The technology sector has long been a focus for investors due to its rapid innovation, growth potential, and significant impact on various aspects of the economy. Despite market volatility, tech companies have shown resilience and adaptability.
Thanks to artificial intelligence (AI), the tech sector is now thriving on innovation and disruption. While the top tech titans are obvious choices, there are numerous smaller players whose long-term growth prospects make them appealing to investors looking for high returns.
The first stock on my list is Wix.com (WIX), a popular cloud-based web development platform. Wix's growing user base and subscription-based revenue model have helped the company maintain steady financial performance.
The second company on my list is Rubrik (RBRK), a cloud data management and data protection company, backed by Microsoft (MSFT). The company listed in April via an initial public offering (IPO), and is now valued at $5.9 billion.
Wall Street is bullish on both of these stocks, expecting them to rally over 18% to 43% over the next 12 months. Let’s find out which is the better buy now.
Wix.com Stock
Wix.com (WIX) offers an intuitive and versatile platform that enables people to create an online presence. Over the years, the company has grown exponentially, providing over 200 million users worldwide with the tools to create stunning websites without the need for extensive technical expertise.
WIX stock is up an impressive 27.4% year-to-date, outperforming the S&P 500 Index’s ($SPX) gain of 16.7%.
In the recently reported first quarter, total bookings increased by 10% year-over-year to $457.3 million, driving total revenue growth of 12% year-over-year to $419.8 million. The company’s expansive AI product offerings and Wix Studio drove the outperformance. Adjusted net income came in at $1.29 per diluted share, up from $ 0.91 per share in the year-ago quarter.
Wix continues to innovate and expand its offerings. The company is investing heavily in AI and machine learning to further enhance its platform's capabilities.
CEO Avishai Abrahami noted, “Wix Studio also continues to perform ahead of plan, with over one million Studio accounts created since our August launch.” He added, “We continue to expect AI and Studio to be increasingly more meaningful drivers of growth in 2024 and the years to come.”
Driven by the outstanding Q1, management now anticipates 12% to 14% growth in full-year bookings, leading to an 11% to 13% increase in total revenue. Wix also anticipates generating a gross margin of 68% to 69% and adjusted free cash flow of $370 million to $400 million in 2024.
Analysts that cover the stock predict a 12.4% increase in full-year revenue to $1.76 billion, with earnings rising by 28.5% in 2024. Revenue and earnings are expected to increase by 13.9% and 22.7%, respectively, in 2025.
On Wall Street, WIX has an overall “moderate buy” rating. Out of the 18 analysts that cover the stock, 11 have a “strong buy” rating, three rate it a “moderate buy,” and four suggest it’s a “hold.”
The mean target price for WIX is $184.59, which implies the stock could increase by 18.7% from current levels. Furthermore, the stock’s Street-high estimate is $210, which suggests the stock can rally up to 35.3% over the next 12 months.
WIX, trading at 27x forward earnings estimates and 4x forward sales, is an appealing buy for investors looking for growth opportunities in the technology sector.
Rubrik Stock
Rubrik (RBRK) provides a comprehensive platform that integrates data backup, recovery, and management for both cloud and on-premises environments. With cybercrimes and data breaches on the rise, Rubrik's solutions are designed to simplify data management processes, while also improving data security.
Rubrik stock is nearly flat with its IPO price of $32, and down about 12.8% from its mid-June highs near $36.
In the first quarter of fiscal 2025, subscription annual recurring revenue (ARR) increased by 46% year on year to $856.1 million. Total revenue increased 38% to $187.3 million. Furthermore, in Q1, the company reported 1,859 customers with subscription ARRs of $100,000 or higher. At the end of the quarter, Rubrik held $606.3 million in cash, cash equivalents, and short-term investments.
The growing importance of data management in an increasingly digital world offers enormous scope for Rubrik. CEO Bipul Sinha believes, “The explosion of data especially with AI is creating a massive market opportunity for Rubrik.”
Rubrik's ability to form high-profile partnerships and integrate with major cloud providers bolsters its market position. Its strategic partnership with cybersecurity giant CrowdStrike (CRWD) aims to improve its data security functions. It has also formed a global strategic alliance to launch new services with IT infrastructure services provider Kyndryl (KD).
It is not unusual for a growing company to be unprofitable. Rubrik posted an adjusted net loss of $1.58 per share in the first quarter. The company expects its adjusted net loss for fiscal 2025 to range between $2.35 and $2.25 per share. Analysts who cover the stock expect losses to eventually drop to $1.45 per share in fiscal 2026.
Management expects full-year subscription ARR to arrive between $983 million and $997 million, with revenue ranging from $810 million to $824 million, which is consistent with consensus estimates. Analysts expect revenue to rise by 28.1% in fiscal 2026.
On Wall Street, RBRK has an overall “strong buy” rating. All 14 analysts that cover the stock now rate it a “strong buy,” with the one single holdout from a month ago joining the majority.
Following its strong Q1 results, Barclays increased Rubrik's price target to $42, while Keybanc raised its target to $48.
The mean target price for Rubrik stock is $45.78, which implies the stock could increase by 43% from current levels. Furthermore, the stock’s Street-high estimate is $50, which suggests Rubrik shares can rally up to 56.3% over the next 12 months.
Which Tech Stock Is The Better Buy?
While Wall Street rates RBRK as a "strong buy," I believe WIX is a better buy-and-hold option for the long term. Rubrik remains unprofitable, whereas Wix has been working to maintain consistent profitability. Furthermore, by making website creation solutions available to everyone, regardless of technical ability, Wix has enabled millions to create their own digital spaces. This explains the increasing demand for its platform.
So, I believe that with the expanding digital world, WIX will undoubtedly grow even more profoundly.
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.
