Spring is in full swing, summer's just around the corner, and the S&P 500 recently hit a record high. When major indexes reach new peaks, that can be a good cue that it's time to re-evaluate your holdings, make sure your core growth theses are still intact, and prioritize investments that offer sound value. However, even with the market riding high, there are still promising tech stocks that are hot without being overheated.

Here's why investors seeking big growth potential should consider building positions in iQiyi (IQ -0.84%)Wix.com (WIX -2.91%), and Take-Two Interactive (TTWO 1.42%) this month.

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Image source: Getty Images.


Wix stock has been posting stellar performance, climbing roughly 70% over the past year and more than 600% over the past five years. Despite that impressive run, it doesn't look like the company's valuation has become unrealistically stretched. 

Wix provides customizable website services and makes it easy and cost-effective for businesses and other users to establish and build a web presence. It's found a lot of success with that core premise in recent years. There are still plenty of small businesses and individuals that need websites to bolster their digital presence and take advantage of e-commerce and online promotional avenues, and Wix should continue to benefit from its service offerings being pretty sticky. 

As long as Wix provides its users with the tools that they need to update and shape existing websites to their desired specifications (and does so at reasonable rates), there are not a lot of catalysts for members to migrate to a competing service. On the other hand, there is plenty of downside to leaving the platform -- including losing the web presence that's been built with established sites. Wix provides a range of free and premium website-customization offerings, so it has the flexibility to reach a wide user base and drive growth through upgrades and new service offerings. 

The business's stickiness and new member additions are helping Wix post fantastic sales growth, with revenue expanding 42% year over year in 2018 and coming in north of 40% in each of the two preceding years. The business is already profitable, and it has the type of model that creates the potential for rapid earnings growth as more members join the platform because expenses scale at a slower rate once the user-base size reaches a tipping point. 

The website-creation specialist trades at roughly 120 times this year's expected earnings and nine times expected sales, but it has a strong position in its market and avenues to continued growth that make that valuation nonprohibitive. 

The company is set to publish first-quarter results on May 16. 


iQiyi is another intriguing, high-growth tech company that's scheduled to report earnings on May 16. Sustained trade disputes between China and the U.S. have contributed to slowing economic growth in the Middle Kingdom and have taken some of the shine off the streaming video stock, and the company's mounting losses certainly haven't helped, either.

The contrast between the $1.3 billion loss on revenue of $3.6 billion that iQiyi posted last year and the enticing long-term potential in China's streaming market does a lot to explain why the stock has been so volatile across its first 13 months as a publicly traded company. 

IQ Chart

IQiyi data by YCharts

Despite trading up roughly 50% year to date, iQiyi shares are still down 52% from the high they hit last summer. The stock has rebounded in 2019, spurred on by strong sales and member growth in its fourth-quarter earnings release and resurgent bullish sentiment for the Chinese tech sector, but shares still trade at an attractive price for investors with a buy-to-hold mindset. 

The multimedia-streaming company has growth baked into its valuation, trading at roughly 3.5 times this year's expected sales, but it has a strong position in a rapidly expanding market and operates in one of the world's fastest-growing major economies. iQiyi's big spending on content and technology for its platform means the company won't be profitable in the near future, but its stock appears cheap in the context of its price-to-sales ratio and ample growth potential.

Take-Two Interactive

Take-Two Interactive has come a long way over the past decade, and the video game publisher's best days are still ahead. The company used to be in danger of being overly reliant on its Grand Theft Auto (GTA) series, but today it dominates the basketball video game category with its NBA 2K franchise, and recently solidified Red Dead Redemption (RDR) as another blockbuster property.

Red Dead Redemption 2 launched last October and managed to ship 23 million copies across the PlayStation 4 and Xbox One platforms as of early February. That performance almost immediately surpassed the roughly 20 million lifetime target that many analysts had for the game, but the market seemed unimpressed. Shares are down 5% in the past year and 30% from the company's record high despite RDR 2's blockbuster debut. 

There are a couple of reasons for the soggy stock performance over the past year. The incredible success of Epic Games' Fortnite sucked up a lot of the attention and generated profits that raised the bar for the rest of the market. Some investors and analysts also seem to be discounting the possibility that RDR 2's online mode will get a big update in the not-too-distant future. That may be a mistake. 

As with Take-Two's hugely successful Grand Theft Auto V, RDR 2's full online mode wasn't ready upon release. The version that users have been playing is a beta -- or an incomplete test version, and the game's developer has yet to introduce major game-play systems. It's not guaranteed that RDR 2 will be able to spur online success with a full release and more content, but Take-Two has achieved a similar feat with Grand Theft Auto V -- and it wouldn't be shocking to see that progression repeat. RDR 2 already enjoys a big installed base, but it has yet to launch on PC, and it's way too early to write off the game's online mode. Take-Two has posted big gains over the past decade, but it's currently underestimated.

With Grand Theft Auto, Red Dead Redemption 2, and NBA 2K giving the company a strong trio of core properties -- and given that there's plenty of opportunity to develop new properties and expand in mobile and new geographic markets -- the company's growth story is still just getting started.

Take-Two reports earnings on May 14 and trades at roughly 20 times this year's expected earnings.