Tech stocks have been some of the best investments of the past decade, to the point that finding “the next Google” has become a well-known phrase among investors. It’s no secret — if you want to chase outsized returns (along with outsized risk), tech stocks are the place to look for those types of gains, as they include some of the fastest-growing companies in the world.
Many of these tech stocks have been sitting at depressed levels since the selloffs in late 2021 and 2022 and have been trading sideways since then. Picking the right ones before they deliver a sharp recovery could result in multibagger returns for investors. The current market recovery has been uneven, with big tech companies dominating while smaller firms see little upside action.
I believe that once investors take profits on the big tech names, some of that money will rotate into these under-the-radar tech stocks. That rotation could provide a huge catalyst for gains. Let’s take a look before that happens!
FlexShopper (FPAY)
FlexShopper (NASDAQ:FPAY) is a financial technology company that operates an e-commerce marketplace, providing an affordable lease-to-own (LTO) option for customers who need new furniture, electronics, home appliances and other durable goods. Customers can own the products in one year or less with easy weekly payments. FlexShopper offers no-money-down options, caters to customers with bad credit and allows early purchase options.
The environment has been challenging for e-commerce companies and those dealing with lending and finance for the past three years. You may expect a company dealing with both simultaneously to be on the verge of bankruptcy, but that isn’t the case here. The stock is some 60% off its February 2020 peak but has been executing very well. It is a small company with a market capitalization of just $25 million. However, its financials have held up well despite the volatility. Revenue is expected to grow 19% and hit a new high of $139 million in 2024, but profits are also expected to dive. That doesn’t concern me too much since I see this as a long-term play. The company has $108 million in debt, and once interest payments ease after rates come down, it should allow FlexShopper to hit profitability. Moreover, lower rates should also mean more banks willing to partner with the company, which could significantly increase revenue from here.
Zuora (ZUO)
Zuora (NYSE:ZUO) provides a monetization platform that unlocks new business opportunities and automates complex revenue streams for various industries and use cases. Software companies have been doing very well, but Zuora has been disappointing. It is down 63% from its 2021 peak, and more surprisingly, it is down 47% from its February 2020 prices. That’s likely because growth hasn’t been very great here. However, we are still looking at annual sales growth hovering around 9-12%. That’s not too bad for a software company trading at 2.8 times sales.
More importantly, Zuora is expected to expand EPS by 32% in FY2025 and again by 22% in FY2026. That puts the forward price-to-earnings ratio at 20 times two years out. Considering how steeply software companies trade, I would not be surprised if Zuora delivers multibagger returns over the coming years.
With over 750 customers and a 98% retention rate, Zuora already has an established base upon which to build. Its global footprint covers dozens of countries and leaves room for geographical expansion. Once growth accelerates even slightly, Zuora could quickly reclaim its previous premium valuation. Getting in before that happens could allow for massive gains.
Eventbrite (EB)
Eventbrite (NYSE:EB) has been trading at depressed levels for a long time. In fact, the stock is now trading at a discount of more than 66% from its 2021 peak. However, from my perspective, the stock seems to be bottoming out as financials start to notably improve.
Losses have been shaved down substantially, from $225 million in 2020 to $55 million in 2022, and the company is expected to turn profitable this year with expected earnings per share of 28 cents. This puts the company’s forward price-to-earnings ratio at just 30 times currently. Looking ahead to 2025, Eventbrite’s EPS numbers are anticipated to reach 55 cents. With that in mind, the stock’s forward price-earnings multiple would drop to only 15 times by then. This rapid expected earnings growth warrants a far higher premium.
Additionally, it’s not solely earnings that are growing impressively. The company’s top line has also expanded remarkably. Analysts expect revenue to surpass pre-pandemic levels this year, with further revenue growth expected afterward. Projections show 2028 revenue potentially hitting $668 million, which is not far from EB’s current market valuation. Cash flow has also already turned positive.
All these catalysts considered, EB stock has substantial room to run over the long term. The pandemic hit the ticketing industry hard, but demand is returning strong.
SurgePays (SURG)
This tiny company has somehow flown completely beneath Wall Street’s radar, meaning hardly any analysts provide coverage on the company. But once you peek under the hood, I think you’ll agree that SurgePays (NASDAQ:SURG) has intriguing potential.
SurgePays offers a suite of financial and telecom products catering to underbanked and underserved groups across the United States. The company’s core product is a fintech platform empowering retail clerks to handle transactions like prepaid wireless plans, gift cards and debit services at the point of sale. It’s a win-win arrangement — partner stores profit on each transaction while providing valuable services to customers. SurgePays also utilizes federal subsidies to supply tablet devices and cellular broadband to income-eligible households.
Right now, SurgePays sports a market cap equal to annual revenue. Shares trade at just 4.7 times forward earnings despite just $5.5 million of debt against $12.7 million of cash in the coffers. This year, SurgePays acquired ClearLine Mobile in a $15 million deal funded by a recent equity offering. Growth is the name of the game, and I like the recent move to scoop up a fast-growing target while SURG stock itself remains attractively priced.
Navitas Semiconductor (NVTS)
Navitas Semiconductor (NASDAQ:NVTS) designs, develops and markets gallium nitride (GaN) and silicon carbide power integrated circuits used in power conversion and charging applications.
One of the biggest drivers for Navitas is the expectation that silicon carbide (SiC) and GaN will continue gaining market share against traditional silicon solutions in multiple markets, given their superior performance and cost attributes.
Navitas Semiconductor reported an impressive 114% year-over-year revenue growth in its latest quarter. The company has a $1.25 billion pipeline of upcoming production programs, indicating strong momentum and continued expansion into key sectors like electric vehicles and data centers.
I’m bullish on Navitas’ potential as a leader in next-gen power semiconductor solutions. If execution remains solid, its innovative product lineup could drive substantial share gains and multibagger returns over time.
Arteris (AIP)
Arteris (NASDAQ:AIP) provides semiconductor interconnect intellectual property (IP) and IP deployment solutions to semiconductor companies. The company specializes in on-chip interconnect fabrics and Network-on-Chip (NoC) interconnect IP used in system-on-chip and AI chip designs.
At the end of 2022, Arteris reported a record RPO of $72.7 million, representing 26% year-over-year growth. This momentum reflects the mission-critical role Arteris IP plays in complex chip designs today and serves as a leading indicator of future licensing revenue expansion.
As artificial intelligence, machine learning and other advanced technologies drive demand for increasingly sophisticated chips, Arteris stands to benefit. Its IP portfolio enables the high-performance and low-latency interconnect fabrics required in these cutting-edge designs.
If adoption continues gaining speed, Arteris’ foundational IP could fuel years of rapid growth. That upside potential makes this an interesting semiconductor name to watch.
IonQ (IONQ)
I believe quantum computing will drive the next big wave of hype and innovation in the tech sector. While the promise of quantum may take years to fully materialize, IonQ (NYSE:IONQ) is an intriguing bet on the vanguard of this computing revolution.
IonQ is actively developing quantum algorithms to tackle complex challenges that even today’s most powerful supercomputers cannot crack. It already works with major organizations to explore potential applications across industries.
Revenue today remains negligible — this is a long-term speculative play. But if quantum captures even a fraction of artificial intelligence’s explosive growth, IonQ would see its valuation multiply.
The quantum computing opportunity could be measured in trillions of dollars over the long term. Getting in early on, a leader like IonQ could result in massive returns over the next decade.
On the date of publication, Omor Ibne Ehsan did not hold (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.
