Parts of the firm’s file protocols, and object protocols are also running out of India. The company is also actively hiring in India and increasing its headcount. India is one of the biggest tech markets in the world and expansion in the country puts the firm in a pole position for fast growth.

On December 1, Susquehanna analyst Mehdi Hosseini maintained a Positive rating on Pure Storage, Inc. (NYSE:PSTG) stock and raised the price target to $44 from $40, noting that the company reported strong third-quarter earnings and guidance which were driven by an increased emphasis on pursuing more profitable deals.

At the end of the third quarter of 2022, 35 hedge funds in the database of Insider Monkey held stakes worth $1.1 billion in Pure Storage, Inc. (NYSE:PSTG), compared to 33 in the preceding quarter worth $961.3 million.

7. Cadence Design Systems, Inc. (NASDAQ:CDNS)

Number of Hedge Fund Holders: 46

Cadence Design Systems, Inc. (NASDAQ:CDNS) provides software, hardware, services, and reusable integrated circuit (IC) design blocks worldwide. On October 18, Cadence Design Systems revealed that it has expanded its partnership with Samsung Foundry to accelerate 3D-IC design. The Integrity y 3D-IC Platform is enabled for die-on-die 3D-IC stacking. This 3D platform supports the company’s Intelligent System Design strategy. The firm has also benefited from recent announcements by the US government to invest in chip infrastructure in the US. In earnings for the third quarter of 2022, the firm posted a more than 20% year-over-year increase in revenue.

On October 25, Baird analyst Joe Vruwink maintained an Outperform rating on Cadence Design Systems, Inc. (NASDAQ:CDNS) stock and lowered the price target to $198 from $204, noting that 2022 is not materially impacted by recent export controls and raised outlook now factors in a better fourth quarter than implied last quarter.

Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Alkeon Capital Management is a leading shareholder in Cadence Design Systems, Inc. (NASDAQ:CDNS) with 3.2 million shares worth more than $523.4 million.

6. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)

Number of Hedge Fund Holders: 85

CrowdStrike Holdings, Inc. (NASDAQ:CRWD) provides cloud-delivered protection across endpoints and cloud workloads, identity, and data. On November 29, CrowdStrike Holdings announced financial results for the third quarter of the fiscal year 2022, reporting that subscription gross margin was 75%, compared to 76% in the third quarter of fiscal 2021. CrowdStrike’s subscription customers that have adopted five or more, six or more and seven or more modules were 60%, 36% and 21%, respectively.

On November 30, Truist analyst Joel Fishbein maintained a Buy rating on CrowdStrike Holdings, Inc. (NASDAQ:CRWD) stock lowered the price target to 200 from $275, noting that the company’s third-quarter revenue and free cash flow topped estimates, but macro pressures weighed on its ARR and net new ARR metrics.

At the end of the third quarter of 2022, 85 hedge funds in the database of Insider Monkey held stakes worth $2.97 billion in CrowdStrike Holdings, Inc. (NASDAQ:CRWD), compared to 78 in the preceding quarter worth $4.1 billion.

In addition to Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:FB), CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is one of the tech stocks with the biggest upside.

In its Q2 2022 investor letter, Carillon Towers Advisers, an asset management firm, highlighted a few stocks and CrowdStrike Holdings, Inc. (NASDAQ:CRWD) was one of them. Here is what the fund said:

“CrowdStrike Holdings, Inc. (NASDAQ:CRWD), a security software platform for protecting information technology assets and cloud workloads, delivered strong earnings results, with solid recurring revenue, customer growth, and profitability. Some investors, however, hoped for bigger numbers on the annual recurring revenue metric. Additionally, CrowdStrike has shown a desire to continue to hire to fuel growth, so the expected increase in future profitability will be held back somewhat in the near term. We remain positive on the company’s prospects, as current geopolitical tensions make cyber security mission-critical.”

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