Know when to put on the brakes and when to get out. Scott Bennett, founder of InvestWithRules.com, joins the "Investing with IBD" podcast to discuss how to follow the big money: trader habits, the intricacies of institutional buying, and how to adjust your fund and trend watching habits. Scott also discusses trends in stocks like Carvana (CVNA), GE Vernova (GEV) and Intuitive Surgical (ISRG).
The most recent trading session ended with Zscaler (
ZS - Free Report) standing at $210.42, reflecting a -0.26% shift from the previouse trading day's closing. This change lagged the S&P 500's daily gain of 0.3%. Meanwhile, the Dow gained 0.99%, and the Nasdaq, a tech-heavy index, added 0.27%.
Coming into today, shares of the cloud-based information security provider had gained 14.06% in the past month. In that same time, the Computer and Technology sector gained 0.27%, while the S&P 500 gained 2.1%.
Market participants will be closely following the financial results of Zscaler in its upcoming release. The company plans to announce its earnings on December 2, 2024. It is anticipated that the company will report an EPS of $0.63, marking a 5.97% fall compared to the same quarter of the previous year. At the same time, our most recent consensus estimate is projecting a revenue of $605.68 million, reflecting a 21.94% rise from the equivalent quarter last year.
Regarding the entire year, the Zacks Consensus Estimates forecast earnings of $2.87 per share and revenue of $2.61 billion, indicating changes of -10.03% and +20.57%, respectively, compared to the previous year.
Any recent changes to analyst estimates for Zscaler should also be noted by investors. These latest adjustments often mirror the shifting dynamics of short-term business patterns. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.
Based on our research, we believe these estimate revisions are directly related to near-team stock moves. To utilize this, we have created the Zacks Rank, a proprietary model that integrates these estimate changes and provides a functional rating system.
The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection remained stagnant. As of now, Zscaler holds a Zacks Rank of #3 (Hold).
From a valuation perspective, Zscaler is currently exchanging hands at a Forward P/E ratio of 73.49. This signifies a premium in comparison to the average Forward P/E of 21.35 for its industry.
Investors should also note that ZS has a PEG ratio of 9.6 right now. Comparable to the widely accepted P/E ratio, the PEG ratio also accounts for the company's projected earnings growth. As the market closed yesterday, the Internet - Services industry was having an average PEG ratio of 2.02.
The Internet - Services industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 41, which puts it in the top 17% of all 250+ industries.
The Zacks Industry Rank is ordered from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.
Keep in mind to rely on Zacks.com to watch all these stock-impacting metrics, and more, in the succeeding trading sessions.
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
With the transition from traditional practices to the latest technologies, rapidly growing demand, and increasing security concerns, the growth prospects of the cloud security market seem bright and lucrative.
Given this backdrop, investors could consider fundamentally robust cloud security stocks CrowdStrike Holdings, Inc. (CRWD - Get Rating), Zscaler, Inc. (ZS - Get Rating), and Check Point Software Technologies Ltd. (CHKP - Get Rating) for substantial returns.
Amidst the rising concerns of cybersecurity, increasing incidents of cyber threats, and organizations prioritizing data protection through the latest technologies, the cloud security market is experiencing robust growth. Also, supporting trends like the adoption of multi- and hybrid cloud environments, integration of artificial intelligence (AI), and the Internet of Things (IoT) are fueling the market.
Gartner projects worldwide IT spending to rise 9.3% in 2025, where spending on software will increase by 14% to $1.24 trillion, compared to an 11.7% rise in 2024, indicating robust trends. Further, a recent survey by Statista revealed that nearly 60% of organizations expect their cloud security budget to increase strongly in the next 12 months.
Rising dependency on cloud security services among organizations has grown significantly owing to its reliability, easy access, and effective risk mitigation solutions. With this, the cloud security software market is expected to reach around $102.59 billion by 2029, expanding at a notable CAGR of 17.6% driven by increasing adoption and efficiency.
Given the industry’s robust outlook, let’s examine the fundamentals of the three Software – Security stock picks, starting with the third choice.
Stock #3: CrowdStrike Holdings, Inc. (CRWD - Get Rating)
CRWD is a global cybersecurity solutions provider. The company’s unified platform offers cloud-delivered protection of endpoints, cloud workloads, identity, and data. It provides corporate endpoint and cloud workload security, managed security, security, and vulnerability management.
