In this article, we discuss the 10 famous tech stocks at a bargain today.
The specter of soaring inflation, rising interest rates, and disappointing quarterly reports have all combined to push a massive selloff in the technology sector over the past few weeks. The tech-heavy NASDAQ Composite has registered a double-digit drop year-to-date after falling towards the backend of last year as well. A slew of technology stocks have thus lost value in 2022 and are now trading at prices that growth investor Cathie Wood of ARK Investment Management has described as “deep value territory”.
Some of the top tech stocks that investors can buy at a bargain today include Snowflake Inc. (NYSE:SNOW), Zoom Video Communications, Inc. (NASDAQ:ZM), and RingCentral, Inc. (NYSE:RNG), among others discussed in detail below. However, Bank of America analyst Savita Subramanian, in a note to investors in late February, has cautioned that it was important to be “selective” when identifying winners of this crash, noting that it took the tech sector over a decade to recover from the dotcom crash at the turn of the millennium.
Our Methodology
The companies that operate in the technology sector and have registered a more than 10% decline in share over the past month were selected for the list. The analyst ratings and business fundamentals of each company were also considered.
Data from around 900 elite hedge funds tracked by Insider Monkey was used to identify the number of hedge funds that hold stakes in each firm.
Famous Tech Stocks at a Bargain Today
10. Zillow Group, Inc. (NASDAQ:Z)
Number of Hedge Fund Holders: 61
Decline in Share Price Over Past Month: 10.01%
Zillow Group, Inc. (NASDAQ:Z) is a digital real estate firm. Hedge funds have been offloading the stock in recent months. At the end of the fourth quarter of 2021, 61 hedge funds in the database of Insider Monkey held stakes worth $2.2 billion in Zillow Group, Inc. (NASDAQ:Z), compared to 67 in the preceding quarter worth $4.2 billion.
On February 11, Benchmark analyst Daniel Kurnos maintained a Buy rating on Zillow Group, Inc. (NASDAQ:Z) stock and raised the price target to $115 from $105, appreciating new targets set by the CEO of the firm that effectively implied doubling of revenue compared to current analyst forecasts for 2023.
Just like Snowflake Inc. (NYSE:SNOW), Zoom Video Communications, Inc. (NASDAQ:ZM), and RingCentral, Inc. (NYSE:RNG), Zillow Group, Inc. (NASDAQ:Z) is one of the stocks that growth investors are flocking to.
In its Q1 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Zillow Group, Inc. (NASDAQ:Z) was one of them. Here is what the fund said:
“Zillow Group, Inc. (NASDAQ:Z) operates leading U.S. real estate sites, a mortgage marketplace, and the Zillow Offers home-buying business. Shares fell during the quarter in concert with the broader rotation out of technology-based stocks despite the company’s continued inflection in mortgages revenue, strong profitability in its core business, and a positive real estate outlook as Zillow Group, Inc. (NASDAQ:Z) builds out its iBuying ecosystem. In our view, Zillow Group, Inc. (NASDAQ:Z) is a leader in the large online real estate advertising market with substantial upside from mortgages and Offers, and we remain investors.”
9. Paycom Software, Inc. (NYSE:PAYC)
Number of Hedge Fund Holders: 46
Decline in Share Price Over Past Month: 11.41%
Paycom Software, Inc. (NYSE:PAYC) provides cloud-based human capital management solutions. On February 9, DA Davidson analyst Robert Simmons kept a Buy rating on the stock and raised the price target to $420 from $385, noting the firm was an “efficient long-term secular share gainer in the payroll space”.
Hedge funds have been loading up on Paycom Software, Inc. (NYSE:PAYC) as the share price falls. At the end of the fourth quarter of 2021, 46 hedge funds in the database of Insider Monkey held stakes worth $1.3 billion in Paycom Software, Inc. (NYSE:PAYC), compared to 40 in the previous quarter worth $1.4 billion.
