Just as market-wide selling knocked the steam out of tech growth stocks, IBM’s historic acquisition of Red Hat reminded investors in this space that smart opportunities are still aplenty in this space—especially when one focuses on well-managed companies and segment leaders.
By their very nature, growth investors are primarily focused on finding companies whose earnings and revenue are expected grow at a rate that outpaces the market. This investment strategy comes with its fair share of risks, but it also brings the exciting possibility of outsized returns—an end goal that every investor desires.
Over the past several years, Wall Street’s most exciting growth stocks have emerged from the technology sector. And despite recent volatility, strong earnings and impressive sales remain the story for many up-and-coming companies in the technology sector. That means that growth investors searching for the next great market-beating stock might want to keep their focus on specific tech stocks.
Luckily, we can pair the proven Zacks Rank with our innovative Style Scores system, which includes a “Growth” category, to find strong growth tech stocks. Investors should note that our Growth category values earnings and sales growth, as well as improvements to a company’s financial statements—including strong cash flows and great return on equity.
With all of this said, check out these three tech stocks for growth investors to consider now:
1. NetApp, Inc. (NTAP - Free Report)
NetApp specializes in hybrid cloud solutions; in other words, it provides data-based services which simplify the management of applications cloud and on-premises environments. NetApp’s products and solutions are in high demand as enterprises around the world continue modernizing and adapting to cloud technology. The stock sports a Zacks Rank #1 (Strong Buy) and sports promising growth characteristics.
Notably, NetApp has an “A” grade for Growth in our Style Scores system. Earnings are projected to improve by more than 27% in 2018, and that growth is expected to continue to the tune of 14% on a long-term, annualized basis. NetApp is also notching cash flow growth of about 25% right now.
2. Turtle Beach Corporation (HEAR - Free Report)
Turtle Beach is a leading designer of headsets for video gamers. It has been at the top of this market for many years, but recently, the company has garnered tons of investor attention on the back of fresh demand from gamers playing Fortnite, a “freemium” shooter game which has 125 million players worldwide.
At one point this year, shares were up a staggering 1,200% in 2018 alone, but the stock has pulled back significantly from its highs. However, this is not a purely speculative trade that is now being punished as excitement cools; rather, it has a real business and is likely undervalued now.
For example, Turtle Beach is projected to surge into profitability with EPS growth of 1,200% on revenue growth of 78% this year. HEAR also has a long-term projected EPS growth rate of 15%. Plus, the stock is trading with a Forward P/E of just 6.8 and a PEG of 0.5. HEAR is currently holding a Zacks Rank #1 (Strong Buy).
3. Twilio Inc. (TWLO - Free Report)
Twilio delivers a cloud-based communications platform that allows developers to send automated phone calls, text messages, and other chat functions. In other words, Twilio APIs can be easily implemented into other software and apps, and the firm is responsible for many of the live chat boxes and programmatic messages you likely receive these days.
TWLO is a Zacks Rank #1 (Strong Buy) and an aggressive earnings growth pick right now, as estimates have its bottom line improving by 116% and 374%, respectively, over the next two full fiscal years. Revenue is projected to growth 48% and 27% in the current and next years as well. Moreover, current cash flow growth is hitting over 82%, and the firm certainly holds that “segment leader” position we mentioned earlier.
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