On November 7, CRWD expanded its distribution partnership with Ignition Technology, bringing the CrowdStrike Falcon® cybersecurity platform to Ignition’s partner base in Ireland. After success in the UK and Nordics, the companies continued their partnership to drive cybersecurity transformation in Ireland and stop breaches with unified AI-native protection across the enterprise.
On the same date, CRWD launched CrowdStrike AI Red Team Services, reinstating its leadership in protecting the infrastructure, systems, and models driving the AI revolution. With CRWD’s world-class threat intelligence and elite expertise, these specialized services proactively identify and help mitigate vulnerabilities in AI systems.
Amid new threats targeting AI applications, CRWD’s elite services team will aid many customers and help organizations assess their AI security posture to defend against model tampering, data poisoning, and other AI-based threats.
Also, on November 6, CRWD announced the acquisition of Adaptive Shield, a leader in SaaS Security. With this acquisition, CRWD will become the only cybersecurity vendor to provide unified, end-to-end protection against identity-based attacks across the entire modern cloud ecosystem.
The acquisition will position it as the leading provider of comprehensive protection across complex hybrid environments.
For the second quarter that ended July 31, 2024, CRWD’s revenue increased 31.7% year-over-year to $963.87 million. Its non-GAAP income from operations grew 45.7% from the year-ago value to $226.79 million. Non-GAAP net income attributable to CrowdStrike was $260.76 million or $1.04 per share, up 44.9% and 40.5% from the prior year’s period, respectively.
Furthermore, the company’s free cash flow rose 44.3% year-over-year to $272.23 million.
The company provided guidance for the third quarter of fiscal 2025, projecting total revenue between $979.20 million and $984.70 million and non-GAAP income from operations expected between $166.70 million and $170.80 million. Also, non-GAAP net income attributable to CrowdStrike is expected to range from $201.20 million to $205.2 million and $0.80 – $0.81 per share.
For the full year, CRWD expects total revenue of $3.89 billion – $3.90 billion. Its non-GAAP income from operations is set to be $774.70 million – $783.90 million. The company’s non-GAAP net income attributable to CrowdStrike is projected from $908.80 million to $918.0 million and $3.61 to $3.65 per share.
Street expects CRWD’s revenue and EPS for the first quarter (ending April 2025) to increase 20.2% and 2.1% year-over-year to $1.11 billion and $0.95, respectively. Also, the company surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
Shares of CRWD have gained 11% over the past month and 68.6% over the past year to close the last trading session at $350.15.
CRWD’s solid fundamentals are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
CRWD has an A grade for Growth and a B for Quality. It is ranked #15 out of 20 stocks in the B-rated Software – Security industry.
In addition to the POWR Ratings we’ve stated above, we also have CRWD ratings for Momentum, Value, Stability, and Sentiment. Get all CRWD ratings here.
Stock #2: Zscaler, Inc. (ZS - Get Rating)
ZS operates as a global cloud security company. The company provides Zscaler Internet Access solution, which allows users, workloads, IoT, and OT devices to have secure access to externally managed applications. It also offers Zscaler Private Access solution, which is designed to provide access to managed applications hosted internally in data centers and private or public clouds.
On November 12, ZS introduced the industry’s first Zero Trust Segmentation solution to deliver a more secure, agile, and cost-effective means to connect users, devices, and workloads across and within globally distributed branches, factories, campuses, data centers, and public clouds.
The company’s new solution prevents lateral movement from ransomware attacks, cutting firewall and infrastructure spending.
On October 15, ZS and Okta announced four new integrations created to accelerate their mutual customers’ zero-trust transformation. With this end-to-end, context-aware security, the companies are helping customers reduce risk, improve the user experience, and enable cross-domain response through shared telemetry and threat intelligence.
During the fourth quarter that ended July 31, 2024, ZS’ revenue increased 30.3% year-over-year to $592.87 million. Its non-GAAP gross profit rose 31% from the year-ago value to $481.04 million. The company’s non-GAAP income from operations of $127.54 million reflects growth of 48.3% year-over-year.
Furthermore, the company’s non-GAAP net income totaled $140.60 million and $0.88 per share, up 39.4% and 37.5% from the prior year’s quarter, respectively.
As per its guidance for the first quarter of fiscal 2025, ZS projects revenue of $604 million to $606 million. It expects its non-GAAP income from operations to be $114 million – $116 million and its non-GAAP net income per share between $0.62 and $0.63.
