In the current market environment, tech stocks present enormous potential. The growing digital age is leading to increased demand for tech products and services. Furthermore, the artificial intelligence (AI) boom has magnified the performance of tech products.
The bigger tech titans, such as Microsoft (MSFT), Amazon (AMZN), and Nvidia (NVDA), are the obvious choices now. However, numerous other rising stars may be appealing opportunities for investors seeking exposure to innovation, growth, and resilience in today's market environment. Let's take a look at two such companies under $30 that are growing at a rapid pace.
UiPath
My first tech pick, trading at around $19 per share, is global software company UiPath (PATH). Founded in 2005, it is best known for its outstanding robotic process automation (RPA) software platform, which uses software robots, or "bots," to automate tasks.
With rising demand for AI and robotics, UiPath's stock skyrocketed 95% last year, outperforming the S&P 500 Index's ($SPX) 25% gain. Despite a strong finish to fiscal 2023, including strong quarterly results and its first quarter of profitability, the stock is down 20% year-to-date.
The increased demand for automation has driven up demand for UiPath's products. Its annual recurring revenue (ARR) increased by 22% to $1.46 billion in the fourth quarter of fiscal 2024.
Total revenue increased by an impressive 31% year on year, reaching $405 million. The company also made a GAAP (generally accepted accounting principles) profit of $0.06 per share in the first quarter, compared to a loss of $0.05 per share in the year-ago quarter.
The company has now integrated AI into robotics with the release of UiPath Autopilot. Plus, UiPath expanded its partnership with Alphabet (GOOGL), allowing customers to use UiPath's AI-powered automation in the Google Cloud.
Cash is king, and UiPath appears financially robust to continue investing in AI offerings. It had $1.9 billion in cash, cash equivalents, and marketable securities as of Jan. 31. It also had an adjusted free cash flow of $309 million at the end of fiscal 2024.
Management expects full-year revenue to range from $1.555 billion to $1.560 billion in 2025. In addition, ARR could arrive between $1.725 billion and $1.730 billion. Analysts expect UiPath's revenue and earnings to grow by 18.9% and 6.9%, respectively, in fiscal 2025.
The global RPA market is poised for significant expansion, forecast to grow at a CAGR of 39.9% by 2030, driven by a surge in digital transformation. UiPath, with its robust suite of automation products, currently holds a 36% share of the global RPA market, and can be expected to benefit from this trend in the coming years. Trading around six times forward 2025 sales, PATH looks like a top AI robotics stock to buy now, with excellent long-term potential.
On Wall Street, UiPath stock is rated as a “moderate buy.” Of the 19 analysts that cover the stock, eight rate it a “strong buy,” one suggests a “moderate buy,” and 10 rate it a “hold.” Based on the average target price of $27.29, the stock has an upside potential of 45.5% from current levels. Its Street-high estimate further implies the stock can go as high as 70.6% in the next 12 months.
Confluent
My second tech pick, trading at around $27 per share, is data streaming provider Confluent (CFLT). It was co-founded by the Apache Kafka creators. Confluent offers cloud-based data analytics solutions. In this AI age, demand for seamless data integration and real-time analytics is increasing, driving up demand for Confluent's platform.
The company’s robust fourth-quarter results have contributed to its stock gain of 14.9% YTD, outpacing the broader market.
The demand for real-time data integration and analysis continues to increase. Confluent's platform, built on Apache Kafka, addresses critical business needs such as analytics, machine learning, and customer engagement, which explains its rapid revenue surge. Between fiscal 2019 and fiscal 2023, the company's revenue rose from $149 million to $777 million.
In fiscal 2023, revenue increased 33% year on year. The number of customers with ARRs of $100,000 or more increased 21% year on year to 1,229. Furthermore, the number of new high-value customers increased by 9% to 4,960 in the fourth quarter.
Although the company has yet to achieve continued profitability, it reported an adjusted net profit of $0.09 per share in the fourth quarter. The company expects to report another profitable quarter in the first quarter of fiscal 2024, driven by a 21% increase in revenue.
For the full fiscal year 2024, management expects revenue to increase by 22.3%, followed by earnings growth to $0.17 per share, up from $0.04 in fiscal 2023. Likewise, analysts expect revenue growth of 22.3% in fiscal 2024 and 25.1% in fiscal 2025.
Last week, Wells Fargo analyst Michael Turrin reiterated his “buy” rating on Confluent stock, with a price target of $36. RBC Capital also followed suit, maintaining a “buy” rating with a price target of $37.
The word on the Street is that Confluent stock is a “moderate buy.” Out of the 28 analysts that cover the stock, 17 suggest it is a “strong buy,” two recommend a “moderate buy,” eight say it is a “hold,” while one suggests a “moderate sell.”
Confluent stock has an average target price of $31.96, which is 18.8% above current levels. The Street-high target price of $40, however, indicates a potential upside of 48.7% in the next 12 months.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
