2 Under-the-Radar Tech Stocks to Buy in 2023

When investors search for tech stocks, there's no shortage of popular names to consider. It only takes one web search or a glance through social media to see the same familiar names over and over again.

Some of the most compelling investments, though, tend to be companies that fewer people have heard of. It kinda makes sense: The less hype there is, the less chance investors have piled into the stock and driven up the price.

With all that in mind, there are two companies I have my eye on within the tech sector. They're not the most familiar names, but they each have a long record of success as both a business and a market-beating investment. Let's dig in and take a look at these two under-the-radar tech stocks and why they might be buys in 2023.

1. Fortinet

While less known and less flashy than some of its competitors, Fortinet (FTNT 0.31%) is one of the largest cybersecurity companies, with over 635,000 customers worldwide. Almost two-thirds of the Fortune 500 are Fortinet customers.

Over just about any time frame, Fortinet has beaten the market. Interestingly, it's also held its own during the bear market we're in. Over the last 12 months, Fortinet's stock price is up 2.1%, compared to the S&P 500, which is down 1.1%. One of Fortinet's more well-known competitors, CrowdStrike, is down 42% over the past year. 

The story of Fortinet is about consistent growth. Consider these headline results for the fiscal year 2022.

Data source: Fortinet.

These are impressive results, but what matters for investors is what is to come, not what has already happened. Fortunately, there's good news here as well. Fortinet expects revenue to grow to $5.4 billion in 2023, which would represent an increase of 23%. Billings are forecasted to grow 21%.

2. ServiceNow

ServiceNow (NOW 0.93%) sells software to companies that helps them run their business processes more efficiently. Because it is business-facing, it's less known to the average investor than some consumer-facing software-as-a-service (SaaS) companies.

In Q1 2023, ServiceNow reported revenue of $2.1 billion and adjusted earnings per share of $2.37. Both of these headline numbers beat analysts' estimates. That's unsurprising because ServiceNow has been a steady grower over the past several years.

Large customers, which ServiceNow defines as those with annual account values greater than $1 million, grew 20% in Q1. This is a continuation of a trend seen for several quarters. Customers also rarely leave the ServiceNow platform. The company posted a renewal rate of 98% or higher in each of the last five quarters.

The strong results in Q1 led management to raise its guidance for subscription growth in 2023. At the end of 2022, the company expected subscription revenue between $8.4 billion and $8.5 billion. This guidance has been raised to between $8.47 billion to $8.52 billion.

While this is a modest increase, many other SaaS companies are experiencing more headwinds on results than ServiceNow seems to be. This makes the company's stock more compelling comparatively.

ServiceNow trades for 34 times its cash from operations per share and 44 times free cash flow. The stock is not cheap, but both of these metrics are below the five-year historical average. Considering the strength the business is showing in this challenging macro environment, I consider shares to be pricey but not unreasonable.