Stocks in the tech sector have skyrocketed over the past year, as investors looked to technology companies for growth during global shutdowns. But some investors have started to flee the tech sector recently, preferring other sectors that they think will expand as the U.S. economy emerges from from the pandemic.
That’s left some technology stocks on sale right now, and there are three in particular that investors should add to their buy lists. Here’s why you should buy shares of Okta (NASDAQ:OKTA), Roku (NASDAQ:ROKU), and Square (NYSE:SQ) right now.
Okta: Invest in identity and access management
Okta helps companies protect their online information and makes it easy for users to access their accounts in what’s called the identity and access management (IAM) market. IAM may seem like an obscure corner of the tech sector, but the segment is growing fast and is already worth $55 billion.
Okta’s services have become a critical part of many companies’ IAM strategies, and the company’s growth in the most recent quarter has been nothing but phenomenal. Revenue jumped 41% in the fourth quarter to $234.7 million. The number of customers with annual contract value worth $100,000 or more also increased by 33% year over year.
For the full fiscal year 2021 (which ended Jan. 31), Okta’s total revenue increased 43% to $835 million, and the company’s subscription sales jumped 44% from 2020.
Despite Okta’s impressive fourth-quarter and full-year results, the company’s share price is down about 20% over the past three months.
But with Okta’s current growth, plus management’s expectation of a 30% jump in total revenue in fiscal 2022, there’s still plenty of room for this company to continue growing. All of this means that Okta’s current share price slide has created a great buying opportunity for tech investors.
Roku: A streaming giant that’s growing fast
It’s no secret that video streaming usage has surged over the past year as many people have spent more time cooped up at home. And one company that has benefited from all of that streaming has been Roku. In the most recent quarter, Roku’s 51 million active users streamed a jaw-dropping 17 billion hours.
The fantastic thing about Roku’s business is that it benefits no matter which streaming service is winning the streaming wars. Let Netflix, Disney, Apple, and HBO duke it out — Roku will keep growing as they create amazing content for the company’s platform.
Each time a user signs up for a new streaming service through Roku’s platform, the company receives a cut of that subscription. The company also has a fast-growing advertising business that will help it diversify its revenue in the coming years and should drive further growth.
The company’s revenue segments helped pushed sales up 58% to $649.9 million in the fourth quarter. And users are spending more on Roku’s platform than ever before — the company’s average revenue per user popped 24% to $28.76 in 2020.
Could TV viewing drop this year as pandemic-related restrictions ease? Sure. But long-term investors would be wise to see that on-demand video streaming is here to stay and Roku is leading the shift. Roku makes it easy for users to access all of their subscription services in one place and it’s grown its user base by 39% over the past year.
Add to all of this the fact that Roku’s stock is down about 12% over the past three months, and this streaming platform looks like a fantastic buy right now.
Square: A long-term play on a digital financial world
Square’s payment processing platform is tapping into a vast and growing digital payments market that will be worth an estimated $2 trillion in the U.S. by 2025.
The company’s payment terminals are prolific among merchants, but Square is expanding its payments made through its online channels as well. Card-not-present payment volume (through online channels) popped 26% in 2020.
Additionally, Square’s Cash App, which allows users to pay each other and pay merchants, has experienced exceptional user growth of 50% in 2020 to 36 million monthly transacting active customers.
And those users have used the app to make a lot of payments, pushing the gross payment volume (GPV) on Cash App to $377 million in the most recent quarter, an increase of 162% from the year-ago quarter.
Square’s stock has tumbled along with many other tech stocks over the past three months, and is down about 10%. For investors who are looking for a great tech play on the expansive digital payment market, Square’s recent drop looks like a steal.
Just one thing about these tech bargains
Investors should remember that the tech sector has been a bit erratic lately, as the market responds to new data about the economy and awaits a post-pandemic world. This could cause some more volatility from the tech sector, but long-term investors should try to shut out the noise and hold on to these stocks for the long haul.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.