The broad tech market may have seen its heyday come and go post-pandemic. Today’s investors are skittish about high-flying growth opportunities amid promising 5% yield on savings accounts and Treasuries. But surprisingly, parts of this year saw rallies and resurgence for a core selection of tech stocks, mainly driven by artificial intelligence (AI) exuberance. That enthusiasm waned a bit in August, and many are back to being cautious and fearful of overblown valuations.
But don’t throw out the robot with the tech bathwater. A handful of tech stocks represent overlooked potential to break free from the broader downturn. Here are three stocks to consider and, if you’re tech-averse, the only three you should focus on.
Palantir Technologies (PLTR)
Palantir Technologies (NYSE:PLTR), a primary player in big data analytics, had a great year as the stock’s soared 123% since January and broken through its 2022 slump. It isn’t just hype though, as the company recently beat analysts’ estimates and saw its second consecutive profitable quarter.
In its Q2 2023 earnings release, Palantir reported an EPS of 4 cents, up from 2 cents a year ago. This positive momentum was supported by an 18% year-over-year rise in revenue, totaling $509 million. That’s a decent analyst beat, as the consensus sat around $502 million.
Palantir’s customer base grew significantly, jumping 55% year-over-year and 9% compared to the previous quarter. The company proved its on a solid financial footing with $79 million in cash from operations, representing a 15% margin. For early-stage tech firms like Palantir, R&D and marketing are huge cash sinks, so a double-digit margin is noteworthy.
Alongside its cushion of government and corporate contracts, its AI technology is a key driver of Palantir’s promising future. Dubbed “the Messi of AI,” Palantir hasn’t yet seen the broad market acknowledgment of its AI potential that drove big-name mega-cap companies higher this year. With impressive financial results and innovative advancements, Palantir is poised to leverage its big data expertise to expand its foothold in the evolving tech landscape.
Chegg (CHGG)
Chegg (NYSE:CHGG), an education-focused company known for its textbook rental service, will soon unveil a new AI-driven homework tool that holds the potential to elevate the company’s stock performance. With a history of positive earnings, Chegg is adept at embracing technological advancements to maintain its competitive edge.
In a press release, CEO Dan Rosensweig emphasized the company’s strategic pivot towards leveraging artificial intelligence. Specifically, he underscored his belief that companies with brand loyalty, sought-after services, and valuable data sets can harness AI for growth, yielding substantial returns.
In addition to its AI-focused endeavors, Chegg recently kickstarted its buyback program. Stock repurchasing is a herald of the company’s superior financial position. That’s further underscored by the company’s quarterly earnings report of revenue standing $182.9 million, slightly lower than the previous year’s $194.7 million, but still beating analysts’ expectations. Impressively, Chegg’s net income amounted to $24.6 million. That’s a huge jump from the prior year’s $7.5 million and defied expectations of a $4.7 million loss.
Keysight Technologies (KEYS)
Keysight Technologies (NYSE:KEYS), an electronics test and measurement equipment manufacturer and software, reported robust financial performance in the latest quarter. The company’s non-GAAP net income hit $393 million, $2.19 per share, showcasing growth from $363 million and $2.01 per share last year. The company reported quarterly revenue of $1.38 billion, which is flat from last year.
Boding well for its potential, Keysight is expected to show 9.5% cash flow growth for the current year. That’s building on an impressive track record of 18.9% cash flow growth over the past three to five years. This performance highlights the company’s consistent ability to generate substantial cash flow.
With its solid foundation and a promising cash flow outlook, Keysight stands as an appealing option for long-term investment. Additionally, considering the potential for undervaluation, investors might find this tech stock the best buy for August.
On the date of publication, Jeremy Flint held a long position in PLTR. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
