With the Nasdaq solidly in bear market territory, most market participants are busy talking about the steep losses tech names have suffered. But in the long term, the technology sector will be a force to reckon with in the market, and if history repeats itself, stocks from the technology sector could start their path to recovery sooner than other stocks. Following both the dot-com bubble and the financial crisis of 2008, the tech-heavy Nasdaq Composite hit its trough long before the S&P 500.
For innovation-focused investors, the potential of some mid-cap tech stocks (stocks with a market cap. that is > $2 billion and < $10 billion) should not be ignored. While small-cap stocks are often fast-growing but volatile, and large-cap stocks tend to be slow-growing and relatively stable, the best mid-caps tend to fall in between: less volatile than fast-moving small caps but with more growth potential than mammoth large-cap companies. Top-ranked mid-cap stocks have a high potential to enhance their profitability, productivity, and market share.
Our research team has a few recommendations for mid-cap stocks poised to take off when the technology sector regains traction, which could happen sooner than you think.
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DXC Technology Co. (DXC) provides information technology services and products. DXC targets IT modernization, including both on-premises and cloud services, as well as data-driven operations and workplace modernization. The company serves 6,000 customers across the private and public sectors globally.
For its fourth quarter of 2022, which ended March 31st, DXC Technology reported $4 billion in revenue, down 8.6% year-over-year and just shy of the $4.1 billion Wall Street was expecting. The company reported $0.84 earnings per share for the quarter, missing the consensus estimate of $0.99 by 15%.
In the days following the May 25th call, Investors showed that they were overlooking the lackluster quarter and focused on the bigger picture for the mid-cap tech firm, snapping up shares. Most analyst firms maintained their positive view of DXC, and the consensus price target of $38 per share remains well above the current price.
Credit CEO Mike Salvino, who joined the company from Accenture in September 2019 for the positive move higher. The company’s top executive has made progress on DXC’s operating issues, setting the company for a solid fundamental rebound over the next year and beyond. Salvino has replaced about 75% of the senior management team, many from Accenture.
Further to his credit, Salvino also successfully convinced investors that DXC’s transformation — which includes a plan to shrink its total revenue while at the same time de-risking its balance sheet — is still on track. The term “better place” was used nine times during the call about the company’s self-imposed overhaul.
DXC shares had fallen 26% from August’s high as of Friday’s close, leaving them priced at only around seven times this year’s projected earnings. Short-term, prolonged market weakness could continue to weigh heavily on the stock, but those with a longer-term outlook will likely appreciate a deeper pull-back as an opportunity to get in at a better price.
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TaskUs (TASK) is an outsourcing company that handles content moderation for notable names like Facebook (META) and Uber (UBER). The company’s principal operations are in the Philippines, with about 19,000 employees located there and about 4,000 located in the United States.
In essence, TaskUs enables and supports the expansion of other high-growth businesses. According to CEO Bryce Maddock, the company most commonly serves companies that “realize their growth is going to be so aggressive that they can no longer do it all themselves.” TASK’s customers include Doordash (DASH), Coinbase (COIN), Netflix (NFLX), Zoom (ZM), and Autodesk (ADSK). Due to its competitive business model, TASK is well-positioned for exposure to the growing digital economy.
Despite solid performance following their June 2021 IPO, TASK’s share price has suffered due to the recent broader market rotation out of growth names. The company recently reported full-year 2021 total revenue of $760.7 million, representing 59.1% year-over-year growth.
Management said it sees 2022 revenue at around $980 million and $1 billion, representing 30% growth and an Adjusted EBITDA margin of approximately 25%. Nevertheless, TASK’s price is down 79% since hitting its September 23rd high of $85.49 as of Wednesday’s close, creating a possible buying opportunity for those looking for growth potential at a bargain price.
If TaskUs management keeps the business on its well-established course, investors could see excellent rewards in the not-too-distant future. The pros on Wall Street see TASK returning to the $ 60s before the year’s end. The 6 analysts offering a 12-month price forecast for the stock have a median target of $39, representing a 123% increase from where the stock closed on Friday.
Despite a solid balance sheet and a phenomenal growth trend, TaskUs Inc. (TASK) has suffered a substantial loss over the past few months, creating a buying opportunity for investors looking to add high-growth names.
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Israel-based SolarEdge Technologies (SEDG) share price has rocketed 21% over the past month, but it’s still down 27% since its record close of $379.81 in November 2021.
SolarEdge technology is some of the most respected in the industry, primarily due to the fantastic work they’ve done in reinvesting in the business. This is especially true when it comes to its inverters, where it is hands down the market leader. Its solar photovoltaic (PV) inverter systems are being installed in more than 133 countries across five continents.
Climate change is an important global issue right now. SEDG’s share price will likely rise even more over the next few years as more residential and solar properties switch to solar power. The current consensus among 25 polled analysts is to Buy SEDG stock. 19 rate the stock a Buy, 6 call it a Hold, and only 1 analyst say to Sell SEDG. The 21 analysts offering 12-month price forecasts for SolarEdge have a median target of $359, representing a 34% increase from Friday’s closing price.
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A company with 400 million ‘patents’
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Tech investor Cathie Wood has invested over $80 million already, and Microsoft founder Bill Gates has invested as well.
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