Tech stocks comprise many of the S&P 500 and the Nasdaq Composite. This sector features many high-growth companies that can scale their revenue and profits over time. Many corporations within the industry have annual recurring revenue models.
However, a major weakness of most tech stocks is that they amass high valuations. Many investors get excited about a tech stock’s long-term potential, and they pile into the stock. That results in astronomical P/E ratios. Those elevated valuations require impressive financial growth to maintain. When growth stocks in the tech sector disappoint, their shares can plummet.
While some investors may panic about sharp dips, savvy investors view some of those dips as long-term buying opportunities. Dips present great potential for long-term returns, but having a few good stocks on your radar is a good idea. These are some of the tech stocks that investors may want to consider on dips.
Crowdstrike (CRWD)
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Crowdstrike (NASDAQ:CRWD) became a household name in one of the worst ways possible. Issues with a few lines of code in an update caused a global IT outage that affected many industries and consumers. The cybersecurity giant is in a PR crisis, prompting some bulls to express caution.
Shares have lost almost 30% of their value in a matter of days and are up by 9% year-to-date. It starkly contrasts Crowdstrike’s 55% year-to-date gain at the end of June. While Crowdstrike is currently dealing with a black eye, investors and business owners will likely forget about this episode within a few years.
Remember Cambridge Analytica? The scandal was a nightmare for investors of Meta Platforms (NASDAQ:META). The stock dropped by more than 40% from its peak within a few months as people lost trust in the company. Some people panicked and sold their shares during that tumultuous time. It may have looked like a smart move then, but Meta Platforms’ stock has more than tripled from its 2018 lows. When people talk about Meta Platforms today, no one mentions Cambridge Analytica.
Crowdstrike is likely to face a similar journey. While this year may be brutal, Crowdstrike will probably reclaim its all-time high and reward patient investors. The company has a strong lead in the industry, impressive growth rates and $3.65 billion in annual recurring revenue.
CommVault Systems (CVLT)
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CommVault Systems (NASDAQ:CVLT) is another cybersecurity company opposite Crowdstrike. While Crowdstrike is a big-name stock enduring a fallout, CommVault Systems is a more obscure cybersecurity stock gaining momentum.
A 63% year-to-date gain should draw some attention, as that’s much higher than the S&P 500 and Nasdaq Composite’s year-to-date returns. The $5.5 billion company also only has a 33 P/E ratio. That’s a lower valuation than what you’ll find for most cybersecurity stocks.
CommVault Systems also delivers solid financial growth. Q4 FY24 revenue increased by 10% year over year to reach $223.3 million. The fast-growing subscription revenue segment increased by 27% year over year and made up more than half of the company’s revenue. CommVault Systems now generates $770 million in annual recurring revenue. The firm even had leftover capital to initiate a $184.0 million stock buyback throughout fiscal 2024. Revenue and profits are rising for the undervalued cybersecurity stock.
Alphabet (GOOG, GOOGL)
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Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has established itself as the online advertising leader. Google and YouTube are two of the most visited websites, and they have garnered billions of dollars in quarterly revenue. The company continued to grow in both segments with its Q2 2024 results. Revenue increased by 14% YOY, while net income was up by 28.6% YOY.
YouTube ad revenue increased by 13% YOY, while Google Cloud revenue was up by 28.8% YOY. Google Cloud should continue to benefit from AI tailwinds. More companies are hosting AI apps using Google Cloud and other cloud platforms. Switching from Google Cloud once a company sets up its digital infrastructure is also very difficult.
Alphabet has outperformed the stock market for many years, and a newly issued dividend only improves the stock’s prospects. Shares are up by 32% year-to-date and have almost tripled over the past five years. The stock has a reasonable 28.5 P/E ratio, which offers a decent margin of safety. The stock is down from its all-time high, but Alphabet should reclaim that level for long-term investors.
On this date of publication, Marc Guberti held long positions in CRWD, CVLT, and GOOG. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