Also, for the full year fiscal 2025, the company expects revenue of approximately $2.60 billion to $2.62 billion. Non-GAAP income from operations ranges from $530 million to $540 million. Its non-GAAP net income per share is set to be at $2.81 to $2.87.
For the first quarter ended October 2024, analysts expect ZS’ revenue to increase 21.9% year-over-year to $605.61 million. For the fiscal year (ending July 2025), the company’s revenue is expected to grow 20.5% year-over-year to $2.61 billion. Moreover, the company has surpassed the consensus revenue and EPS estimates in all of the trailing four quarters.
The stock has gained 5.3% over the past month and 11.3% over the past six months to close the last trading session at $200.94.
ZS’ promising outlook is reflected in its POWR Ratings. The stock has a B grade for Growth and Sentiment. Within the same industry, ZS is ranked #14 of 20 stocks.
To access additional ratings of ZS for Momentum, Stability, Value, and Quality, click here.
Stock #1: Check Point Software Technologies Ltd. (CHKP - Get Rating)
Headquartered in Tel Aviv, Israel, CHKP develops, markets, and supports a range of products and services for IT security worldwide. It offers a multilevel security architecture, cloud, network, mobile devices, endpoint information, and IOT solutions.
On November 20, CHKP unveiled the new Check Point Quantum Firewall Software R82 (R82) and additional innovations for the Infinity Platform. The new R82 delivers new AI engines, post-quantum encryption, and accelerated DevOps with greater simplicity for data center operations. The new solution will prevent against zero-day threats and empower customers.
During the third quarter that ended September 30, 2024, CHKP’s total revenues increased 6.5% year-over-year to $635.10 million, of which its security subscription revenues were up 11.5% year-over-year to $276.90 million. The company’s non-GAAP operating income grew 1.9% from the year-ago value to $274 million.
Additionally, the company’s non-GAAP net income and EPS came in at $255.40 million and $2.25, indicating increases of 5.4% and 8.7% from the prior year’s quarter, respectively.
Analysts expect CHKP’s revenue for the fourth quarter (ending December 2024) to increase 5.3% year-over-year to $698.43 million. The consensus EPS estimate of $2.65 indicates a 3.3% rise year-over-year. Further, the company topped the consensus revenue and EPS estimates in three of the trailing four quarters.
CHKP’s stock has surged 16.4% over the past six months and 24.1% over the past year to close the last trading session at $176.83.
CHKP’s POWR Ratings reflect its bright prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has an A grade for Quality. CHKP is ranked #7 out of 20 stocks in the B-rated Software – Security industry.
Click here to access additional CHKP ratings (Growth, Sentiment, Value, Stability, and Momentum).
What To Do Next?
Zscaler Inc 
ZS will be reporting its first-quarter earnings on Monday. Wall Street expects 63 cents in EPS and $606.20 million in revenues as the company reports after market hours.
The stock is up 2.56% over the past year, 24.69% over the past six months.
Let’s look at what the charts indicate for Zscaler stock and how the stock currently maps against Wall Street estimates.
Read Also: Here’s How Much You Would Have Made Owning Zscaler Stock In The Last 5 Years
Zscaler Shows Moderately Bullish Trend Ahead Of Q1 Earnings
Zscaler is showing a moderately bullish trend ahead of its earnings, although slight selling pressure is evident.
Chart created using Benzinga Pro
The stock price of $204.96 is hovering just below its eight-day simple moving average (SMA) of $206.77, which signals some near-term resistance.
However, Zscaler stock is trading above key support levels, with the 20-day SMA at $201.27, the 50-day SMA at $189.44, and the 200-day SMA at $187.77, all suggesting a bullish long-term outlook.
The moving average convergence/divergence (MACD) indicator is also positive at 5.39, reinforcing the overall bullish sentiment.
The relative strength index (RSI) of 57.45 shows Zscaler stock is not yet overbought, indicating room for potential upside as it prepares for earnings.
Zscaler Analysts See 17% Upside
Zscaler Analysts Ratings & Consensus Estimates: The consensus analyst rating on Zscaler stock stands at a Buy currently with a price target of $219.85. Analysts from BTIG, Jefferies and Keybanc set an average price target of $242.67 for Zscaler stock, implying a 17.37% upside.
ZS Price Action: Zscaler stock was up 0.7% to $206.41 at the time of publication Friday.
