In this article, we discuss 10 under-the-radar tech stocks to buy now.
Dan Ives, a technology and software analyst at Wedbush Securities, is a well-known tech bull. On August 23, he said in an interview to Business Insider that despite the economy cooling down, the Federal Reserve may remain on its aggressive course of rate hikes to control inflation. Many Wall Street analysts from major firms like Goldman Sachs and Bank of America believe that the S&P 500’s 17.4% jump from mid-June to mid-August was a bear market rally which will die down eventually.
Regardless of these risks, Dan Ives is “firmly” bullish on tech heading in the second half of 2022. He believes artificial intelligence and cybersecurity will see long-term growth, and in some years, the current challenges of the technology sector will be just a hiccup. The tech space posted better than anticipated Q2 earnings, and enterprise spending remains exceptionally resilient. This bolsters Ives’ confidence that the summer tech rally can continue in the fall too. Ives told Business Insider:
“Tech stocks overcorrected on the downside going into earnings. The Street was expecting Armageddon, and it was much better than feared.”
On August 24, Bloomberg reported that elite hedge funds were piling into mega-cap US tech stocks like Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and NVIDIA Corporation (NASDAQ:NVDA). Mega-cap tech stocks have gained 10% in the June quarter, compared to a 9% rise in the S&P 500 Index. However, investors who seek out growth fundamentals apart from mega-caps but still prefer strong investment opportunities, should check out under-the-radar tech stocks.
Photo by Tech Daily on Unsplash
Our Methodology
We selected companies that usually don’t get much limelight and attention but provide strong growth opportunities and robust balance sheets. These stocks have been awarded positive analyst ratings recently. The list is ranked according to the hedge fund sentiment around the securities, which was gauged from Insider Monkey’s Q2 2022 database of around 900 elite hedge funds.
Under-The-Radar Tech Stocks to Buy Now
10. Backblaze, Inc. (NASDAQ:BLZE)
Number of Hedge Fund Holders: 4
Backblaze, Inc. (NASDAQ:BLZE) is a California-based cloud storage company that provides cloud services to store and protect data in the United States and internationally. The company posted a Q2 non-GAAP loss per share of $0.23, beating market consensus by $0.07. The revenue of $20.69 million outperformed estimates by $0.39 million. Backblaze, Inc. (NASDAQ:BLZE) expects a Q3 revenue of $21.4 million to $21.8 million, versus a Wall Street consensus of $21.36 million.
On August 10, B. Riley analyst Zach Cummins maintained a Buy recommendation on Backblaze, Inc. (NASDAQ:BLZE) but lowered the price target on the shares to $12.50 from $16.50 following the Q2 beat. The analyst is motivated by the management’s “strong execution since going public and the sustained demand for low-cost cloud storage solutions, particularly in a recessionary environment”. He cited compressed multiples for the slashed target.
According to Insider Monkey’s Q2 data, Backblaze, Inc. (NASDAQ:BLZE) was part of 4 hedge fund portfolios, compared to 3 funds in the last quarter. David Atterbury’s Whetstone Capital Advisors is the leading stakeholder of the company, with 208,427 shares worth over $1 million.
9. Workiva Inc. (NYSE:WK)
Number of Hedge Fund Holders: 13
Workiva Inc. (NYSE:WK) is an American cloud-based company that offers compliance and regulatory reporting solutions worldwide. The Workiva platform provides data linking, data integrations, full audit trail services, and customer relationship management systems. It serves public and private enterprises, government agencies, and higher-education institutions.
Workiva Inc. (NYSE:WK) posted its Q2 results on August 9, reporting a non-GAAP loss per share of $0.17, which beat expectations by $0.09. Its revenue of $131.5 million grew 24.5% year over year and outperformed estimates by $5.45 million. The company had 642 customers with an annual contract value of more than $150,000, a 28% increase from the 500 customers in the prior-year quarter.
On August 10, Baird analyst Rob Oliver raised the price target on Workiva Inc. (NYSE:WK) to $105 from $100 and maintained an Outperform rating on the shares.
