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3 Unloved Tech Stocks With Room To Run, Especially Ahead Of Earnings

By Investing.com (Jesse Cohen/Investing.com)Stock MarketsMay 05, 2021 05:37AM ET
www.investing.com/analysis/3-unloved-tech-stocks-with-room-to-run-especially-ahead-of-earnings-200577607
3 Unloved Tech Stocks With Room To Run, Especially Ahead Of Earnings
By Investing.com (Jesse Cohen/Investing.com)   |  May 05, 2021 05:37AM ET
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Fast-growing technology stocks were some of the best performers over the last year, before a general selloff hit the group in recent weeks, dragging down the NASDAQ 100, which tracks the 100 largest stocks listed on the tech-heavy index.

From rising yields leading investors to rethink frothy valuations, as well as the ‘reopening trade,’ which has seen investors dump tech shares, there are several negative factors currently plaguing the sector.

NASDAQ 100 Daily Chart
NASDAQ 100 Daily Chart

Despite the pullback, here are three stocks to consider ahead of their respective earnings reports in the coming days, amid the ongoing sector selloff. All three still have plenty of room to grow their respective businesses, making them solid, long-term investments.

1. Cloudflare

  • Earnings Date: Thursday, May 6
  • EPS Growth Estimate: +50% Y-o-Y
  • Revenue Growth Estimate: +43.6% Y-o-Y
  • Year-To-Date Performance: +5.5%
  • Market Cap: $24.9 Billion

Cloudflare (NYSE:NET), which provides web security and infrastructure services, has had a remarkable run since plunging to a bear-market low of $15.05 during the peak of the coronavirus-related selloff of March 2020.

At one point, shares of the San Francisco, California-based tech company rebounded by more than 500%, benefitting from strong demand for its cloud-based networking and cybersecurity services. 

However, after rallying to a record high of $95.77 on Feb. 10, NET stock has lost momentum, tumbling roughly 16% to close at $80.19 on Tuesday. Year-to-date, shares have gained 5.5%, underperforming the S&P 500.

At current valuations, the cybersecurity specialist has a market cap of $24.9 billion.

NET Daily Chart
NET Daily Chart

Cloudflare, whose earnings and revenue easily topped expectations in the fourth quarter, is projected to report first quarter financial results on Thursday, May 6, after the close.

Consensus estimates call for the network security firm—which has either beaten or matched Wall Street expectations for five consecutive quarters—to post a loss of $0.02 per share, narrowing from a loss of $0.04 per share in the year-ago period.

Revenue is anticipated to jump almost 44% year-over-over to $131.0 million, reflecting growing demand for its web security, content delivery, and enterprise networking services and solutions.

Beyond the top-and-bottom line numbers, investors will keep an eye on Cloudflare’s total paying customers, which reached an all-time high of 111,000 in the previous quarter.

Market players will also focus on the network security firm’s outlook for the rest of the year and beyond. Cloudflare previously projected a full-year fiscal 2021 loss in a range of $0.08 to $0.09 on revenue of $591 million.

2. Trade Desk

  • Earnings Date: Monday, May 10
  • EPS Growth Estimate: -14.4% Y-o-Y  
  • Revenue Growth Estimate: +35% Y-o-Y
  • Year-To-Date Performance: -16.8% 
  • Market Cap: $32.5 Billion

Trade Desk (NASDAQ:TTD), which operates a self-service software platform where customers can buy and manage data-driven digital advertising campaigns, has seen its stock endure some turbulence lately.

After enjoying year-to-date gains of as much as 15% through mid-February, TTD stock—which ended at $666.55 yesterday—is now 31.5% below the record high of $972.30 reached on Dec. 22.

Despite year-to-date losses of almost 17%, the Ventura, California-based digital ad-buying specialist—which has a market cap of $32.5 billion—has seen its shares rally 129% in the last 12 months, benefitting from a growing wave in digital ad-purchasing.

