The Nasdaq’s bullish trend continues this year, with the tech-heavy index up 31.7% year to date. Nasdaq Composite has outperformed The Dow Jones Industrial Average and the S&P 500 index’s increases of 3.4% and 15.8%, respectively.
Tech-focused exchange-traded fund, Technology Select Sector SPDR ETF (XLK) has jumped 38.6% year to date, giving way to a sharp rebound so far in 2023 as companies continue to protect profitability after a massive sell-off in 2022 on recession concerns, inflationary pressure, increased oil prices and higher interest rates. The latest forecast for worldwide IT spending by Gartner also indicates an upside for tech stocks. Despite the ongoing macroeconomic and geopolitical challenges, the independent research firm forecasts worldwide IT spending to increase 5.5% year over year to $4.6 trillion in 2023. The sector’s upside in the rest of 2023 is likely to be driven by the impressive long-term growth prospects of tech companies, including eGain ( EGAN Quick Quote EGAN - Free Report) , Vipshop ( VIPS Quick Quote VIPS - Free Report) , Tencent Music Entertainment Group ( TME Quick Quote TME - Free Report) , Zuora ( ZUO Quick Quote ZUO - Free Report) and Snap ( SNAP Quick Quote SNAP - Free Report) , owing to continuous digital transformations. The rapid adoption of cloud computing and the ongoing integration of AI and machine learning have been major growth drivers. Growing demand to modernize workflow across industries is expected to drive the demand for generative AI applications such as Microsoft-backed OpenAI‘s ChatGPT, Google’s Bard and Anthropic’s Claude. Moreover, the growing demand for e-commerce, contactless delivery through drones and digital payment highlights the urgency for accelerated 5G network development. Meanwhile, blockchain, IoT, smartphones, autonomous vehicles, storage solutions, AR/VR and wearables, networking and connectivity solutions — including Wi-Fi as well as Wi-Fi/Bluetooth integrated SOCs — and the need for high-speed data in both communications networks and data centers offer significant growth opportunities. Our Picks
Per the Zacks’ proprietary methodology, stocks with the combination of a
Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer solid investment opportunities. The Growth Style Score condenses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of its growth. You can see the complete list of today’s Zacks #1 Rank stocks here.
Based on this, here we pick five technology stocks currently trading for less than $20 a share that have strong fundamentals and are well-poised for growth in 2023.
While these stocks trade under $20 and can be more volatile than their costlier peers, strong bottom-line projections and positive estimate revisions in recent times point toward momentum in the near term. The chart below shows the price performance of our five picks year to date. Year-to-Date Performance Image Source: Zacks Investment Research eGain is the leading provider of cloud customer engagement hub software. With a presence in North America, EMEA and the APAC, this Zacks Rank #1 company offers web customer interaction applications, social customer interaction applications and contact center applications. eGain solutions help improve customer experience, optimize service processes and boost sales across the web, social and phone channels. Hundreds of the world's largest companies rely on eGain to transform their fragmented sales engagement and customer service operations into unified customer engagement hubs. The stock is currently priced at $12.12 and has a Growth Score of A. The Zacks Consensus Estimate for this Zacks Rank #1 company’s fiscal 2023 earnings has moved north by 5.3% to 20 cents per share in the past 60 days. Vipshop is an online discount retailer for brands. It provides branded products to consumers in China through flash sales on the vipshop.com website. The company’s continued efforts toward strengthening product offerings and improving product procurement are aiding its financial performance, given the growing proliferation of online shopping amid the pandemic. Solid execution of its merchandising strategy is bolstering its active customer base. Vipshop’s successful transition to discount retailing is a major upside. This is likely to continue driving momentum across repeat customers and help attract new ones. Its quarterly results are likely to keep benefiting from its deepening focus on high-margin-generating apparel-related businesses, especially the discount apparel business. Deep discount channels are expected to bolster its online gross merchandise volumes in the quarters ahead. The stock is currently priced at $16.19 and has a Growth Score of A. The Zacks Consensus Estimate for this Zacks Rank #1 company’s 2023 earnings has moved north by 17.6% to $1.94 per share in the past 60 days. Tencent Music operates online music entertainment platforms to provide music streaming, online karaoke and live streaming services in the People's Republic of China. TME offers QQ Music, Kugou Music and Kuwo Music, which enable users to discover and listen to music in personalized ways. TME is witnessing strong growth in music subscription revenues, supported by higher revenues from sales of digital albums and advertising services. Gains in subscriptions are driving revenues from online music services. Improved operating efficiency and effective cost optimization are also driving its profitability. The stock is currently priced at $7.26 and has a Growth Score of A. The Zacks Consensus Estimate for this Zacks Rank #2 company’s 2023 earnings has moved north by 5.5% to 58 cents per share in the past 60 days. Zuora provides cloud-based software on a subscription basis. The company's product portfolio includes Zuora Billing, Zuora RevPro, Zuora CPQ, Zuora Insights and Zuora Collect. Last month, the company unveiled two additions to its product lineup, the Zuora Warehouse and BYOW (Bring Your Own Warehouse) Technology, and Zephr's subscriber-led growth engine. Zuora’s Zephr is the world's first subscriber-led growth engine. With Zephr, companies can dynamically create offerings tailored for each subscriber, fostering conversion, retention and ongoing value delivery. These offerings can range from freemium conversions and upsell add-ons to churn saves and win-back strategies. With the ability to perform fast and efficient data analysis within Zuora UI, enterprises can make informed decisions quickly and be more competitive. The stock is currently priced at $10.11 and has a Growth Score of A. The Zacks Consensus Estimate for this Zacks Rank #2 company’s 2023 earnings has moved north by 87.5% to 15 cents per share in the past 60 days. Snap is benefiting from user growth, attributed to strong adoption of Augmented Reality (AR) Lenses, Discover content and Shows, which in turn is driving the top line. The company has been witnessing improving user engagement. Snap reaches over 75% of 13 to 34-year-olds in over 20 countries, representing above 50% of global advertising spend. The Snapchat+ subscription service reached more than 3 million paying subscribers in the first quarter. The company has been making considerable progress in diversifying revenues with Snapchat+, ARES and sponsored AR advertising, which are expected to aid top-line growth in the near term. The stock is currently priced at $12.12 and has a Growth Score of A. The Zacks Consensus Estimate for this Zacks Rank #2 company’s 2023 earnings has remained steady at 4 cents per share in the past 60 days.