Many tech investors either gravitate toward well-established blue chips like Apple and Microsoft for safety, or they chase hyper-growth stocks like Snowflake and CrowdStrike in the hopes of bigger long-term gains. There's nothing inherently wrong with either strategy, but investors can miss out on a lot of promising plays if they only follow those well-known stocks.
So today, let's take a break from those trending tickers and focus on under-the-radar tech plays -- ChargePoint (CHPT 8.61%), Impinj (PI 3.60%), and Tenable (TENB -1.32%) -- and see why these three stocks might be great long-term investments.
1. The EV play: ChargePoint
ChargePoint builds EV charging stations. It ended its latest quarter with an installed base of more than 200,000 network ports, which represented 70% growth from a year ago. It generates most of its revenue by selling its charging systems to businesses, which either provide them to customers or use them to charge their own fleets, while the rest comes from subscription fees, which it collects from drivers who access its charging stations.
ChargePoint's revenue only rose 1% in fiscal 2021, but it surged 65% to $242 million in fiscal 2022 (which ended this January) as it scaled up its charging network. Analysts expect its revenue to soar 99% to $482 million this year as even more businesses install EV charging stations. ChargePoint trades at 10 times that estimate, which is a surprisingly low price-to-sales ratio for a hypergrowth company with plenty of upside potential.
ChargePoint's net loss narrowed in fiscal 2022, but it will likely remain unprofitable for the foreseeable future. All of that red ink makes it a risky play as interest rates continue to climb, but its profitability could gradually improve as economies of scale kick in and its pricing power improves. Therefore, investors looking for an alternative way to profit from the secular growth of the EV market without choosing an individual automaker should check out ChargePoint.
2. The IoT play: Impinj
Impinj is one of the world's largest producers of radio-frequency identification (RFID) tags and tag-reading hardware. RFID tags are widely used to track merchandise and optimize supply chains, and companies often feed that data into analytics software to streamline their businesses. That business model makes Impinj a crucial "pick and shovel" play in the sprawling Internet of Things (IoT) market, which connects objects to each other and the cloud.
A lot of Impinj's recent growth was driven by the "retail apocalypse" and the death of weaker brick-and-mortar retailers. To track consumer trends and keep their inventories lean, many retailers are now aggressively tracking their products with RFID tags to optimize their inventories, spot troubling trends, and widen their moats against Amazon. The recent supply chain disruptions across the world have also highlighted the growing importance of RFID tags and tracking software.
Those secular trends are generating long-term tailwinds for Impinj. Its revenue rose 37% to $190 million in 2021, and analysts expect another 29% growth to $245 million this year. It isn't profitable on a GAAP (generally accepted accounting principles) basis yet, but it turned profitable again on a non-GAAP basis in 2021 with a net profit of $6 million. Analysts expect its non-GAAP earnings to more than double this year.
Impinj's stock might seem a bit pricey at more than 100 times forward earnings and nine times this year's sales. However, I believe it could still be a great long-term play on the growing IoT market.
3. The cybersecurity play: Tenable
Tenable isn't as well-known as cybersecurity leaders like Palo Alto Networks (PANW 0.17%) and CrowdStrike, but it's carved out a defensible niche in proactive network protection services. Instead of fending off attacks, Tenable's Nessus platform scans networks for security threats like misconfigured software, weak passwords, and other flaws.
Tenable offers the home version of Nessus for free, while a paid version enables companies to scan their entire networks. It currently serves more than 40,000 organizations worldwide, including 60% for the Fortune 500 and 40% of the Global 2000. It's also been locking in those customers with the expansion of its stickier, subscription-based cloud platform Tenable.io.
Tenable's revenue rose 23% to $541 million in 2021. It also isn't profitable on a GAAP basis, but its non-GAAP net income jumped 87% to $39 million. Analysts expect its revenue to grow 25% this year, but for its non-GAAP earnings to decline 44% as it ramps up its investments.
Like Impinj, Tenable might initially seem expensive at more than 100 times forward earnings. However, it only trades at six times this year's sales, which makes it fairly cheap relative to its cybersecurity peers. Palo Alto, which is larger but growing at a similar rate, trades at eight times this year's sales. Simply put, Tenable could still have plenty of room to grow.