We're not even at the halfway point of 2023 yet, and already tech stocks have put up impressive gains this year. Year to date through June 12, the Nasdaq has jumped 29%, recovering much of last year's losses.
Not every investor is convinced the bear market is over, however, and some stocks are still going for a deep discount. Let's take a look at two under-the-radar tech stocks that look poised to outperform.
1. Upstart
As much as any other stock, Upstart (UPST 2.76%) has been the poster child for pandemic-era volatility. The stock entered the public markets through a mostly quiet IPO in late 2020 before surging through 2021. Demand for its artificial intelligence (AI)-based loan originations spiked as interest rates were low and consumer savings were strong, pushing the stock past $400 a share.
However, in 2022, the stock collapsed as credit markets slowed and lenders grew more skeptical of Upstart's pool of borrowers.
Now, Upstart has moved off its lows this year, more than doubling following a rally after its earnings report, but the stock is still down more than 90% from its pandemic-era peak.
While Upstart is highly sensitive to the macroeconomic environment, especially as lenders are reluctant to use new technology in a recessionary environment, there are some signs that the tables are turning in its favor.
The company's own macro index showed that macro headwinds peaked in October 2022. Its second-quarter guidance called for revenue growth to accelerate on a sequential basis, as it expects revenue to grow roughly 30% from the first quarter to the second.
Upstart has already demonstrated its ability to be profitable in a favorable economy, and the two rounds of layoffs it issued should make the company more profitable no matter what happens with the economy.
The AI-based lender is tackling a massive multi-trillion-dollar market in consumer loans and plans to enter home equity line of credit (HELOC) loans later this year, which could be a beachhead into mortgages.
If Upstart's technology truly is better than the conventional FICO score, the stock has a ton of upside potential. Now is a great time to buy Upstart stock. The price is still low and there's potential for an ongoing short squeeze as 34% of the stock is sold short.
2. Expedia
The travel recovery is in full force, and Expedia (EXPE -0.40%) is clearly benefiting. However, the online travel agency has traditionally gotten less interest from investors than peers like Booking Holdings and Airbnb.
As a result, the stock trades at a forward price-to-earnings ratio of just 12. However, the company is currently enjoying tailwinds from the travel recovery and is making investments that should allow it to thrive over the long term.
In its first quarter, revenue rose 18% to $2.7 billion, a record for a Q1. It still posted an adjusted loss on the bottom line as the first quarter is the seasonally slowest, but the company is making investments in AI that should pay off down the road.
Expedia has integrated ChatGPT into its travel app, allowing customers to start an open-ended conversation to get recommendations on where to go, where to stay, what to do, and how to get around. It also saves the customer time by automatically saving hotels that were discussed in the conversation. Those investments should help differentiate Expedia from peers and give it an early edge in what's likely to be the future of travel search.
Similarly, Expedia has built a plug-in so anyone can start a conversation in ChatGPT and then connect to Expedia when they're ready to book.
Given its investments in AI, the recovery in the travel sector, and a forward P/E of just 12, Expedia looks like a good bet to outperform over the next year.