In its Q4 2020 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and Paycom Software, Inc. (NYSE:PAYC) was one of them. Here is what the fund said:
“Paycom Software, Inc. (NYSE:PAYC) is a cloud-based SaaS provider for human capital management. Its simple yet innovative single-instance software initially targeted small and mid-size businesses, and it is being adopted widely. Paycom Software, Inc. (NYSE:PAYC) has a highly repeatable sales process driven by more than 90% customer retention and a solid track record for selling more to existing customers while acquiring new users. We also like Paycom’s founder/CEO and his impressive track record for value-creating reinvestment. Despite the challenges created by the pandemic, revenue grew 14% in the fourth quarter and for 2020. Additionally, we believe Paycom Software, Inc. (NYSE:PAYC) is well-positioned to benefit from digital transformation as more corporate functions move to the cloud.”
8. Datadog, Inc. (NASDAQ:DDOG)
Number of Hedge Fund Holders: 73
Decline in Share Price Over Past Month: 16.27%
Datadog, Inc. (NASDAQ:DDOG) provides monitoring and analytics services. Elite hedge funds remain bullish on the stock. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Tiger Global Management LLC is a leading shareholder in Datadog, Inc. (NASDAQ:DDOG) with 5.3 million shares worth more than $944 million.
On February 22, Goldman Sachs analyst Kash Rangan upgraded Datadog, Inc. (NASDAQ:DDOG) stock to Conviction Buy from Buy with a price target of $250, noting the firm was on track to outpace growth in the overall cloud market and expand in spaces like security, affirming that the firm had “multiple vectors for growth”.
In its Q1 2021 investor letter, Artisan Partners Limited Partnership, an asset management firm, highlighted a few stocks and Datadog, Inc. (NASDAQ:DDOG) was one of them. Here is what the fund said:
“We also added to Datadog, Inc. (NASDAQ:DDOG). Shares of Datadog, Inc. (NASDAQ:DDOG) retreated in Q1 in sympathy with the broader information technology sector. However, the company remains on solid fundamental footing, recently setting a quarterly record for net new customer additions. Datadog’s cloud solutions fill a void left by legacy tools built for on-premise IT infrastructures, enabling it to take share in an underpenetrated, large addressable market. We believe the company’s low-touch land-and-expand customer acquisition model, combined with a steady expanding product portfolio, position it well for strong profit and cash flow growth in the coming years.”
7. Teladoc Health, Inc. (NYSE:TDOC)
Number of Hedge Fund Holders: 39
Decline in Share Price Over Past Month: 17.29%
Teladoc Health, Inc. (NYSE:TDOC) provides virtual healthcare services. The company posted earnings for the fourth quarter of 2021 on February 22, beating market estimates on earnings per share and revenue by $0.51 and $7.7 million respectively.
Hedge funds have been selling Teladoc Health, Inc. (NYSE:TDOC) stock. At the end of the fourth quarter of 2021, 39 hedge funds in the database of Insider Monkey held stakes worth $2.4 billion in Teladoc Health, Inc. (NYSE:TDOC), compared to 40 in the previous quarter worth $2.8 billion.
In its Q4 2020 investor letter, Carillon Tower Advisers, an asset management firm, highlighted a few stocks and Teladoc Health, Inc. (NYSE:TDOC) was one of them. Here is what the fund said:
“Teladoc Health, Inc. (NYSE:TDOC) offers remote physician access to patients at home. After experiencing incredible levels of growth throughout the early stages of the pandemic as its unique value proposition rose to the forefront of the healthcare industry, the firm’s shares cooled off a bit as optimistic vaccine data slightly curtailed investor expectations for the firm’s future growth potential. We sold the stock.”
6. PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 110
Decline in Share Price Over Past Month: 14.52%
PayPal Holdings, Inc. (NASDAQ:PYPL) provides digital payment services. Hedge funds have been shedding the stock amid a broader lull around growth offerings. At the end of the fourth quarter of 2021, 110 hedge funds in the database of Insider Monkey held stakes worth $9.9 billion in PayPal Holdings, Inc. (NASDAQ:PYPL), compared to 123 in the preceding quarter worth $12.8 billion.
PayPal Holdings, Inc. (NASDAQ:PYPL) recently announced that it was forming a cryptocurrency advisory council to facilitate the setting up of a digital financial system. The company has already integrated crypto payments on the main platform.