According to Insider Monkey’s data, 13 hedge funds were bullish on Workiva Inc. (NYSE:WK) at the end of the second quarter of 2022, compared to 17 funds in the earlier quarter. Praesidium Investment Management Company is the leading position holder in Workiva Inc. (NYSE:WK), with 1.11 million shares worth $73.4 million.
In addition to Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and NVIDIA Corporation (NASDAQ:NVDA), Workiva Inc. (NYSE:WK) is one of the tech stocks that hedge funds are monitoring amid a potential tech rally.
Here is what Artisan Small Cap Fund has to say about Workiva Inc. (NYSE:WK) in its Q4 2021 investor letter:
“Workiva is a leading provider of cloud software for financial reporting with approximately 70% of its business tied to SEC reporting through its core Wdesk offering. Over the past decade, the SEC has phased in requirements for companies to file their financials using an XBRL data tagging format. XBRL is a standard for tagging business and financial reports to increase the transparency and accessibility of business information by using a uniform format. This regulatory change has enabled Workiva to disrupt and capture significant market share from traditional printing vendors including RR Donnelly & Merrill. In late 2019, the company completed a multi-year investment cycle which enabled it to debut a new, modern technology platform allowing the company to incubate new ideas, see new regulations and introduce use cases in a matter of weeks/months instead of multiple years, with FERC reporting being a good example of this most recently. In addition to the rollout of these new use cases, we believe the company can expand its international footprint. Business outside of North America is small (~8% of revenue in 2020), and its recent investments to expand its international sales presence should position it ahead of a European mandate requiring 5,000 companies to begin using XBRL tagging starting in January 2022 (vs. ~500 companies who have adopted Wdesk in EMEA today). Finally, the company also has the potential to benefit from the ramp-up of ESG regulatory reporting longer term. The company has spent over a decade building an engine for SEC reporting and can repurpose this platform for compiling metrics including GHG emissions, labor requirements, conflict minerals and other ESG-related KPIs.”
8. DigitalOcean Holdings, Inc. (NYSE:DOCN)
Number of Hedge Fund Holders: 18
DigitalOcean Holdings, Inc. (NYSE:DOCN) is a New York-based company that operates a cloud computing platform in North America, Europe, Asia, and internationally. The company’s platform offers cloud infrastructure and tools for developers, start-ups, and small and mid-sized businesses. On August 8, DigitalOcean Holdings, Inc. (NYSE:DOCN) posted a Q2 non-GAAP EPS of $0.20, beating estimates by $0.10. For FY 2022, the company expects a total revenue of $564 million to $568 million, versus a consensus of $566.32 million. The non-GAAP operating margin is projected to be 15% to 16%, and free cash flow will range from 9%-10% of revenue.
On August 23, DigitalOcean Holdings, Inc. (NYSE:DOCN) has made a deal to acquire Cloudways for $350 million in cash, which is a managed cloud hosting and SaaS provider for SMBs. The transaction will boost revenue growth and raise high spend customers by 18%. DigitalOcean Holdings, Inc. (NYSE:DOCN) and Cloudways will serve over 124,000 customers, who pay more than $50 per month, representing approximately 84% of the pro forma company’s total revenue.
Oppenheimer analyst Timothy Horan on August 9 maintained an Outperform rating on DigitalOcean Holdings, Inc. (NYSE:DOCN) but lowered the price target on the stock to $65 from $80. The analyst observed that the company posted a Q2 revenue of $133.9 million, a 160bps miss at +29% year-over-year versus 36% in the preceding quarter. He believes the coming quarter will be notably ahead of guidance. However, a soft macro, with half the revenue from international SMBs, adds to uncertainty in the next year.
According to Insider Monkey’s Q2 data, 18 hedge funds were long DigitalOcean Holdings, Inc. (NYSE:DOCN), compared to 26 funds in the last quarter. Richard Driehaus’ Driehaus Capital is the biggest stakeholder of the company, with 779,219 shares worth $32.2 million.
