close
close

Latest Post

Fairfield’s annual sidewalk flea market and street festival takes place this weekend Video recordings of near-accidents are intended to warn about train safety
3 cheap technology stocks you should buy now

Given the strength of the stock market (especially in technology stocks) since the beginning of 2023, it has become harder to find bargains in the technology space. Technology stocks have led this recent market rally, as evidenced by the roughly 80% increase in share price. Nasdaq-100 during this time. Due to their strong performance, many of these stocks are expensive to buy today.

And yet, not all technology stocks have joined this rally… at least not yet.

There are at least three cheap tech stocks with real growth potential that investors can buy now. I currently own all three of these stocks. Here’s what attracted me to them.

1. UiPath

After a strong performance of the share until the end of last year, UiPath (NYSE: PATH) is on the verge of collapse after the company recently issued disappointing forecasts and its CEO resigned.

The artificial intelligence (AI) automation software company helps companies automate mundane business tasks like data entry, as well as understand and process documents like invoices. Its platform also tracks automation performance metrics and performs quality assurance, while newer solutions like its Intelligent Document Processing (IDP) offering can extract, interpret and process data from various types of documents, whether digital or even handwritten.

The company has done a good job of growing its existing customer base, as evidenced by its 118% net retention rate last quarter. However, despite recent partnerships, it has struggled to attract new customers. This has been attributed to competition from companies such as Microsoft and its new AI offering Copilot, it should be noted that AI is still relatively new and many companies are still in the process of developing their AI strategies and figuring out how best to implement those plans.

Therefore, it’s more likely that software vendors are part of the second phase of AI growth, rather than being among the first beneficiaries. Meanwhile, the recent sell-off has sent UiPath stock into a tailspin, and it’s trading at a price-to-sales (P/S) ratio of under 5. Factoring in the $1.9 billion in net cash and marketable securities on the balance sheet, the stock is trading at an enterprise value-to-sales ratio of just 3.6. That’s just cheap for a software company that’s still growing well and has strong future prospects.

PATH PS Ratio (Forward) ChartPATH PS Ratio (Forward) Chart

PATH PS Ratio (Forward) Chart

2. Docusign

While UiPath was able to expand its customer base well, it had difficulty acquiring new customers, Docusign (NASDAQ: DOCU) has the opposite problem. The electronic signature company is experiencing good customer growth, adding 50,000 new customers last quarter. However, net dollar retention for the quarter was 99%, showing how difficult it is to expand its existing customer base.

Weakness in markets such as real estate, where many documents are signed electronically, certainly played a role, while demand also eased somewhat due to the COVID-19 pandemic. However, the company is committed to innovating and transforming itself into a platform business. It has added a number of new features and solutions and will combine its electronic signature and contract lifecycle management (CLM) products into its new smart contract management (IAM) solution.

With a price-to-earnings (P/E) ratio of under 16 and an enterprise value to EBITDA (earnings before interest, taxes, depreciation and amortization) ratio of 10.4, the stock is cheap. Note that the latter metric takes into account net cash and subtracts non-cash expenses.

DOCU P/E (Forward) ChartDOCU P/E (Forward) Chart

DOCU P/E (Forward) Chart

Overall, Docusign stock looks cheap given the potential of its IAM solution and its planned transition to a platform company, so I would buy on the recent price dip.

3. Alphabet

On the other side of the spectrum alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG) The stock recently hit all-time highs. And yet, with a price-to-earnings (P/E) ratio of just 24, the stock is one of the cheapest megacap technology stocks on the market.

GOOGL P/E (Forward) ChartGOOGL P/E (Forward) Chart

GOOGL P/E (Forward) Chart

The company has a dominant position in the search space along with Google and will look to incorporate AI insights into its results when it best fits. Over time, Alphabet should find new ways to monetize its AI search results with new forms of ads and capitalize on the 80% of its search results that do not contain ads, potentially offering a long-term growth perspective.

Meanwhile, Google Cloud services are already benefiting from the increasing use of AI. The high-fixed-cost business has recently become profitable and should see a strong increase in profitability now that it has reached the required scale. At the same time, the company’s YouTube business is one of the leading and most profitable video services on the market and is just starting to monetize its short-form videos.

Overall, Alphabet is a cheap technology stock that appears to be a good buy at current levels despite recent all-time highs.

Should you invest $1,000 in UiPath now?

Before you buy UiPath stock, consider the following:

The Motley Fool Stock Advisor The analyst team has just published what they believe to be The 10 best stocks for investors to buy now… and UiPath wasn’t one of them. The 10 stocks that made it through could deliver huge returns in the years to come.

Consider when NVIDIA created this list on April 15, 2005… if you had invested $1,000 at the time of our recommendation, You would have $759,759!*

Stock Advisor offers investors an easy-to-understand plan for success, including instructions on how to build a portfolio, regular updates from analysts, and two new stock recommendations per month. The Stock Advisor Service has more than quadrupled the return of the S&P 500 since 2002*.

View the 10 stocks »

*Stock Advisor returns as of June 24, 2024

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet, Docusign, and UiPath. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Docusign, Microsoft, Nvidia, and UiPath. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

3 Cheap Tech Stocks to Buy Now was originally published by The Motley Fool

Leave a Reply

Your email address will not be published. Required fields are marked *