Under The Radar Tech Stocks To Invest In Today

Nov 19, 2020 06:06 PM ET
Under The Radar Tech Stocks To Invest In Today

Technology is the best-performing sector in the United States. In the past few years, small tech firms have transformed themselves into some of the world’s giants. For example, Facebook, which had a market cap of $104 billion during its IPO, is now worth more than $835 billion. 

Shopify is yet another example, which had a market value of $1.2 billion during its IPO five years ago is now worth more than $127 billion. In this article, we will look at five under-the-radar technology stocks you should invest in today.

Box (BOX)

Started in 2005, Box is a technology market leader that offers cloud storage services to thousands of businesses and millions of customers. Its primary service allows users to save files in the cloud and access them wherever they are using their smartphones and computers. 

For individuals, the most basic package starts at $0, but it can be upgraded to $10 per month for more storage. For an enterprise, the package starts at $5 per user and can be extended to $35 per user. 

Today, Box is used by more than 69% of businesses in the Fortune 500 list and hundreds of thousands of smaller ones, like AstraZeneca, Coca-Cola, Intuit, and Herbalife Nutrition. It has also expanded its services to include security and compliance, collaboration, and workflow automation.

At the same time, its revenue has been on a growth path. It has increased from just $40.5 million in 2012 to more than $736 million in the past 12 months. However, it has never made a profit, which has made most investors avoid it. Indeed, its stock price has fallen by more than 22% in the past three years and by more than 7% in the past three months. 

Still, Box is an excellent company to invest in for several reasons:

  • While it faces strong competition, it has sustained a long period of low churn. 

  • The company has made some strong investments in its bid to retain and upsell its customers. 

  • It is reasonably undervalued compared to its peers.

Box has been a laggard for years.

Box has been a laggard for years

Medallia (MDLA)

Medallia is a low-profile technology company that most people have never heard about. Started in 2001, it has seen its market value climb to more than $4 billion. MDLA offers services to such famous clients as PayPal, ABN Amro, Bank of America, and Comcast, among others. 

Its services are intended to help the businesses understand their customers and then improve their customer experience at scale. The Medallia Experience Cloud is its main platform, which combines artificial intelligence and machine learning to solve these challenges. Indeed, the platform captures and analyses more than 6 billion experiences annually. 

In the past few years, it has also increased the range of its tools to include Medallia conversations that help companies to communicate with their customers. It also has Medallia Crowdcity, Medallia Digital, and Medallia Social.

Subsequently, Medallia has been on a growth path that has seen its revenue climb from $261 million in 2018 to more than $414 million in the past 12 months. And that growth has become possible because of the growing demand for customer insights and feedback in all industries. 

Medallia has underperformed partly because it is misunderstood.

Medallia (MDLA)

Dropbox (DBX)

Dropbox is very similar to Box, Google Drive, and Microsoft’s OneDrive. Started in 2007, DBX offers cloud storage services to both individuals and companies. It has more than 15 million customers, and it offers its services to some of the leading players in the world market.

For the corporate clients, the pricing of its storage services starts at $15 per account and goes to $25. For individuals, DBX offers a free package where customers get 2 GB of free storage. They can upgrade this for up to $17 per month for a Premium plan and $10 for Basic.

Dropbox, which is now valued at more than $8.32 billion, has seen its revenue and profitability grow over the years. In 2015, it had more than $603 million in revenue. That grew to more than $1.85 billion in the past 12 months. Also, unlike Box, it has managed to become profitable. It moved from a loss of more than $484 million in December 2018 to a profit of $82 million in the past 12 months. 

Despite its progress, Dropbox has underperformed other high-flying technology companies, as shown below. But there are still some reasons why you should invest in it:

  • It is expanding rapidly in the enterprise industry. 

  • It has limited churn, which is a good thing for a SAAS company. 

  • It is growing rapidly and becoming profitable at the same time.

Dropbox vs. Nasdaq 100

Dropbox vs. Nasdaq 100

Zendesk (ZEN)

Zendesk offers solutions that help their corporate clients communicate with their customers better. Its solutions also help them sell, gather community data, and provide other services to customers. It is a brand most people have never heard of, but whose functionality we have all used in one way or another. For example, whenever you communicate with staff at Shopify, Slack, Venmo, and Uber, you are using the company’s tools. 

ZEN was started in 2007 in Denmark and has seen its market value rise to more than $14 billion. While it has never made a profit, Zendesk has seen its profit grow from more than $38 million to more than $975 million. 

Zendesk is a good investment option because of its importance to customers, the existing relationships with the biggest companies in the world, and the fact that it is creating more solutions to upsell existing customers. As seen below, despite its strong fundamentals, ZEN has been an underperformer.

Zendesk has underperformed the market.

Zendesk (ZEN)

Dynatrace (DT)

Dynatrace offers cloud monitoring services to large organizations. Specifically, they use artificial intelligence in their services to monitor the performance of applications and multi-cloud infrastructure. The service is popular mostly with the companies built on cloud infrastructure, like Landbay, Temenos, and SAP. 

In recent months, demand for cloud solutions has been rising, as evidenced by the recent strong performance by Microsoft, Amazon, and Google. That is partly because companies have seen the importance of cloud computing as more distractions happen. 

That has led to significant growth for Dynatrace, whose revenue has grown from more than $406 million in 2017 to more than $618 million in the past 12 months. Its profit has increased to more than $78.8 million.

Dynatrace (DT)

Final thoughts

The tech universe is a large one, particularly in the United States. While we all know about companies like Microsoft, Facebook, and Apple, there is a universe of other quality stocks that are rarely mentioned. The five we have mentioned here are just a sample. They have quality services and excellent recurring revenue.

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