Technology stocks recently saw a significant pullback as investors weighed valuation concerns and safer opportunities presented by rising Treasury bond yields . The tech sector has driven impressive gains for the market over the last year, and it's not unreasonable to take a cautious approach to stock buying amid signs of volatility and uncertainty about how stimulus funds and monetary policy might shake market performance.
On the other hand, investors who identify high-quality growth stocks and seize opportunities created by market turbulence to build their positions should enjoy very strong performance over the long term. With that in mind, read on for a look at three fast-growing tech companies that seem primed for success.
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1. Impinj
The last year has brought twists, turns, and big pricing swings for shareholders of Impinj (PI 1.46%). The specialist in radio-frequency identification (RFID) products had been gaining traction in the retail and airline industries, but demand over the last 12 months has been very uneven as a result of the pandemic.
Now, it looks like some of the headwinds that hindered the company are easing, and customers are starting to increase orders again. Stronger pricing power in the semiconductor space driven by new technology cycles also suggests a more favorable operating backdrop for Impinj.
The company's RFID tag, sensor, and software technologies allow retailers to track and analyze product trends with a new level of detail. Businesses including Zara and Macy's already use Impinj's solutions to keep better track of their inventory, provide product availability info for customers, and determine whether to move goods between in-store and e-commerce channels.
Omnichannel has never been more important for the retail industry, and being able to shift goods to meet consumer demand where it's happening and predict where demand is heading will become increasingly important. RFID could also see adoption ramp up in industries including healthcare, hospitality, and manufacturing -- potentially creating huge growth catalysts for Impinj. With companies just starting to use advanced data analytics, RFID could find new uses in nearly every industry, and Impinj is delivering technologies for a market with explosive possibilities.
2. Himax Technologies
Himax Technologies (HIMX 0.75%) is another chip specialist that should benefit from strong demand in the semiconductor space. The company generates most of its revenue from the sale of display drivers, which determine the colors displayed by pixels on television screens, mobile devices, and other hardware.
Himax stock has roughly tripled over the last year, but the company's market capitalization still sits at roughly $2.5 billion, and it looks like the valuation has room to run . Even after the stock's impressive rally, shares trade at roughly 12 times this year's expected earnings and two times expected sales. These levels still look attractive in the context of strong performance for the core business and growth opportunities in new product categories.
The market for display drivers has historically been somewhat cyclical, and that raises questions about what stage in the upcycle Himax's business is in. While the automotive display market remains pressured and the television market probably won't be an explosive growth source, the company looks poised to benefit from a strong upgrade cycle in the mobile market. 5G is already driving an uptick in mobile device sales, and the rollout and overall impact of the next-generation technology are in their early stages. The company's sales surged roughly 57.7% year over year in the fourth quarter, and guidance for sequential growth between 5% and 10% in Q1 suggests momentum for display drivers will continue in the near term.
The company's engineering and research teams have also spent years working on augmented reality (AR) and machine vision applications, and success in these emerging categories could help Himax tap into high-margin opportunities that are just beginning. The display driver segment appears primed for a sustained rebound, and even a few significant wins in AR and machine vision will radically improve the business' performance and outlook.
3. Fiverr
Fiverr International (FVRR 1.18%) operates a gig-labor marketplace that connects workers with clients. If you were looking for an image to be edited or a voice-over for an advertisement you were making, you could probably find a professional on the platform who could do the job, and at a fraction of the cost of traditional hiring methods.
Pricing on the core platform ranges from $5 to $995 per contract, but verified subscribers to the company's premium tier can list jobs above that range. Business is booming: Driven by a 45% year-over-year increase for active buyers on its platform, Fiverr's revenue surged 89% in the fourth quarter .
With the small contract price implied by the company's name, there might be some concern that room for long-term growth is limited. But Fiverr is taking a "land and expand" approach to the gig economy. Its current model is focused on bringing as many users on board as possible, but there will be plenty of opportunity to bring larger enterprises to the platform and build recurring, service-based revenue streams in addition to one-off contracts.
Because of added costs including payroll taxes, office space, and insurance, many companies will increasingly pivot to gig workers over the next decade. The gig economy is just starting to evolve, and Fiverr's ground-floor position and leading role in facilitating it should help create strong growth for years to come.
Take the long view
The recent pullback for tech stocks highlights the fact that investing in the sector remains high risk compared to other corners of the market. Charting performance for Impinj, Himax, and Fiverr admittedly involves more speculation than some investors will be comfortable with, but each of these is companies has the opportunity to tap into powerful market trends and deliver big returns if they continue to successfully innovate and iterate.
