Tech stocks are under fire again. The tech-heavy Nasdaq Composite Index (^IXIC +1.71%) fell more than 4% over the last month while the broader S&P 500 Index (^GSPC +0.84%) traded sideways. True pure-play investments in the technology sector dropped even deeper.
Some of the tech stocks behind these dramatic index and fund results look like fantastic deep-discount buys today. I can't promise to put real money in all of the ideas below, but I'm certainly tempted to make a few moves here. You should give these high-quality technology investments a second look, too.
Image Source: Getty Images.
1. Fastly
Let's start with a stock that I actually did buy more of last week. Content delivery and edge computing expert Fastly (FSLY +5.15%) has seen its share prices plunge 40% lower over the past month, driven by a slight earnings miss.
Analysts expected Fastly to post a $0.11 net loss per share on revenues near $85.1 million in the first quarter. The actual report landed ever so slightly below those targets with a loss of $0.12 per share and top-line sales of $84.9 million. Fastly's stock fell 27% the next day.
If that doesn't strike you as an overreaction to a mild miss, I don't know what will. Keep in mind that Fastly also boosted the midpoint of its full-year revenue guidance from $380 million to $385 million. Management's confidence in a stronger second half makes sense in the light of Fastly's normal pattern of seasonal trends, amplified by the world's return from last year's coronavirus lockdowns.
"Typically, we sign new customers in Q1 and Q2, which then ramp on our platform in the latter half of the year," CEO Joshua Bixby explained in the first-quarter earnings call. "Historically, usage expansion on the platform is slower in Q2 as people tend to spend more time outside and less time on devices. This year, we believe this effect will be somewhat exaggerated as the world begins to reopen."
So I doubled my investment in Fastly a week ago. Fastly's unique focus on customer-friendly flexibility and powerful edge computing services will serve us investors well in the years to come. It would be a shame to miss this wide-open buying window.
2. Roku
Media-streaming technology specialist Roku (ROKU +2.26%) is trading 35% below February's all-time highs, including a 19% drop in the last month.
Soft earnings were not the problem this time. Roku completely smashed Wall Street's first-quarter estimates, but that wasn't enough to overcome several weeks of sensitive investor nerves.
Roku did nothing wrong, other than skyrocketing too far and too fast over the past year or so. This company is an increasingly obvious winner as consumers everywhere cut the cable TV cord in favor of internet-based video streams. The stock is still up by 170% in 52 weeks, even after the recent discount.
I get why the price had to come down. Roku is barely profitable and shares are trading at a sky-high 20 times trailing sales. That's rich even by growth-stock standards. Still, Roku should continue to deliver analyst-stumping results for years to come. The company is only starting to explore a massive global market.
This is one of those situations where I make it impossible to boost my own Roku position because I keep telling you that it's a good idea. Oops, I did it again -- the Fool's disclosure policy won't let me touch the stock for another two days thanks to this very article. Maybe I'll get around to it someday soon, but nothing is stopping you from grabbing some Roku shares today at a great price.
The rebound is coming. Image source: Getty Images.
3. Universal Display
Honestly, I really should increase my holdings in Universal Display (OLED 1.07%) as soon as possible. I don't know how much longer the stock will stay 27% below January's all-time highs.
This is the developer behind the phosphorous organic light-emitting display (OLED) technology you probably have in your smartphone, your tablet computers, and maybe even the living room TV. Small OLED screens are everywhere these days, alongside a healthy helping of their larger TV-grade brethren. OLED-based light fixtures are coming up next. Manufacturing partners are expanding their OLED-building production lines and expecting a strong return on their investment. And Universal Display collects revenues based on the total area of OLED screens hitting the market, plus some fees as the exclusive reseller of OLED materials from longtime partner PPG Industries (PPG +0.62%).
The revenue stream is a little lumpy, which is why stock prices are down at the moment. Universal Display beat the Street's first-quarter estimates across the board but left analysts scratching their heads over the unchanged full-year guidance. If the start of the year was strong but the full-year targets didn't move, you should expect some weak results in the back half of the year. Right?
Universal Display may indeed post some modest results over the next couple of quarters, in keeping with the company's history of generating unpredictable earnings. That doesn't change the long-term growth trend or the enormous size of this company's addressable market, which means that clever investors should take advantage of temporary drops in Universal Display's share prices.