Reddit (/ˈrɛdɪt/ ) is an American social news aggregation, content rating, and forum social network. Registered users (commonly referred to as "Redditors") submit content to the site such as links, text posts, images, and videos, which are then voted up or down ("upvoted" or "downvoted") by other members. Posts are organized by subject into user-created boards called "subreddits". Submissions with more upvotes appear towards the top of their subreddit and, if they receive enough upvotes, ultimately on the site's front page. Reddit administrators moderate the communities. Moderation is also conducted by community-specific moderators, who are unpaid volunteers.[5] It is operated by Reddit, Inc., based in San Francisco.[6][7]
As of August 2024, Reddit is the 9th most-visited website in the world. According to data provided by Similarweb, 51.75% of the website traffic comes from the United States, followed by the United Kingdom at 7.15% and Canada at 7.09%.[6]
Reddit was founded by University of Virginia roommates Steve Huffman and Alexis Ohanian, as well as Aaron Swartz, in 2005. Condé Nast Publications acquired the site in October 2006. In 2011, Reddit became an independent subsidiary of Condé Nast's parent company, Advance Publications.[8] In October 2014, Reddit raised $50 million in a funding round led by Sam Altman and including investors Marc Andreessen, Peter Thiel, Ron Conway, Snoop Dogg, and Jared Leto.[9] Their investment valued the company at $500 million at the time.[10][11] In July 2017, Reddit raised $200 million for a $1.8 billion valuation; Advance Publications remained the majority stakeholder.[12] In February 2019, a $300 million funding round led by Tencent brought the company's valuation to $3 billion.[13] In August 2021, a $700 million funding round led by Fidelity Investments raised that valuation to over $10 billion.[14] The company then reportedly filed for an IPO in December 2021 with a valuation of $15 billion.[15][16] Reddit debuted on the stock market on the morning of March 21, 2024, with the ticker symbol RDDT.[17] The current—July 2024—market cap is $10 billion.[18]
Reddit has received praise for many of its features, such as the ability to create several subreddits for niche communities,[19][20] being a platform for raising publicity for numerous causes,[21] and has grown to be one of the most visited websites on the Internet.[22] It has also received criticism for spreading misinformation.[23]
To curate the list of the 10 best tech stocks to invest in on the dip, we used the Finviz stock screener and CNN. Using the screener we shortlisted technology stocks that were down at least 25% on a year-t0-date basis, but analysts see a more than 25% upside. Once we had an aggregated list of the tech stocks fitting our criteria, next we cross-checked their analyst upside potential from CNN. Lastly, we ranked these stocks in the ascending order of the analyst upside potential. Please note that the data was collected on November 25, 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Share Price: $9.74
Year-To-Date Performance: -77.47%
Analyst Upside Potential: 28.21%
Wolfspeed, Inc. (NYSE:WOLF) is a leading company in the semiconductor industry, specializing in wide bandgap semiconductors. These materials, particularly silicon carbide (SiC) and gallium nitride (GaN), are essential for various power applications due to their efficiency and performance advantages over traditional silicon-based components. It is one of the best tech stocks to invest in on the dip.
Wolfspeed, Inc. (NYSE:WOLF) opened the world’s largest 200mm silicon carbide plant in upstate New York in 2022 as management believes silicon carbide chips will disrupt the traditional silicon chips. The stock was doing well in a low interest rate environment and with the EV market running hot. However, as the interest rates rose and the EV market cooled down its stock took a hit and has been down by around 77% on a year-to-date basis.
During the first quarter of fiscal 2025 as well, the company reported significant steps towards its business expansion. The company targets generating approximately $3 billion in annual revenue from its new 200mm silicon carbide manufacturing footprint at facilities in Mohawk Valley, New York, and North Carolina.
It also signed a preliminary memorandum for up to $750 million in direct funding under the CHIPS and Science Act, along with an additional $750 million from a consortium of lenders. This brings the total potential funding to $2.5 billion, which will facilitate their expansion plans in the US.
In the first quarter, Wolfspeed reported a remarkable 2.5 times year-over-year growth in its automotive sector. The number of car models utilizing Wolfspeed’s silicon carbide solutions has quadrupled from 2023 to 2024, with expectations of a further 75% increase in 2025.
ClearBridge Growth Strategy stated the following regarding Wolfspeed, Inc. (NYSE:WOLF) in its Q3 2024 investor letter:
“We exited long-time holding Wolfspeed, Inc. (NYSE:WOLF), a leading global supplier of silicon carbide substrate wafers and devices. After giving management ample time to ramp production at its new Mohawk Valley facility, we closed the position due to continued execution missteps and cyclical headwinds impacting electric vehicle, industrial and energy applications that have repeatedly pushed the company’s path to profitability further out.”