  

TTD Daily Chart
TTD Daily Chart

Trade Desk, which torched expectations for its fourth quarter earnings and revenue in early February, next reports financial results before the U.S. market opens on Monday, May 10.

Consensus calls for earnings per share of $0.77 for its first quarter, slowing nearly 14% from EPS of $0.90 in the year-ago period. Revenue, however, is forecast to increase 35% from the same quarter last year to $216.9 million, thanks to strong growth in internet TV ad revenue.

Internet video streaming accounts for 25% of the digital advertising company’s overall sales.

As such, investors will be eager to see if Trade Desk continues to enjoy explosive growth in its mobile video, connected TV, and audio markets, which all saw double-digit year-over-year gains in Q4.

More importantly, investors are hoping Trade Desk will provide guidance regarding its outlook for the remainder of the year, after the online advertising company failed to previously offer a forecast.

3. Palantir Technologies

  •  Earnings Date: Tuesday, May 11
  •  EPS Growth Estimate: -47.3% Q-o-Q
  •  Revenue Growth Estimate: +3.1% Q-o-Q
  •  Year-To-Date Performance: -8.1%
  •  Market Cap: $40.0 Billion

After scoring a gain of nearly 91% through the first four weeks of 2021, Palantir Technologies (NYSE:PLTR)—which provides data-analytics software and services to government agencies and large companies—shares have since lost momentum, falling 8% year-to-date, amid a selloff in high-growth tech stocks.

PLTR stock closed yesterday’s session at $21.64, roughly 52% below its all-time high of $45.00, touched in late January. At current levels, the Denver, Colorado-based data mining company has a market cap of $40 billion.

Despite recent turmoil, shares of the Peter Thiel-founded analytics software provider are still up 116% since making their trading debut at $10 on Sept. 30, thanks to growing demand for its high-tech software tools.

PLTR Daily Chart
PLTR Daily Chart

Palantir is scheduled to report financial results for the third time as a public company ahead of the opening bell on Tuesday, May 11. As such, it faces no year-over-year comparisons.

Consensus estimates call for the enterprise software company—which topped estimates for earnings and revenue in the two preceding quarters—to post Q1 EPS of about $0.03 per share, declining roughly 50% from EPS of around $0.06 in the previous quarter.

Revenue is expected to rise 3% from the last quarter to $332.1 million, amid increased demand for its data-analytics software tools from government agencies around the world, such as the U.S. Food & Drug Administration, and the U.K. National Health Service.  

Palantir generates 56% of its total revenue from government contracts.

As such, investors will stay laser-focused on growth in Palantir’s government sector revenue, which saw a year-over-year gain of 85% to $190 million in the previous quarter.

Commercial enterprise revenue growth, which rose just 4% to $132 million in the last quarter, will also be eyed, as the tech company seeks to diversify its customer base.

With nearly 140 customers, Palantir aims to expand into various other sectors, such as health care, energy, and manufacturing.

Investors will also pay close attention to Palantir’s guidance for the rest of the year and beyond. The big-data firm said in the last quarter that it expects full-year fiscal 2021 revenue growth of 30%, slowing from sales growth of 47% in 2020.

3 Unloved Tech Stocks With Room To Run, Especially Ahead Of Earnings
 

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3 Unloved Tech Stocks With Room To Run, Especially Ahead Of Earnings

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Comments (2)
Cameron Hamm
Cameron Hamm May 05, 2021 12:09PM ET
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solid advice. all 3 now trending on thier pre covid growth trend lines. mid term definitely bullish
Tyler Higgins
pekas13 May 05, 2021 12:01PM ET
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Elastic NV has a lot of room to run and is being overlooked.
Catalin Paval
Catalin Paval May 05, 2021 12:01PM ET
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what.s that ???
Catalin Paval
Catalin Paval May 05, 2021 12:01PM ET
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elastic NV ???
Cameron Hamm
Cameron Hamm May 05, 2021 12:01PM ET
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that target price..
 
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