In addition to Snowflake Inc. (NYSE:SNOW), Zoom Video Communications, Inc. (NASDAQ:ZM), and RingCentral, Inc. (NYSE:RNG), PayPal Holdings, Inc. (NASDAQ:PYPL) is one of the stocks that elite investors have their eyes on.
In its Q4 2020 investor letter, Polen Capital Management, an asset management firm, highlighted a few stocks and PayPal Holdings, Inc. (NASDAQ:PYPL) was one of them. Here is what the fund said:
“For the full year 2020, one of the top performers was PayPal Holdings, Inc. (NASDAQ:PYPL), which we purchased in 2019, the company continues to take market share in digital payments and has seen an acceleration in user adoption and engagement, especially within their “silver tech” or older user demographic. We expect many more years of ongoing double-digit growth from their various business segments and new initiatives.”
5. Stitch Fix, Inc. (NASDAQ:SFIX)
Number of Hedge Fund Holders: 35
Decline in Share Price Over Past Month: 23.53%
Stitch Fix, Inc. (NASDAQ:SFIX) is a California-based ecommerce firm. Elite hedge funds hold large stakes in the company. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm DE Shaw is a leading shareholder in Stitch Fix, Inc. (NASDAQ:SFIX) with 1.6 million shares worth more than $30 million.
Stitch Fix, Inc. (NASDAQ:SFIX) posted earnings for the second fiscal quarter of 2022 on March 8, beating market estimates on earnings per share and revenue by $0.02 and $2.2 million respectively.
In its Q2 2021 investor letter, RGA Investment Advisors LLC, an asset management firm, highlighted a few stocks and Stitch Fix, Inc. (NASDAQ:SFIX) was one of them. Here is what the fund said:
“We purchased a new position–Stitch Fix, Inc. (NASDAQ:SFIX)–which is attacking this problem of abundance and the friction of shopping digitally head on with curation and personalization.
Your Own Personal Clothing Store
Stitch Fix, Inc. (NASDAQ:SFIX) is incredibly interesting. Founded by Katrina Lake in 2011, Stitch Fix turned apparel shopping into a delightfully personalized, subscription-based platform. The company collects numerous data points when onboarding a customer from the generics and quirks of each individual’s size and shape to tastes in designers, colors and styles. This empowers the company’s stylists to curate a “fix” with five clothing items on a periodic cadence (monthly, quarterly, semi-annually, etc.) of the customer’s choosing. A box arrives with its contents formerly unseen by the customer, with the constant being each item is already a known fit based on the size and shape of the customer’s body type and the trove of data Stitch Fix has on other “look alikes” across their customer base. Of the 5 items, a customer can keep all or none, but they must pay $20 irrespective of whether they keep anything. After reviewing the items, a customer can keep all items (for which they would get a 25% keep five discount) or return some items and checkout online to pay full price.
We owe immense gratitude to Mario Cibelli for helping us think through this company the right way (Mario covered the company in depth with Elliot on a recent episode of This Week In Intelligent Investing).
It is a company we first analyzed and found interesting heading into IPO, deploying the same customer lifetime value framework that led us into our Roku position early. Stitch Fix was intriguing and challenging through this lens, because churn is high in the measurable data, making the CLTV of each individual customer very sensitive to small changes in churn. Mario insisted the more appropriate way to think about this company is comparing them to a retailer like Nordstrom. People start their journey with Stitch Fix, Inc. (NASDAQ:SFIX), buy a bunch of clothes over several months and then shut off the subscription once a satisfactory portion of their wardrobe has been replenished. Customers reengage once another round of refreshment is needed, but while some churn is the bad kind, not all fits that mold…” (Click here to see the full text)
4. Zoom Video Communications, Inc. (NASDAQ:ZM)
Number of Hedge Fund Holders: 48
Decline in Share Price Over Past Month: 26.84%
Zoom Video Communications, Inc. (NASDAQ:ZM) owns and runs a video communications platform. The company posted earnings for the fourth quarter of 2021 in late February, beating market estimates on earnings per share and revenue by $0.22 and $30 million respectively.
