As the tech-heavy Nasdaq 100 (NDX) begins rolling over, investors may wish to pay more attention to valuations. Undoubtedly, upbeat growth expectations are fine and dandy. Still, if you pay a premium price tag for such growth, you should expect considerable volatility. However, there seems to be value in less crowded tech stocks. Therefore, let’s use TipRanks’ Comparison Tool to check out three less obvious innovators—GRAB, ZS, and SONO—that boast Strong Buy ratings from analysts alongside reasonable valuations and expectations.
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Grab (NASDAQ:GRAB)
Grab is the much smaller Southeast Asian equivalent of Uber (NASDAQ:UBER), offering its ride-hailing and food-delivery services (under GrabFood) in numerous nations across the region, including the Philippines, Thailand, and Vietnam. The stock has been a massive laggard, now down more than 80% from its 2021 post-IPO peak of almost $17 per share.
Bogged down by lackluster margins and tough macro conditions, the valuation “reset” in GRAB stock has been unforgiving. Still, the turns may have already begun to show signs of turning, with the ride-hailer recently clocking in its first-ever profitable quarter ($11 million profit in its fourth quarter revealed earlier this year).
Despite the solid February showing, the stock remains stuck in the gutter. However, looking ahead, management remains optimistic about its road ahead. Though it’s way too early to refer to Grab as an Uber in the making, one can’t help but be encouraged by efforts to support profitable growth from here. Following an extremely underrated (and underappreciated) quarter, I have to stay bullish on the stock as it looks to follow Uber’s path of sustainable, profitable growth.
If Grab can keep delivering margin improvements without weighing too heavily on revenue growth, it will certainly be tough for Mr. Market to keep the stock depressed. The good news is there are many drivers Grab can pull in the age of AI.
Apart from leveraging AI tools to drive efficiencies across its platform (AI-generated delivery instructions should prevent time wastage at the hands of lost or confused drivers), Grab is looking to targeted advertising as a profit engine.
What Is the Price Target of GRAB Stock?
GRAB stock is a Strong Buy, according to analysts, with 10 unanimous Buys assigned in the past three months. The average GRAB stock price target of $4.41 implies 34.9% upside potential.
Zscaler (NASDAQ:ZS)
Zscaler stock’s recovery rally, which kicked off in early 2023, has come to a corrective halt, with shares now down more than 31% from their 52-week highs of around $260 per share. The $26.2 billion cloud-based security firm recently broke its awful six-day losing streak but could continue to be dragged down as high inflation pushes rate cuts further out into the future, adding pressure to high-growth firms that aren’t yet profitable.
With an intense focus on expanding margins, I view ZS stock as more of a buy-the-dip opportunity than anything else and am inclined to stay bullish as the firm pushes closer to profitability.
Undoubtedly, sales growth has slowed down considerably of late, with sales recently rising 35% in the second quarter, its slowest pace in many quarters. However, as growing cyber threats (some of which may be armed with AI tools) emerge, I find that it’ll just be a matter of time before demand for top-of-the-line cybersecurity products, like those in the Zscaler portfolio, reaccelerates again.
Following the recent barrage of cyberattacks hitting big-name managed health providers, analysts over at Macquarie touted Zscaler as one of two top cybersecurity companies poised to benefit from a potential uptick in spending.
In the meantime, management is investing heavily to better position itself for the next cybersecurity upswing. Whether it’s through organic innovations (think its generative AI-powered security control solutions) or via acquisition (think the recent purchase of Israel-based security company Avalor), Zscaler still seems to have its foot on the gas.
What Is the Price Target for ZS Stock?
ZS stock is a Strong Buy, according to analysts, with 26 Buys and seven Holds assigned in the past three months. The average ZS stock price target of $261.03 implies 49.74% upside potential.
Sonos (NASDAQ:SONO)
Home audio technology company Sonos also saw its stock’s newfound momentum falter, with shares recently correcting by around 14% from their year-to-date peak of $19.76. A slate of intriguing new products is looming, including true wireless headphones scheduled for a 2024 launch and a potential streaming device that could land later this year or early next year. Therefore, SONO stock stands to be a wild mover.
Add incremental updates to existing products (think portable speaker Sonos Roam) into the equation, and it’s clear Sonos still has what it takes to stay at the forefront of audio innovations. All things considered, I’m inclined to stay bullish and watch the stock closely as it comes in a bit at the hands of macro headwinds and unfortunate product delays.
Indeed, such delays to widely anticipated products, like the firm’s coming headphones, are never ideal. However, whenever you have a reputation to uphold, it’s far better to miss a deadline than risk tarnishing a brand with a glitch that’s easily solved with a bit more time.
Reportedly, Sonos’ coming headphones are forecasted to be a hot seller, with as many as one million units reportedly to be in production over the next year. The product needs to be polished and free from pesky glitches if Sonos stock is to reverse course again. Fortunately, I think the firm is on the right track. It’s just that investors need to be a bit more patient with the stock.
What Is the Price Target for SONO Stock?
SONO stock is a Strong Buy, according to analysts, with four Buys and one Hold assigned in the past three months. The average SONO stock price target of $29.52 implies 74.4% upside potential.
The Takeaway
The following lesser-known tech plays have been lacking in the momentum department lately. As the rest of the market cools off, perhaps investors may have a chance to get into the following Strong-Buy-rated innovators at an even better price. Today, Wall Street sees SONO stock as having the most to gain (~74%) from current levels.
