Many cryptocurrencies skyrocketed to all-time highs in 2021, driven by social media buzz, stimulus checks, and a retail rush toward speculative investments. But rising interest rates popped that bubble last year, and most cryptocurrencies are still trading far below their peaks.
The crypto market seems to have stabilized in the first half of 2023, but it still faces an uncertain future as regulators crack down on the leading exchanges. So instead of chasing cryptocurrencies again for growth, I believe investors should buy these three promising tech stocks -- Adyen (ADYE.Y 2.20%), Li Auto (LI +0.49%), and UiPath (PATH +1.86%).
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1. The digital payments play: Adyen
Adyen is a Dutch fintech company that works behind the scenes to process payments, collect customer data, and track business trends. By integrating Adyen's backend software into their own online and in-store payment platforms, merchants can accept more than 250 payment methods -- including various credit cards, debit cards, mobile wallets, and payment apps.
Unlike PayPal and other digital payment companies, Adyen doesn't provide a consumer-facing app or offer peer-to-peer payment services. Instead, it simply lets businesses customize their own payment and data-gathering methods without locking them into a walled garden. That's probably why eBay abandoned its longtime partner PayPal in 2018 and switched to Adyen over the following five years.
OTC: ADYE.Y
Key Data Points
That flexibility makes Adyen a promising long-term play on the expansion of the global digital payments market, which Grand View Research expects to grow at a compound annual growth rate (CAGR) of 21% from 2023 to 2030.
Adyen's revenue already grew at a whopping CAGR of 40% between 2018 and 2022, and analysts expect its revenue line to continue climbing at a CAGR of 29% from 2022 to 2025.
Adyen's stock isn't cheap, at 25 times this year's sales, but I believe it still has plenty of room to grow as more businesses seek quick ways to upgrade their payment systems to accept a wide range of payment options. It should also continue to chip away at companies like PayPal with its decentralized approach to processing payments.
2. The EV play: Li Auto
Li Auto is a Chinese producer of plug-in hybrid electric vehicles (PHEVs). It currently sells three main vehicles: the LV family sized SUV, and the L8 and L9 crossover SUVs.
Li stands out in the crowded Chinese EV market because it's ramping up its production much faster than many of its peers. The company's deliveries soared 177% in 2021 and rose 47% to 133,246 vehicles in 2022. In the first quarter of 2023, its deliveries grew another 66% year over year -- even as the broader market faced supply chain challenges.
NASDAQ: LI
Key Data Points
By comparison, Li's closely watched rival, Nio (NIO +1.29%), grew its deliveries by 109% in 2021, but that figure only rose 34% to 122,486 in 2022 and grew a mere 20% year over year in the first quarter of 2023. Nio also ended the first quarter with a slim vehicle margin of 5.1%, while Li maintained a much healthier vehicle margin of 19.8% -- even as an ongoing price war forced most of China's EV makers to slash their prices.
Analysts expect Li's revenue to grow at a whopping CAGR of 65% from 2022 to 2025. Yet Li's stock still trades at just 2 times this year's sales -- presumably because the murky macro environment and tensions between the U.S. and China are squeezing its valuations. But if those headwinds dissipate, Li might just recover and outperform many of its EV peers.
3. The automation and AI play: UiPath
UiPath develops robotic process automation (RPA) tools that can be integrated into an organization's existing software applications. Once activated, they can automate repetitive tasks like entering data, processing invoices, sending out mass emails, and onboarding new customers.
By using UiPath's tools, companies can replace human employees, streamline their operations, and improve their overall efficiency.
NYSE: PATH
Key Data Points
UiPath's annual revenue grew at a CAGR of 47% between fiscal 2020 and fiscal 2023 (which ended in January 2023), but it suffered a slowdown over the past year as the macro headwinds forced many companies to rein in their software spending.
Yet despite those challenges, analysts still expect its revenue to rise at a CAGR of 19% from fiscal 2023 through fiscal 2026 as the market keeps growing. The global RPA market could also still expand at a CAGR of 30% between 2023 and 2030, according to Consegic Business Intelligence, so UiPath probably isn't close to saturating its total addressable market yet.
The rise of generative AI platforms such as ChatGPT might seem to be a disruptive threat to the RPA market, but UiPath insists it can profit from that paradigm shift by upgrading its own software robots with generative AI tools. It's too early to tell if that bet will pay off, but it could turn UiPath from an automation play into an AI play if it plays its cards right.
UiPath isn't profitable yet, but its stock isn't expensive, at 6 times this year's sales. The company's shares might remain volatile for now, but its low enterprise value of $8 billion suggests UiPath could become a potential multibagger or takeover target in the future.