Share Price: $5.38
Year-To-Date Performance: -29.09%
Analyst Upside Potential: 48.70%
indie Semiconductor, Inc. (NASDAQ:INDI) specializes in creating automotive semiconductors and software solutions that enhance vehicle technology. It focuses on key high-growth areas including Advanced Driver Assistance Systems (ADAS), driver automation, in-cabin user experience, and electrification.
During the third quarter results for fiscal 2024, indie Semiconductor, Inc. (NASDAQ:INDI) announced securing design wins with major automotive manufacturers such as Porsche, General Motors, and several Chinese OEMs like BYD and Xiaomi. Management noted that China’s demand for integrated circuits (ICs) remains strong, particularly in the electric vehicle sector, indicating a healthy market presence.
The company also expanded its strategic backlog to $7.1 billion, up from $6.3 billion last year, driven primarily by momentum in Advanced Driver Assistance Systems (ADAS). ADAS programs now account for over 72% of this backlog, highlighting the company’s strong position in this critical market segment. Overall, the revenue for the quarter came in at $54 million up 3.1% subsequentially and surpassing management’s guideline.
As more and more automotive companies are testing and launching assisted driving technologies and autonomous vehicles, the demand for indie Semiconductor, Inc. (NASDAQ:INDI) technologies remains robust. Although, the stock has been down 29% on a year-to-date basis, analysts’ 12-month median price target points towards 49% upside from current levels. Management is also optimistic about the company’s future and is expecting fourth-quarter revenue to increase by more than 7% sequentially, projecting a midpoint revenue of $58 million. It is one of the best tech stocks to invest in on the dip.
Baron Opportunity Fund stated the following regarding Indie Semiconductor, Inc. (NASDAQ:INDI) in its Q3 2024 investor letter:
“Indie Semiconductor, Inc. (NASDAQ:INDI) is a fabless designer, developer, and marketer of automotive semiconductors for advanced driver assistance systems (ADAS) and connected car, user experience, and electrification applications. Indie’s stock fell during the quarter as it guided 2024 revenue growth below Street expectations, as auto production is expected to be incrementally worse, and excess inventory in the automotive supply chains of its customers has delayed indie’s new chips from ramping into high-volume programs. Despite these near-term headwinds, indie is outperforming peers who are seeing significant year-over-year sales declines. It has not suffered a program cancellation for any intact car programs, and it continues to win new sockets in future car platforms, positioning the company for strong growth over the medium and long term, supported by its $6.3 billion design win backlog, of which $4.6 billion is in ADAS applications. Indie has several large-volume programs set to ramp beginning in early 2025, including a marquee radar-related win, the biggest program in the company’s history, which we believe will drive a return to outsized growth in 2025 (indie doubled revenue each year from 2021 through 2023). We believe indie can continue to significantly outpace the broader industry and will approach $1 billion in revenue by the end of this decade, all supported by its contracted visibility, and its stock will re-rate as rapid growth returns.”
Share Price: $10.76
Year-To-Date Performance: -39.11%
Analyst Upside Potential: 49.34%
StoneCo Ltd. (NASDAQ:STNE) is a financial technology company that provides various software solutions to help businesses manage their transactions and operations more effectively. The company specializes in technology solutions that facilitate electronic payments and financial services for businesses, particularly small and medium-sized enterprises.
Although the stocks have been down around 39% on a year-to-date basis, particularly due to the hit it took by the headwinds during the pandemic and the mishap of unreliable government data usage while assessing the creditworthiness of clients. However, during fiscal 2024, StoneCo Ltd. (NASDAQ:STNE) demonstrated significant progress toward its strategic goals, achieving several key financial metrics and maintaining a strong market position.
The financial services segment of the company showed strong profitability, with the take rate for Micro, Small, and Medium Businesses (MSMBs) reaching a record 2.58%. This increase was driven by a growing credit portfolio and stable banking revenues amid a competitive payments environment. Moreover, the company also reported robust growth in transaction volumes, particularly in PIX QR Code transactions. The total payment volume (TPV) for MSMB cards grew by 16% year-to-date, while overall MSMB TPV increased by 23% during the same time.