7. Duolingo, Inc. (NASDAQ:DUOL)
Number of Hedge Fund Holders: 18
Duolingo, Inc. (NASDAQ:DUOL) is a Pennsylvania-based company operating a language-learning website and mobile app in the United States and China. On August 4, Duolingo, Inc. (NASDAQ:DUOL) reported a Q2 GAAP loss per share of $0.38, beating market estimates by $0.14. The company posted a revenue of $88.39 million, up 50.3% on a year over year basis, outperforming Wall Street consensus by $2.68 million. Duolingo, Inc. (NASDAQ:DUOL) reported that total bookings were $97.5 million, an increase of 51% from the prior year quarter, and paid subscribers came in at 3.3 million at June end, an increase of 71% YoY. Monthly active users grew 31% YoY to 49.5 million and daily active users grew 44% to 13.2 million.
Barclays analyst Mario Lu raised the price target on Duolingo, Inc. (NASDAQ:DUOL) on August 5 to $102 from $95 and kept an Equal Weight rating on the shares. The company posted “another strong beat and raise” quarter, the analyst told investors in a research note.
According to Insider Monkey’s data, Duolingo, Inc. (NASDAQ:DUOL) was part of 18 hedge fund portfolios at the end of Q2 2022, up from 14 funds in the prior quarter. Henry Ellenbogen’s Durable Capital Partners is the leading stakeholder of the company, with 3.7 million shares worth $330.6 million.
6. Payoneer Global Inc. (NASDAQ:PAYO)
Number of Hedge Fund Holders: 21
Payoneer Global Inc. (NASDAQ:PAYO) is a New York-based provider of payment solutions that assist marketplaces, platforms, and online merchants worldwide. The company offers multiple services such as cross-border payments, multi-currency accounts, physical and virtual Mastercard cards, tax, and compliance and risk. Payoneer Global Inc. (NASDAQ:PAYO) posted a Q2 beat and raised its 2022 guidance, driven by an improving business outlook in Ukraine and higher interest income due to a rising rate backdrop. The company now expects the full-year revenue to fall between $580 million-$590 million, up from its earlier range of $550 million-$560 million and topping the $563 million Wall Street consensus.
Goldman Sachs analyst Will Nance on July 14 upgraded Payoneer Global Inc. (NASDAQ:PAYO) to Buy from Neutral with a price target of $6.50, up from $5.50, representing 44% upside. The analyst said he was “constructive” on Payoneer Global Inc. (NASDAQ:PAYO)’s exposure to “broad-based” e-commerce growth over the coming years, as well as its ongoing investments in B2B solutions.
According to Insider Monkey’s data, 21 hedge funds were long Payoneer Global Inc. (NASDAQ:PAYO) at the end of Q2 2022, compared to 27 in the prior quarter. Jasper Ridge Partners held the leading position in the company, with roughly 12 million shares worth $47 million.
5. Bumble Inc. (NASDAQ:BMBL)
Number of Hedge Fund Holders: 23
Bumble Inc. (NASDAQ:BMBL) provides online dating and social networking platforms. On August 10, Bumble Inc. (NASDAQ:BMBL) reported a Q2 revenue of $220.45 million, up 18.4% year over year, beating estimates by $1.09 million. Total average revenue per paying user increased to $23.65, compared to $20.88 in the prior quarter. Total paying customers also climbed to 3 million from 2.9 million previously. In Q3 2022, Bumble Inc. (NASDAQ:BMBL) expects total revenue to lie in the range of $236 million to $240 million and Bumble app revenue of $184 million to $187 million.
Susquehanna analyst Shyam Patil on August 11 raised the price target on Bumble Inc. (NASDAQ:BMBL) to $36 from $24 and reaffirmed a Positive rating on the shares. The analyst said the company continues to gain share and is also making strong strides in international expansion. He is optimistic about Bumble Inc. (NASDAQ:BMBL)’s solid niche in the online dating market and its huge potential for growth.
Among the hedge funds tracked by Insider Monkey, 23 funds were bullish on Bumble Inc. (NASDAQ:BMBL) at the end of June 2022, up from 17 funds in the last quarter. Jim Simons’ Renaissance Technologies is the leading position holder in the company, with 898,600 shares worth about $25.3 million.
Unlike mega-caps like Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and NVIDIA Corporation (NASDAQ:NVDA), Bumble Inc. (NASDAQ:BMBL) is one of the under-the-radar tech stocks to watch.