Zoom Video Communications, Inc. (NASDAQ:ZM) is one of the top communications stocks on Wall Street. Among the hedge funds being tracked by Insider Monkey, New York-based firm Tiger Global Management LLC is a leading shareholder in Zoom Video Communications, Inc. (NASDAQ:ZM) with 6.1 million shares worth more than $1.1 billion.
In its Q1 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Zoom Video Communications, Inc. (NASDAQ:ZM) was one of them. Here is what the fund said:
“We concluded our campaigns in Zoom Video Communications, Inc. (NASDAQ:ZM). We have been paring our position in Zoom Video Communications, Inc. (NASDAQ:ZM) for several quarters, anticipating the reduced need for video conferencing as vaccination rates climb and people return to their workplaces. That said, we believe there is a strong case to be made that the pandemic has prompted a permanent inflection in videoconferencing’s importance—sustainably higher remote work arrangements, more online learning and less business travel. Furthermore, the company’s dramatically expanded user base (up 485% YoY in Q3) positions it well to cross sell additional services, Zoom Phone in particular. The long-term future remains bright, but we decided to end our successful investment campaign in favor of opportunities in our pipeline with more attractive near-term growth prospects.”
3. Roku, Inc. (NASDAQ:ROKU)
Number of Hedge Fund Holders: 43
Decline in Share Price Over Past Month: 32.38%
Roku, Inc. (NASDAQ:ROKU) operates a TV streaming platform. Hedge funds have been offloading the stock in recent months. At the end of the fourth quarter of 2021, 43 hedge funds in the database of Insider Monkey held stakes worth $2.2 billion in Roku, Inc. (NASDAQ:ROKU), compared to 57 in the preceding quarter worth $2.8 billion.
On February 19, Bank of America analyst Ruplu Bhattacharya maintained a Buy rating on Roku, Inc. (NASDAQ:ROKU) stock with a price target of $235, underlining that although the firm missed revenue guidance for late 2021, the active accounts for the firm continued to register growth during the period.
In its Q4 2020 investor letter, RGA Investment Advisors, an asset management firm, highlighted a few stocks and Roku, Inc. (NASDAQ:ROKU) was one of them. Here is what the fund said:
“For two years running, Roku, Inc. (NASDAQ:ROKU) has now been either the largest or second largest driver of performance in portfolios. When we purchased Roku, obviously we never expected such a phenomenal outcome, so quickly—these things can only be chalked up to luck. However, we do think luck is the residue of design and Roku, Inc. (NASDAQ:ROKU) had all the hallmarks ex ante as the kind of position that could do something wildly spectacular. One of the first signs in seeing Roku’s potential was the sharp contrast between our modeled expectations for the top line of the business and where the consensus expectations were. This was the Shopify setup all over again. By this time, we had added an additional tool to our analytical framework, and this helped further enforce our conviction that not only was it we who were right about where things should go, but also that the very existence of this gap could be a potent source of fuel behind the stock as the world came around to our expectation. Specifically, we had become increasingly comfortable building lifetime value analyses of companies, and notably, when we bought Roku, we were quite confident that with only modest annual increases in average revenue per user (ARPU), and a 5-year average customer lifespan, we were buying the company for its existing customer base and nothing more. In other words, the growth at Roku, Inc. (NASDAQ:ROKU) was entirely free at the prevailing prices we bought into.”
2. Snowflake Inc. (NYSE:SNOW)
Number of Hedge Fund Holders: 84
Decline in Share Price Over Past Month: 32.63%
Snowflake Inc. (NYSE:SNOW) owns and runs a cloud-based data platform. On March 3, Cowen analyst Derrick Wood kept an Outperform rating on the stock with a price target of $390, noting that the recent pullback in share price of the firm was a buying opportunity because the fundamentals of the firm were intact despite recent underperformance.
Snowflake Inc. (NYSE:SNOW) is one of the favorite cloud stocks in the finance world. Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Altimeter Capital Management is a leading shareholder in Snowflake Inc. (NYSE:SNOW) with 17 million shares worth more than $5.7 billion.
