Yahoo Finance 3 Tech Stocks That Actually Are Undervalued
Written by Amy Legate-Wolfe at The Motley Fool Canada
Tech stocks have had a bad reputation these days. Many soared during the pandemic and have since bottomed out. In many cases, it was warranted. Some grew too fast during a time of growth, only to be left with no provisions for losses. Yet there are tech stocks that simply do not fit into this category.
Today, I’m going to look at three tech stocks that are still down, but definitely don’t count them out. Instead, each could be an undervalued play that could bring in huge returns.
Kinaxis
One of the tech stocks seeing some renewed interest is Kinaxis (TSX:KXS). Analysts remain bullish on the company, with shares rallying in the last few weeks. Shares are now up 26% in the last year and 15% year to date. However, it still remains far below its all-time highs.
Analysts believe it’s a transitional year for Kinaxis stock, with earnings before interest, taxes, depreciation, and amortization (EBITDA) recovering in 2024. On the way to that recovery, shares should increase and even reach $200 per share before 2023 is out.
Software as a Service (SaaS) revenue remains strong and provides predictability — something you don’t see all that often with tech stocks. Furthermore, it offers a huge amount of diversification among enterprise-level companies. This includes with heavy-hitters like Toyota and Procter & Gamble, with no one customer accounting for more than 10% of total revenue.
Kinaxis stock expects to reach revenue between US$420 and US$430 million in 2023, so this could be a banger year for those interested in Kinaxis stock, down 23% from all-time highs.
CGI
Another top stock, and one with a lot of history, is CGI (TSX:GIB.A). This software company focuses on acquiring smaller software businesses and allowing them to thrive. But even with shares up 33% in the last year, analysts remain convinced this is one of the undervalued tech stocks to consider.
During its most recent earnings report, CGI stock reported revenue of $3.72 billion — a 13.7% increase year over year. While analysts expected the stock do to well, they didn’t expect it would do this well. The company continued to show it can deliver earnings as well as remain defensive in an economic downturn. That is why it’s still a top choice for investors.
CGI stock has been around for decades, and in the near and long term, there are benefits for investors. Mergers and acquisitions remain fruitful, and long-term contracts are abundant. This has led to a solid balance sheet for CGI stock, and easy growth for the future, leading analysts to conclude CGI stock will continue to outperform.
Open Text
The last of the tech stocks I would urge investors to consider is Open Text (TSX:OTEX). The reason is that right now, it’s not performing as well as Kinaxis stock and CGI stock. That being said, it certainly is on the rise.
Shares of Open Text stock are down 2% in the last year, but 24% year to date. The recent jump came after the company reported strong earnings back in February, while at the same time laying off about 8% of its workforce. This came after an acquisition of U.K. software giant Micro Focus for just shy of US$6 billion.
Revenue was up, earnings were up, cloud revenue up as well, with net income up a whopping 192.7% year over year. So, analysts were certainly surprised by the positive news. With growth on the way and cash on the books, Open Text stock still looks solidly undervalued and offers a 2.6% dividend yield as well at writing.
The post 3 Tech Stocks That Actually Are Undervalued appeared first on The Motley Fool Canada.
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Fool contributor Amy Legate-Wolfe has positions in Kinaxis. The Motley Fool recommends CGI and Kinaxis. The Motley Fool has a disclosure policy.
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