Please ensure Javascript is enabled for purposes of website accessibility

2 Cheap Tech Stocks to Buy Right Now

By Keith Noonan – Aug 21, 2021 at 7:25AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

These companies have been facing some setbacks, but they could bounce back and crush expectations.

It's been an up and down year for the technology sector. While large-cap players including Microsoft, Alphabet, and Apple have posted big gains across the stretch, many smaller players have seen volatile trading. Investors might be looking at recent market turbulence and wondering what comes next. 

While it's difficult to predict which trends will shape the market in the short term, the tech sector is still a great starting point for investors who are on the hunt for explosive growth. And recent market volatility has created opportunities to invest in promising companies at discounted prices. Read on for a look at two stocks that are worth adding to your portfolio before August falls off the calendar.

Three people siting down and discussing something.

Image source: Getty Images

Zuora

Maintaining an overly strict dichotomy between value and growth can cause investors to miss out on some great opportunities. Zuora (ZUO -1.33%) isn't posting profits yet, and its forward price-to-sales multiple of roughly 5.6 might look high in comparison to other stocks that fall into the traditional "value" category. But it looks cheaply valued for a software-as-a-service (SaaS) category leader, and it could go on to crush expectations and serve up great returns for shareholders.

Zuora provides a software platform that makes it easy for companies to implement subscription-based billings and payments. The last two decades have seen rising adoption for subscription-based business models, and Zuora could continue to play an important role in powering the growth of the subscription economy.

Zuora is a category leader in its service niche, and there's a good chance that more businesses will pivot to subscription-based business models. Customers who sign up with a subscription service tend to stick around as long as the core product continues to be of reasonably high quality, and companies are prioritizing building recurring-revenue streams because these sales are more dependable and profitable over time.

That advantages of the subscription model will likely continue to attract new enterprise customers, and Zuora looks like a top play for benefiting from the growth of the overall subscription economy. On the other hand, it's also fair to note that its recent performance has been somewhat uneven.

The company's share price has slumped roughly 47% over the last three years as growth has fallen short of the market's expectations. Headwinds created by the pandemic have further complicated matters. Zuora isn't a low-risk stock, but it's worth a look for investors who are willing to weather potential volatility in pursuit of multibagger performance. 

With a market capitalization of roughly $1.9 billion, Zuora still has big room for growth, and the company looks like a worthwhile play for investors aiming to benefit from the growth of the subscription economy. Investors should proceed with the understanding that there's speculation involved in charting the company's future, but it could deliver big wins. 

Ubisoft

It's been an interesting few years for Ubisoft Entertainment (UBSFY -0.37%). The French video game publisher was posting strong performance in 2018 thanks to successful releases in the Rainbow Six and Ghost Recon franchises, but subsequent installments fell short of expectations -- and that's made it more difficult to map what comes next for the video game publisher.

The company's share price is down roughly 40% over the last three years, and it's also down 43% from its 52-week high of roughly $21 per share. Not all is lost, however. Ubisoft is in the early stages of a business pivot that will see it concentrating on releasing more mobile and free-to-play (F2P) titles. This change of strategy will give the company an opportunity to meet a much wider audience and generate revenue through the sale of optional in-game items and currencies.

Is this new approach guaranteed to work? No, but it could have a huge payoff, and there are reasons to be optimistic about the company's long-term prospects.

With a market capitalization of roughly $7.3 billion, Ubisoft looks cheaply valued and could go on to deliver explosive performance. Just a single new successful franchise could dramatically alter the company's outlook, and it's not unreasonable to expect that it will prove the doubters wrong and serve up more big hits. 

The gaming industry looks poised for strong growth in coming decades as a growing number of players take up the hobby and an emerging global middle class paves the way for rising discretionary spending. Ubisoft's combination of proven development studios, time-tested marketing teams, and bankable franchises should help it benefit from rising demand for interactive entertainment, and the stock is a worthwhile buy for investors seeking exposure to the gaming space. 

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Keith Noonan owns shares of Ubisoft Entertainment and Zuora. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, and Microsoft. The Motley Fool recommends Ubisoft Entertainment and Zuora and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Ubisoft Entertainment Stock Quote
Ubisoft Entertainment
UBSFY
$5.39 (-0.37%) $0.02
Zuora Stock Quote
Zuora
ZUO
$7.40 (-1.33%) $0.10

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
351%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.