Here is what RiverPark Funds has to say about Snowflake Inc. (NYSE:SNOW) in its Q1 2021 investor letter:
“We also established a position in Snowflake Inc. (NYSE:SNOW) during the quarter. Snowflake offers cloud-based data storage and analytics, generally termed “data warehouse-as-a-service.” The data warehousing market—created by the massive, growing amount of user, customer, and account data and the need to search and analyze it—has historically stored its data on physical servers located on-premises. The cloud data platform market—storing data off-premises on cloud servers—is a relatively new $70 billion+ market. Significantly, incremental warehouse data capacity and renewals are expected to be driven by and to the cloud, with more than 75% of databases in the cloud by 2022.
Snowflake Inc. (NYSE:SNOW) requires absolutely no infrastructure management from its users, is fully scalable for each customer, runs on Amazon, Microsoft, or Google cloud platforms, and most critically, Snowflake helps companies analyze their data. The company also has a unique, customer-aligned billing model based on usage. All of which has led to Snowflake being among the leaders of this highly fragmented market, posting 124% revenue growth last year. SNOW’s growth comes from the combination of more customers—which grew 73% last year—and customers buying more services—the company boasts an amazing 150%+ net customer retention. The company’s growing scale has also led to increasing gross margin and operating leverage, up 1,100 basis points and 8,200 basis points, respectively, over the past two years. The company has guided to FCF break-even this year, and with the company’s capital expenditure-light model—Snowflake Inc. (NYSE:SNOW) uses the public cloud for hosting—we expect FCF to grow much faster than revenue growth, which we forecast to grow comfortably more than 50% per year for the next several years. Additionally, we have great confidence in Snowflake Inc. (NYSE:SNOW) management team, which previously had an enormously successful run guiding one of our other core Cloud software holdings ServiceNow.”
1. RingCentral, Inc. (NYSE:RNG)
Number of Hedge Fund Holders: 47
Decline in Share Price Over Past Month: 33.73%
RingCentral, Inc. (NYSE:RNG) provides software solutions. At the end of the fourth quarter of 2021, 47 hedge funds in the database of Insider Monkey held stakes worth $2.4 billion in RingCentral, Inc. (NYSE:RNG), compared to 48 in the preceding quarter worth $2.9 billion.
RingCentral, Inc. (NYSE:RNG) posted earnings for the fourth quarter of 2021 on February 22, reporting earnings per share of $0.39, beating estimates by $0.02. The revenue over the period was $448 million, beating expectations by $13 million.
Here is what Baron Opportunity Fund has to say about RingCentral, Inc. (NYSE:RNG) in its Q2 2021 investor letter:
“RingCentral, Inc. (NYSE:RNG) has been a three-year portfolio holding and remains a leader in the cloud unified communications-as-a-service (UCaaS) space, which includes voice, video, messaging, and call center services. But after posting its third quarter in a row of accelerating revenue growth in the first quarter, RingCentral’s shares began to sell off on fears around heightened competition with both Microsoft Teams, of which RingCentral, Inc. (NYSE:RNG) is a partner, and with Zoom Communications, a former partner who has launched its own voice communications offering. Shares sold off further during the period with the rotation out of secular growth names into cyclicals. We used the pullback in the shares to add significantly to our position given RingCentral’s best-in-class UCaaS technology, including five 9’s contractual service commitments (fully operational 99.999% of the time) for voice, which is orders of magnitude above its competitors; presence in roughly 40 countries; data governance and security requirements; number portability with all the relevant domestic and international carriers; and positioning as the Gartner Magic Quadrant UCaaS Leader. The UCaaS market is still quite early in its adoption curve, with only about 3% penetration of the roughly 400 million existing business landline seats in operation today. We believe RingCentral, Inc. (NYSE:RNG) is in a solid position to capture meaningful share of this market, with its exclusive partnerships with legacy landline players like Avaya, Atos, and Alcatel, which effectively gives it a “hunting license” for about half of those 400 million legacy seats, leveraging joint go-to-market efforts with each partner. We remain confident that RingCentral is well positioned to achieve at least 30% top-line growth for years to come, along with steadily improving operating margins and free cash flow generation.”
You can also take a peek at 10 Best Healthcare Dividend Stocks to Buy Now and 10 Dividend Stocks with Over 20 Years of Dividend Increases.
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Disclosure. None. 10 Famous Tech Stocks at a Bargain Today is originally published on Insider Monkey.
