Once the post-COVID boom faded, many high-flying tech stocks plummeted, potentially creating opportunities for growth investors looking to position their portfolios for substantial gains. In my view, select beaten-down tech companies appear primed for massive upside if bought before the impending recovery.
Of course, timing the bottom involves substantial risk, given the ongoing market turbulence. However, I don’t foresee an imminent recession, given the strength of the labor market and strong macro data coming in. Thus, accumulating shares of oversold tech stocks looks like an enticing proposition.
Naturally, stomaching volatility is necessary to invest in these cyclic tech plays. The potential rewards provide elevated risk, best-suited for those with a high risk tolerance. While broader markets will heavily influence their recoveries, I believe the steep sell-offs in many tech stocks position them for enormous upside once sentiment improves. Concentrating bets heightens risk further, but also positions investors for maximum gains if the selected stocks return to favor.
Interest rates are basically at their peak, and the pink sheets broadly appear oversold to me. Now may be the time to scoop up some potential multi-bagger tech stocks before the upswing. Of course, an iron gut is mandatory to endure rollercoaster price swings for any stock with an outsized upside. With that said, let’s look at the following three.
Usio (USIO)
While Usio (NASDAQ:USIO) has traded in a relatively flat range over the past year, I believe this fintech stock merits a closer look as its adoption accelerates. In my view, USIO offers appealing tech capabilities across various fintech domains, making it well-positioned as the space gains traction.
Despite its small size, Usio boasts an impressive suite of fintech solutions spanning prepaid cards, ACH payments, merchant services, and more. Usio is projected to reach profitability next year and grow revenue 20% in 2023. Looking ahead to 2024 earnings, its forward price-earnings ratio sits at just 17-times, with a price-to-sales ratio of only 0.5-times for 2023. In my opinion, this seems like a bargain, given USIO’s growth trajectory.
Naturally, I expect the post-pandemic cooldown in fintech to shift back to growth as the sector normalizes. Once clarity returns, USIO stock could surge higher, in my view. The stock has languished amidst the recent economic turmoil, but its diverse fintech offerings strategically position it for the next upturn.
In summary, though Usio hasn’t made huge waves recently, its blend of financial technology capabilities and reasonable valuation make it an intriguing investment. If the company delivers on 2023’s projected profitability and revenue growth, I believe its stock should follow suit. The average Wall Street analyst sees 336% upside in one year.
Ebix (EBIX)
While more volatile than other picks here, Ebix (NASDAQ:EBIX) presents a potential upside after its massive decline. This diversified financial services company provides solutions spanning insurance, remittance, lending, and wealth management. Despite recent instability, I feel EBIX stock is nearing a strong support level where it could reverse higher.
The company has disappointed lately with top-line declines and guidance cuts. Consequently, EBIX has plunged more than 95% from its peak. However, shares seem extremely oversold at this point, in my opinion, having breached decade-lows.
Though risks undoubtedly persist, analysts forecast Ebix’s profits to quintuple next year. Based on 2024 estimates, its forward price-earnings ratio stands at just 3.4-times, with a price-to-sales of only 0.3-times. To me, this signals the negativity is overdone.
If Ebix’s various financial services businesses stabilize as management predicts, its beaten-down stock should respond favorably. The path remains murky, but patient investors could be rewarded by buying EBIX stock around $5 per share, in my view. While volatility won’t vanish overnight, I believe much of the potential pessimism is already priced in from these levels. The average Wall Street analyst sees 333% upside in one year.
ZeroFox (ZFOX)
In the battered cybersecurity space, ZeroFox (NASDAQ:ZFOX) appears poised for a turnaround after substantial underperformance. Though profits remain elusive, its 26% projected sales growth for 2023 and narrowing losses signal positive momentum, in my opinion.
ZFOX stock has plunged roughly 93% from its initial public offering, reaching all-time lows. Its debt load of over $190 million also remains a concern, especially amid rising rates. However, I feel ZeroFox has weathered the worst of its challenges. Cash burn is slowing as management focuses on efficiency and leveraging operating scale.
Bulls point to ZeroFox reaching cash flow breakeven by mid-2025 as cybersecurity demand rebounds. Considering its capabilities in external threat intelligence and protection, the company could quickly regain favor if sector sentiment improves.
In essence, I believe ZeroFox has been excessively punished during the tech selloff. Its promising growth and progress regarding profitability merit attention before sentiment shifts. Wall Street seems to share the same view, as the average analyst sees 267% upside in one year.
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On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
