For bargain hunters looking for good stocks to buy that aren't trading at sky-high valuations, this isn't the easiest market. It's tough to find true no-brainer buys since the S&P 500 is up more than 10% this year and many stocks are performing well despite the ongoing coronavirus pandemic's many economic challenges. It's even more difficult to identify bargains in the tech sector, as the tech-heavy NASDAQ 100 index has gained 36% year to date.
However, you can get started with two great bargains that I found for you in the tech sector. These companies are poised to deliver some strong returns for your portfolio in the coming years. Here's a closer look at cloud communications expert 8x8 (NYSE:EGHT) and content delivery network operator Limelight Networks (NASDAQ:LLNW). These undervalued stocks can give you some solid returns starting from low buy-in prices.
This company delivers cloud-based voice, video, and chat communications to businesses of every size. 8x8's services become functions in their clients' mobile and web apps, matched with call center and total phone system solutions. One might think that this business model would fire on all cylinders in this age of work-from-home policies and increased reliance on digital communication services. However, 8x8's stock has gained just 3% in 2020.
8x8 really has been a well-oiled machine this year. Revenues rose 18% year over year in October's second-quarter report, while adjusted net losses shrank from $0.16 to $0.03 per share. The company smashed Wall Street's estimates across the board, just like in July and May.
The company is attracting large customers to highly profitable multiyear deals. Most of 8x8's contracts end up being bundled packages with several services; customers who renew their deals tend to increase their annual spending on additional services or more seats. 8X8 even posted 11% higher small business sales even in the second quarter, when many smaller companies faced difficult budget restrictions.
Management is confident that this year's healthy growth will continue for the foreseeable future, with or without the market-changing COVID-19 pandemic. The bottom line should even turn positive in the next fiscal year, which starts in the spring.
8x8 is a great growth stock with a promising long-term future. It should be skyrocketing right now. Market makers disagree, which opens up a nice buying window for the rest of us.
Streaming media services were hot commodities even before the novel coronavirus arrived. The global health crisis only accelerated a powerful cord-cutting trend that started many years ago, and Limelight Networks has a finger in every launch of new media-streaming services.
The company is also expanding its product portfolio with edge computing services and cloud security solutions. Limelight's sales are surging, and the company is reporting positive earnings before interest, taxes, depreciation, and amortization every quarter. This is a successful turnaround story that started with the settlement of a long-running legal tussle with larger rival Akamai Technologies (NASDAQ:AKAM) in 2018.
Limelight posted 15% year-over-year growth in last month's third-quarter report, comfortably exceeding Wall Street's targets. The company missed analysts' earnings expectations entirely due to interest payments on $105 million of new debt papers. The stock plunged 30% lower the next day.
That was two weeks ago. Since then, Limelight's share prices have fallen another 9%. The stock was a no-brainer buy as soon as the bargain-bin discount started and an even better investment at these larger rebates. There is nothing wrong with the business itself, and the additional cash gives management a level of financial flexibility that Limelight hasn't seen before.
I can't wait to see how Limelight spends a portion of that debt-based cash reserve. Ideas include accelerated network upgrades, new service launches that require additional hardware, and maybe even a small plug-in acquisition or two. Meanwhile, Limelight Networks is a screaming buy.