Ave Maria World Equity Fund stated the following regarding StoneCo Ltd. (NASDAQ:STNE) in its fourth quarter 2023 investor letter:
“StoneCo Ltd. (NASDAQ:STNE) provides solutions that enable merchants and integrated partners to conduct electronic commerce seamlessly across in-store, online, and mobile channels in Brazil. StoneCo has faced near-term operational challenges because of the pandemic and high levels of inflation in Brazil. The company appears to be moving past these challenges and it appears that the successful integration of the newly acquired software business with its payments business will drive substantial shareholder value longer term.”
Share Price: $77.40
Year-To-Date Performance: -37.94%
Analyst Upside Potential: 51.75%
Axcelis Technologies, Inc. (NASDAQ:ACLS) is another technology company that specializes in designing, manufacturing, and servicing equipment used in the production of semiconductor chips.
One of the key products made by the company includes machines called ion implanters, which are essential for adding specific materials (dopants) into semiconductor wafers. The Ion implanters can be tailored for various needs including high energy, high current, and medium current depending on the requirement. In addition, it also provides maintenance services, spare parts, equipment upgrades, and consumer training services.
Purion series is one of their flagship products, which is designed to enhance chip manufacturing efficiency. During the third quarter of fiscal 2024, Axcelis Technologies, Inc. (NASDAQ:ACLS) reported revenue of $256.6 million, slightly up from the previous quarter’s $256.5 million. The revenue came from two main segments including, $201.1 million from systems sales and $55.5 million from consumables, spares, and services (CS&I). Management expects the CS&I segment to grow steadily as the company’s installed base increases, providing ongoing revenue and profitability.
China remains one of the significant markets for Axcelis Technologies, Inc. (NASDAQ:ACLS) and accounted for around 71% of total system sales, driven by demand in the image sensor market for smartphones. However, management anticipates a decline in revenue from China in the fourth quarter and early 2025 due to customers adjusting to previously built capacity.
Middle Coast Investing stated the following regarding Axcelis Technologies, Inc. (NASDAQ:ACLS) in its Q3 2024 investor letter:
“Axcelis Technologies, Inc. (NASDAQ:ACLS), the semiconductor equipment maker we own in most accounts, is also in transition. Demand for electric vehicles and hybrids has slowed, while demand for memory chips has not yet picked up. Caught in between these cycles, its shares sold off heavily this quarter, and as one of our biggest positions, that hurt our results. It is also a company with a great balance sheet, that has gained share in its sector, and that is exposed to areas of our economy that should grow for years, all while priced relatively cheaply. Micron’s earnings at the end of the quarter suggested the memory recovery is at hand.”
Share Price: $44.14
Year-To-Date Performance: -54.81%
Analyst Upside Potential: 58.66%
Concentrix Corporation (NASDAQ:CNXC) is a technology company that specializes in improving customer experiences for businesses. The company also uses data to understand customer behavior and feedback. For instance, the Voice of Customer service of the company involves gathering and analyzing customer feedback to understand their needs better.
The company, on September 25th, announced the launch of its new product called iX Hello, which is an intelligent experience technology suite designed to enhance business productivity through generative AI. The product is a fully customizable, AI-powered virtual assistant that can be tailored to fit the specific needs of any business. It can be deployed quickly without requiring complex coding, making it accessible to various teams within an organization.
Concentrix Corporation (NASDAQ:CNXC) has been doing great in terms of revenue generation. For the third quarter of fiscal 2024, the company generated $2.39 billion in revenue, up 46.2% year-over-year. As per the management, revenue growth for the quarter was driven by 8% year-over-year growth in retail, travel, and e-commerce verticals.
It is one of the best tech stocks to invest in on the dip and analysts’ 12-month median price target is pointing towards a 59% upside from current levels.
FPA Queens Road Small Cap Value Fund stated the following regarding Concentrix Corporation (NASDAQ:CNXC) in its Q3 2024 investor letter:
“Concentrix Corporation (NASDAQ:CNXC) is one of two top customer experience (CX) vendors globally. The company began by managing call centers but has since evolved into a high-tech business process outsourcer (BPO) that also designs and runs customer-facing websites and apps, integrates the data, and optimizes a client’s customer interactions. The company was spun out from TD Synnex, another of the Fund’s core holdings, and we have always been impressed with CNXC’s innovation and growth. CX is a relatively new business model, and Concentrix has been rolling up smaller competitors. In March, 2023 they bought WebHelp, a leading European CX player, for $4.8B in cash and stock. 22 We believe the WebHelp acquisition will help consolidate an industry where Concentrix and Teleperformance are the largest players.