Here is what Polen U.S. Small Company Growth Fund has to say about Bumble Inc. (NASDAQ:BMBL) in its Q1 2022 investor letter:
“Online dating company Bumble delivered strong fourth quarter growth metrics in March. The company has been successfully executing on its core strategic priorities of driving scale and engagement, monetization, and profitability. This is a newer position for us that we opportunistically purchased in the quarter. We are excited about the market potential for online dating, which has been growing in popularity but is still under penetrated in many markets. The stigma related to it has been lessened as a result of the pandemic and general activity should improve as the economy reopens. We think Bumble is competitively advantaged because the company empowers women to make the first move. We believe that Bumble can take share in dating and leverage its brand in other categories.”
4. Varonis Systems, Inc. (NASDAQ:VRNS)
Number of Hedge Fund Holders: 24
Varonis Systems, Inc. (NASDAQ:VRNS) is a New York-based company that offers software products and services to manage, analyze, and secure enterprise data. On August 1, Varonis Systems, Inc. (NASDAQ:VRNS) reported a revenue of $111.45 million, an increase of 26.0% year over year, outperforming estimates by $0.19 million. The annual recurring revenues grew 30% year-over-year to $426.3 million. For Q3 2022, the company expects revenues of $123 million to $125.5 million, versus a $124.35 million consensus, representing a year-over-year growth of 23% to 25%. The full-year 2022 guidance was raised too.
Needham analyst Alex Henderson on August 2 maintained a Buy recommendation on Varonis Systems, Inc. (NASDAQ:VRNS) and lowered the price target on the shares to $35 from $75. The company posted a robust Q2 with revenues up 26% year-over-year, topping the Wall Street forecast despite stronger than expected foreign exchange headwinds, the exit from Russian operations, and a weakening Shekel, the analyst told investors in a research note. The pipeline is strong and upsell healthy even as management observed higher scrutiny for deals in Europe, the analyst contended.
According to Insider Monkey’s data, 24 hedge funds were long Varonis Systems, Inc. (NASDAQ:VRNS) at the end of June 2022, compared to 26 funds in the last quarter. Tremblant Capital is the leading position holder in the company, with 2.4 million shares worth about $71 million.
3. Upwork Inc. (NASDAQ:UPWK)
Number of Hedge Fund Holders: 25
Upwork Inc. (NASDAQ:UPWK) is a California-based company that operates a marketplace for freelancers, connecting businesses with independent professionals and agencies. On July 27, Upwork Inc. (NASDAQ:UPWK) reported a Q2 revenue of $156.9 million, up 26.3% year over year, exceeding market consensus by $9.12 million. The company raised its full-year 2022 revenue guidance to between $612 million and $617 million, versus a consensus of $597.04 million. This represents a 22% year-over-year growth at the midpoint.
On July 28, JMP Securities analyst Andrew Boone maintained an Outperform rating on Upwork Inc. (NASDAQ:UPWK) and lowered the price target on the shares to $33 from $45. The company’s Q2 results were “solid” as gross services volume was slightly under forecasts but revenue outperformed estimates by 6%, the analyst told investors.
According to Insider Monkey’s Q2 data, Upwork Inc. (NASDAQ:UPWK) was part of 25 hedge fund portfolios, compared to 26 funds in the last quarter. David Brown’s Hawk Ridge Management is the leading position holder in the company, with 3.35 million shares worth $69.4 million.
2. Clarivate Plc (NYSE:CLVT)
Number of Hedge Fund Holders: 31
Clarivate Plc (NYSE:CLVT) is a London-based information services and analytics company. On August 9, the company posted a Q2 non-GAAP EPS of $0.22, beating market estimates by $0.02. The revenue of $686.6 million climbed 54.1% year over year. However, the revenue fell short of Wall Street consensus by $4.3 million.
Wells Fargo analyst Seth Weber on July 12 initiated coverage of Clarivate Plc (NYSE:CLVT) with an Overweight rating and a $20 price target. Although currency and macro headwinds present potential challenges, fiscal 2022 consensus estimates are already at the low end of Clarivate Plc (NYSE:CLVT)’s guidance, the analyst told investors in a research note. He said the stock’s valuation presents an attractive risk/reward given the company’s science and intellectual property, as well as “considerable progress” over the last few years in terms of portfolio, operations, and costs.
