The market fell again on Thursday after it mounted a comeback Wednesday from a three-session beating that sent the Nasdaq into correction territory. Analysts and investors have been calling for a pullback in the tech-driven market rally for months and more selling could be on the horizon as many of the big names like Tesla (
TSLA Quick Quote TSLA - Free Report) and Zoom Video ( ZM Quick Quote ZM - Free Report) still have valuations that seem unfathomable and unjustified to many.
That said, investors with longer-term horizons don’t need to try to time the market so precisely. In fact, trying to time the market can lead to buying high and selling low, with consistent quick gains in and out of stocks often reserved for the most experienced traders.
Instead, investors might want to focus on economic trends and consumer behavior that appear to have not just short-term momentum, but real staying power. This is part of the reason why tech stocks and e-commerce firms have thrived during the pandemic, as people got a glimpse of what is assumed to be the future: digitally connected everything with a focus on data, convenience, smartphones, and all things tech.
Clearly, some investors might want to remain on the sidelines as election-based turmoil could make things more volatile in the near-term. That said, market movers and institutional investors have to find returns somewhere and with interest rates pinned near zero for the foreseeable future, the equities market is likely set to benefit over the long run.
Today we look at three highly-ranked stocks that are widely regarded as “cheap” because they trade for under $20 per share. All three stocks are also part of different niche areas within the broader tech space that appear set to grow for years, if not decades to come…
Mitek Systems, Inc. ( MITK Quick Quote MITK - Free Report)
Prior Close: $11.86 USD
Mitek Systems is built for our mobile and digital world, with offerings that help companies verify a user’s identity. The firm, which utilizes AI and computer vision, also offers remote check deposit solutions and its tech is embedded in the apps, platforms, and websites of over 7,000 financial organizations. The digital identity verification firm has grown steadily in recent years and it topped our Q3 FY20 estimates at the end of July, with sales up 16% and adjusted earnings up 25%.
The firm’s longer-term earnings outlook has turned far more positive since its report. This positivity helps Mitek grab a Zacks Rank #2 (Buy) at the moment, alongside its “A” grade for Growth and “B” for Momentum in our Style Scores system.
Zacks estimates call for its FY20 revenue to jump 17%, with FY21 expected to come in another 15% higher sales. Mitek’s adjusted EPS figures are projected to surge 38% and 16% over this same stretch. And it boasts a strong history of quarterly earnings beats.
MITK’s offerings are tailor-made for an economy that is only becoming more mobile and digital-centric. This has helped attract investors, as the stock has soared 245% in the last five years to crush the tech sector’s 120%, which includes an 80% climb off the market’s lows.
Plus, the stock sits about 10% off its recent highs. On top of that, Mitek trades at a discount to the tech sector and 35% below its own two-year median in terms of forward earnings. And it is part of the Zacks’ Computer - Optical Imaging industry that is highly-ranked right now.
ChannelAdvisor Corporation ( ECOM Quick Quote ECOM - Free Report)
Prior Close: $14.30 USD
ChannelAdvisor is a cloud-based firm that offers e-commerce solutions that help brands and retailers connect with customers, grow sales, and more. The company topped our Q2 estimates in early August. “Our second quarter results were exceptional, with record revenues and record adjusted EBITDA both substantially exceeding our original guidance for the quarter,” CEO David Spitz said in prepared remarks.
ECOM, which has been around since 2001, enables its clients to improve sales and optimize fulfillment on platforms like Amazon (
AMZN Quick Quote AMZN - Free Report) and eBay ( EBAY Quick Quote EBAY - Free Report) . Investors should note that the company acquired Paris-based e-commerce analytics firm, BlueBoard, in July.
ChannelAdvisor’s strong earnings revisions help it hold a Zacks Rank #1 (Strong Buy) at the moment, with its FY20 consensus up 40% and FY21 up 26%. The firm also lands “B” grades for Growth and Momentum.
ECOM has jumped 65% in 2020, which includes a recent pullback. ECOM was trading above $20 a share at the end of August and even higher at the start of last month. This gives the stock over 30% more room to run before it climbs back to its recent peak.
ECOM also trades at a discount to the tech sector despite its outperformance over the last 12 months. Let’s also not forget that ChannelAdvisor is part of an industry that will expand for year to come, as e-commerce accounted for only 16% of total U.S. retail sales in Q2 despite near perfect conditions to dominate.
DouYu International ( DOYU Quick Quote DOYU - Free Report)
Prior Close: $15.42 USD
DouYu is a Chinese video gaming and e-sports focused live streaming company that went public in July 2019. The firm has drawn comparisons to Amazon’s Twitch for its ability to allow people to watch video games live. DOYU operates across both PC and mobile apps and it says it “has gained coveted access to a wide variety of premium eSports content.” The firm also stands to grow within the booming gaming global video space that is
projected to soar from $159 billion in 2020 to over $200 billion by 2023.
DouYu is backed by Chinese social media and gaming powerhouse Tencent (
TCEHY Quick Quote TCEHY - Free Report) . And investors should note that firm Tencent proposed in August that DouYu enter into a stock-for-stock merger with rival HUYA ( HUYA Quick Quote HUYA - Free Report) . The firm is currently evaluating the “preliminary non-binding proposal.” The deal would create a mega power in the streaming gaming industry in the world’s second-largest economy. But it’s unclear if it will happen.
DouYu beat our Q2 estimates in August and its growth outlook appears solid. The firm’s adjusted fiscal 2020 earnings are projected to soar over 220% to $0.55 a share on 26% higher sales that would see it reach $1.31 billion.This is expected to be followed up by another 34% earnings growth and 30% stronger revenue in FY21. DouYu’s consensus earnings estimates have climbed since its release to help it land a Zacks Rank #2 (Buy) at the moment, alongside “B” grades for Growth and Momentum.
DOYU shares have soared over 80% in 2020 and 70% in the last three months alone. The stock has taken a hit as part of the broader tech selloff, down around 15% from its early September highs. Meanwhile, its P/S ratio trades in-line with its industry and it offers exposure to a growth industry.
These Stocks Are Poised to Soar Past the PandemicThe COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking. Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early. See the 5 high-tech stocks now>>