Technology companies have fallen victim to the stock market's recent volatility, as evidenced by the Nasdaq Composite's 24% year-to-date pullback. Investors have headed for the exits in the wake of 40-year-high inflation, rising interest rates, and protracted concerns coupled to the war between Russia and Ukraine. Rather than purchasing shares of higher-priced, more speculative technology stocks, investors have mobbed to value-oriented companies and fixed income instruments.
As a result of this shift, however, there are several fast-growing tech stocks that now trade at enticing valuation levels. It's unclear as to when the technology sector may bounce back, but investors with extended time horizons can ignore this short-term noise and concentrate on the underlying fundamentals of these companies.
Here are two roaring technology stocks with significant upside that investors should consider adding to their portfolios right now.
Image source: Getty Images.
1. SoFi Technologies
Seeing as it's down 55% since the start of the year, you might think that SoFi Technologies (SOFI -0.28%) is struggling. However, the opposite is actually true. The company's adjusted revenue surged 49% year over year to $321.7 million in the first quarter, and its adjusted EBITDA soared 110% to $8.7 million, representing the seventh consecutive quarter the metric has finished in the green. The company's adjusted EBITDA margin of 3% also concluded above the high end of management's 0% to 2% guidance.
SoFi added 408,000 new members to its fintech platform in Q1, ascending 70% year over year to 3.9 million users. In the same quarter, SoFi introduced 689,000 new products since the last quarter, bringing total product count to 5.9 million, which represents 84% year-over-year growth. In the latest earnings release, CEO Anthony Noto stated:
These strong results, which we achieved despite volatile markets and the changing political, fiscal and economic landscape, demonstrate how our strategy of building a full suite of differentiated products and services has created a uniquely diversified business that can not only endure, but outperform across market cycles.
The fintech enterprise continues to make headway in expanding its business, even after the continued expansion of the student loan moratorium, which is now set to expire in August. In spite of current headwinds, management raised guidance for the full 2022 fiscal year. As a result, analysts project SoFi's top line to reach $1.5 billion, translating to 47% growth year over year, and its earnings per share (EPS) to end at negative $0.44.
The biggest risk associated with SoFi is its lack of profitability, but given its consistent improvements and shriveled price-to-sales multiple of 4.5, daring investors should consider taking a chance on this stock today.
2. UiPath
UiPath (PATH -1.52%) uses software robots to automate routine office functions, and although its business is in fine shape, the stock has nosedived 62% year to date. On June 1, the company reported a top line of $245.1 million in Q1, climbing 32% year over year, and its adjusted EPS of negative $0.03 ended ahead of Wall Street's negative $0.05 estimate. UiPath's GAAP gross margin of 82% also concluded notably higher than its 74% value in the same quarter a year ago.
The company's annualized renewal run-rate -- which is a key metric for SaaS (software as a service) businesses that have subscription agreements -- climbed 50% to $977.1 million. As a result of the strong outing in the first quarter, management hiked guidance for the full fiscal year. The company now expects revenue to range between the close $1.085 billion and $1.090 billion, representing nearly 22% growth year over year if UiPath can achieve the upper limit.
Likewise, management forecasts annual recurring revenue (ARR) in the range of $1.220 billion and $1.225 billion as of January 31, 2023, and non-GAAP operating profit to eclipse up to $15 million.
The solid performance has boosted UiPath's share price, however, the stock still trades below 10 times sales. This certainly doesn't classify the stock as cheap, but its price-to-sales multiple today is more than two times lower than it was at the beginning of the year. And given the secular growth industry that it participates in, investors should expect to pay a richer price. It's down more than 50% despite upholding strong growth, so UiPath may be worth checking out at the moment.
