Have Tech Stocks Found a Bottom?
This past week, the broader markets rallied following the Juneteenth holiday weekend. The NASDAQ led the way with a near 7.5% gain as the tech-heavy index was rescued from oversold territory by investors. Overall, the NASDAQ is still down by 27% this year, but tech stocks seem to be forming a bottom as the selling pressure mostly tapers off.
I’ve been highlighting several tech stocks that I love during this bear market. After all, bear markets are usually the best times to be loading up on great companies at a discount. Could we fall lower? Sure. But timing the bottom is next to impossible in this type of market environment. Dollar-cost averaging is the only effective way of taking advantage of some of these prices. So after I already wrote about tech stocks like AMD (NASDAQ:AMD), Meta Platforms (NASDAQ:META), and Snowflake (NYSE:SNOW), here’s two more tech stocks I’m eyeing at these current price levels.
Olo (NYSE:OLO)
Some of you might not have heard of this company, but it is the ordering software platform that is used by 82,000 restaurants across the US. Olo went public in 2021 and shares are down by more than 70% since the IPO and currently trading for about $10.00 per share. It’s an interesting company to say the least. Major chains like Denny’s and PF Chang’s use Olo’s software, and the company did see a more than 30% CAGR in new users over the past four years.
Why do I like Olo? The company is profitable already with gross margins of 70% and is the leading platform used across the country. It has even partnered with delivery services like Lyft (NASDAQ:LYFT) to integrate more delivery options. Olo is steady and has good cash flow with great margins, meaning this could be a compounder over the next decade.
Twilio (NYSE:TWLO)
Do you remember when Twilio was all the rage a couple of years ago? Remember when the stock also traded for more than $400 per share? If you liked it then, you better love it now. Shares are trading in the double digits as of the time of this writing, and the stock is down by 62% year to date. Twilio is still seeing excellent growth and even guided for 36-38% revenue growth for the quarter. That’s great by any standards, but this market environment is simply punishing non-profitable companies.
Twilio’s main figure that investors should look at is its dollar-based net expansion rate. This is a measure of how much more customers are spending on the product as time goes on. Twilio has a 127% DBER which means that on average, customers are spending 127% more each year. That is an incredible stat for growth. You’re still not going to get great PE ratios when it comes to high-growth tech stocks, but on a price to sales basis, Twilio is trading at just 4.8 times sales. The underlying numbers make this a great buy and a company that should dominate its industry for years to come.
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