Among the hedge funds tracked by Insider Monkey, Leonard Green & Partners is the largest shareholder of the company, with 116.6 million shares worth $1.6 billion. Overall, 31 hedge funds were long Clarivate Plc (NYSE:CLVT) at the end of Q2 2022, compared to 36 funds in the prior quarter.
Here is what ClearBridge Select Strategy has to say about Clarivate Plc (NYSE:CLVT) in its Q3 2021 investor letter:
“We took advantage of alternative asset classes to establish exposure in healthcare analytics firm Clarivate. Clarivate sells a range of analytics and data packages to biopharmaceutical and medical technology customers. The common stock had come under pressure due to disappointing medium-term growth guidance and a large secondary offering of convertible securities. We purchased the mandatory convertible shares, which pay an attractive yield, as we wait for the company to rebuild its credibility with investors and convert to common equity in the low $30s.”
1. Qualtrics International Inc. (NASDAQ:XM)
Number of Hedge Fund Holders: 32
Qualtrics International Inc. (NASDAQ:XM) is an American company that operates an experience management platform to manage customer, employee, product, and brand experiences. On July 20, Qualtrics International Inc. (NASDAQ:XM) reported a Q2 revenue of $356.37 million, up about 43% year over year, topping market estimates by $11.52 million.
HSBC analyst Antonin Baudry on August 9 reiterated a Buy rating on Qualtrics International Inc. (NASDAQ:XM) but lowered the price target on the shares to $20 from $40. The company’s momentum remained solid in Q2 and its 30% discount to cloud peers seems unjustified, the analyst told investors. He noted that Qualtrics International Inc. (NASDAQ:XM)’s earnings for the first half of 2022 was ahead of consensus and visibility on Q3 supports guidance for the full year.
According to Insider Monkey’s data, 32 hedge funds were long Qualtrics International Inc. (NASDAQ:XM) at the end of Q2 2022, up from 30 funds in the last quarter. Silver Lake Partners is the biggest stakeholder of the company, with roughly 25 million shares valued at $312.5 million.
Here is what VGI Partners has to say about Qualtrics International Inc. (NASDAQ:XM) in its Q4 2021 investor letter:
“Our analysis shows Qualtrics is the world leader in experience management (EM) software. EM software is a category that has been turbocharged by the pandemic as corporations and governments are striving to better understand their customers and employees in order to improve satisfaction, retention and in turn maximize the dollar return on each customer. Customer experience was previously assessed via surveys and other forms of analog feedback. Today Qualtrics allows its clients to assess their customers’ feedback and improve the experience with more sophisticated tools (e.g. Net Promoter Scores) and in real time via multiple data feeds which include call center conversations, emails, online chatbots, social media feeds and so on.
A good example of a Qualtrics customer is JetBlue Airlines, a major American low-cost airline. JetBlue uses the platform to analyze customer feedback and in turn better tailor pricing for flights and also improve the in-flight experience, in order to expand Net Promoter Scores (NPS) and increase customer retention through this real-time feedback. For example, by combining flight frequency and pricing studies, JetBlue found that 82% of their passengers didn’t care about free bags and instead preferred cheaper ticket prices. JetBlue responded by rolling out different rate structures and pricing options for passengers, which were well received. By taking a deep dive into passengers’ feedback in Philadelphia, JetBlue was able to trace dissatisfaction to the lack of airport shops and amenities open early in the morning, where JetBlue responded quickly by simply passing out water, juice, and coffee at the gate to boost customer satisfaction.
Large corporations are accelerating their usage of Qualtrics software with 85% of the Fortune 100 using the platform. The incremental spend with Qualtrics by existing customers is impressive and continues to grow in excess of 20%. This is underpinned by expanding usage along with the adoption of additional modules which allow clients to gain greater depth and breadth of data from the Qualtrics platform. In addition, new customers add to the growth of existing customers resulting in what we believe will be revenue growth of over 30% p.a. over the coming years…” (Click here to see the full text)
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Disclosure: None. 10 Under-The-Radar Tech Stocks to Buy Now is originally published on Insider Monkey.
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