The market is currently concerned about the potential of artificial intelligence to disrupt Concentrix’ core call center business – all CX companies’ shares are down badly over the last two years.23 On Sep. 25, 2024 CNXC stock got hit again when they released fiscal 2024 Q3 results and took down revenue guidance – fiscal 2024 organic revenue is now expected to come in between -.5% and 1.5%. 24 Concentrix has a debt to EBITDA ratio of 3x from the Webhelp deal which will be a problem if earnings deteriorate quickly. But Concentrix now trades at less than five times adjusted EPS and is highly cash generative. We think, but don’t know, that Concentrix’ domain knowledge and integration into customers’ work flows make for meaningful switching costs and that clients will be reluctant to let AI manage the relationships with their customers. We have held on to Concentrix shares but have not added to the position.”
Share Price: $8.12
Year-To-Date Performance: -32.96%
Analyst Upside Potential: 59.65%
PagSeguro Digital Ltd. (NYSE:PAGS) is a Brazilian Fintech company that provides a variety of services aimed at helping individuals and small businesses manage their finances and accept payments. The company not only offers a free digital bank account called PagBank, which allows users to perform typical banking activities without needing a traditional bank account. It also provides tools for accepting payments both online and in-person including Point of Sale (POS) and Mobile Point of Sale (mPOS) devices.
PagSeguro Digital Ltd. (NYSE:PAGS) reported significant growth across various financial metrics during its third-quarter results for fiscal 2024. For instance, its Total Payment Volume (TPV) increased by 37% year-over-year, reaching $23.46 million in Q3 2024. The growth was driven by all market segments, including micro, small, and medium businesses (MSMB), which saw a 26% increase year-over-year in TPV.
Moreover, the company also grew its total clients and active business clients by 6.2% and 3.4% year-over-year. As a result of an increase in active clients, the Cash-in for the company increased by 49% year-over-year, whereas the credit portfolio surpassed $553 million after increasing 30% during the same time. PagSeguro Digital Ltd. (NYSE:PAGS) remains on track to deliver expected results for fiscal 2024.
Share Price: $9.62
Year-To-Date Performance: -65.69%
Analyst Upside Potential: 65.80%
Viasat, Inc. (NASDAQ:VSAT) is a global communications company that specializes in providing high-speed satellite broadband and secure networking solutions. The company offers high-speed internet services primarily through satellite technology, catering to both residential and commercial customers. This includes fixed broadband for homes and mobile broadband for businesses and government operations. It also develops a variety of satellite and wireless products, along with network and terminal solutions that facilitate broadband connectivity.
The company serves a diverse range of industries including, aviation, maritime, energy, and government sectors. In the second quarter of fiscal year 2025, Viasat reported a revenue of $1.1 billion, which represents an 8% decrease compared to the same period last year. However, when excluding a one-time revenue boost from a litigation settlement in the previous year, the revenue decline is only 1%. This slight decrease was due to lower earnings from their Communication Services segment, which was offset by growth in their Defense and Advanced Technologies (DAT) sector.
Viasat, Inc. (NASDAQ:VSAT) achieved record contract awards totaling $1.3 billion, marking a 25% increase from the previous year. The DAT segment alone saw its awards more than double, reaching about $510 million during this quarter. Although the stock of the company has been down 66% year-to-date, analysts’ 12-month median price target is pointing towards a 66% upside from current levels. It is one of the best tech stocks to invest in on the dip.
Cove Street Capital Small Cap Value Fund stated the following regarding Viasat, Inc. (NASDAQ:VSAT) in its Q3 2024 investor letter:
“Viasat, Inc. (NASDAQ:VSAT), E.W. Scripps (ticker: SSP), and Compass Minerals (ticker: CMP) were our biggest detractors this year. Each has specific fundamental problems, but they share perceptions of balance sheet issues that we would suggest are producing grossly negative viewpoints on their respective stock prices. Viasat just refinanced most of its debt stack which puts that to rest; Scripps has stated they will sell its Bounce TV network by the November earnings call; and Compass booted its CEO, and we believe we are days or quarters from a “for sale” sign. Not our finest moments, but all are stupid cheap in our opinion with real asset support. Recent Fed decisions should help here.”
Share Price: $12.03
Year-To-Date Performance: -47.70%
Analyst Upside Potential: 91.38%
WEBTOON Entertainment Inc. (NASDAQ:WBTN) operates a leading global storytelling platform that connects creators and users through a diverse range of digital content, primarily in the form of web comics and web novels. The platform was launched by Naver Corporation and has grown to host millions of creators and engage a vast audience worldwide.
The company operates in over 150 countries, with a significant portion of its monthly active users coming from outside its primary markets, which include South Korea, Japan, and North America. The platform has more than 24 million creators and is used by around 170 million monthly active users.
On November 15, WEBTOON Entertainment Inc. (NASDAQ:WBTN) announced the launching a new Online Retail WEBTOON Shop for Webcomic merchandise. This will not only help the company increase engagement for its digital platform but will also add a new revenue stream from the direct-to-consumer merchandise market.
In its recent financial report for the third quarter of fiscal 2024, WEBTOON Entertainment Inc. (NASDAQ:WBTN) highlighted several key achievements that reflect its growth and profitability. It reported total revenue of $347.9 million, marking a 9.5% increase compared to the same period last year. This growth was primarily driven by strong performance in Paid Content and Advertising. Moreover, the company also achieved a net income of $20 million, a significant turnaround from previous losses. This improvement was attributed to better gross profit margins, increased interest income from cash assets, and favorable tax benefits.
Share Price: $12.80
Year-To-Date Performance: -48.70%
Analyst Upside Potential: 96.54%
Aehr Test Systems, Inc (NASDAQ:AEHR) specializes in providing testing solutions for semiconductor devices. Their main products include the FOX-P family of systems, which are designed to test semiconductor devices at different stages including Wafer Level Testing and Singulated Die Testing. The systems also perform “burn-in” tests, where devices are subjected to stress conditions to identify any early failures. This process helps ensure that the final products are reliable and function properly once in use.
While the revenue of Aehr Test Systems, Inc (NASDAQ:AEHR) was down 36.5% year-over-year to $13.1 million. It was actually above analyst expectations. The slow down in electric vehicle sales has impacted stock negatively and it has dropped 48.70% on a year-to-date basis.
However, what’s impressive about the company is the fact that the company has received its first orders to test AI accelerators. This means that the company has potentially entered a new hyper growth market. CEO, Gayn Erickson mentioned that they are currently in discussions with its first customer for gallium nitride (GaN) semiconductor devices, focusing on volume production testing and burn-in processes.
The company anticipates that the market for GaN devices will expand rapidly, with a projected compound annual growth rate (CAGR) exceeding 40%, potentially reaching over $2 billion in annual sales by 2029. Analysts are also betting high on the stock as their 12 month median price target points towards a 96.54% upside from current levels.
Share Price: $10.58
Year-To-Date Performance: -32.18%
Analyst Upside Potential: 118.22%
Pagaya Technologies Ltd. (NASDAQ:PGY) is a financial technology (FinTech) company based in Israel. In simple terms, the company uses advanced technology, including data science, machine learning, and artificial intelligence (AI), to help lending companies assess the creditworthiness of potential customers quickly and accurately. The AI technology allows lenders to evaluate customers’ credit in real-time, which helps them make informed decisions about who to approve for loans.
It provides solutions for various types of loans, such as personal loans, car loans, and credit card loans. They primarily serve lending institutions around the world, enabling them to expand their customer base while minimizing risk.
The company has been focused on expanding its network base and partnerships. During the third quarter results of fiscal 2024, the company reported a network volume of $2.4 billion, reflecting an 11% year-over-year increase. This growth was supported by existing partnerships, particularly in personal loans, which grew 15% and point-of-sale loans which improved 67% compared to the previous year. It achieved a record total revenue of $257 million, marking a 21% increase year-over-year, primarily due to a 24% rise in fee revenue.
Net losses remain one of the concerns for management of Pagaya Technologies Ltd. (NASDAQ:PGY), which is mainly due to non-cash expenses and one time costs. The net losses have caused the stock price to go down by 32.18% on a year-to-date basis. However, CEO Gal Krubiner stated that the company is on track to achieve GAAP profitability and positive cash flow by 2025, driven by effective execution of their 2024 strategy, which entails adding new partnerships and network volume.
Looking ahead, management projects full-year 2024 network volume between $9.5 billion and $9.7 billion, with total revenue expected between $1.01 billion and $1.025 billion. It is one of the best tech stocks to invest in on the dip.
While we acknowledge the potential of Pagaya Technologies Ltd. (NASDAQ:PGY) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
