Many tech stocks have taken price cuts in 2025. On March 19, the tech-heavy Nasdaq-100 market index closed down 6.2% year-to-date. Many of the underlying price drops are from high-flying market darlings getting price corrections -- the time seems right to step away from risky investments in this unpredictable economy.
But some of the plunging tech stocks weren't even expensive in the first place. I can't take my eyes off of business automation expert Bill Holdings (BILL +0.71%) and digital advertising specialist PubMatic (PUBM +1.68%). These high-octane growth stocks looked affordable enough at the end of 2024, and now they're on fire sale.
PubMatic: Down 35% in 2025
Ad-tech veteran PubMatic had a reasonably valued stock at the start of the year. Still suffering from the ad market downturn that followed from the inflation crisis in 2022, the stock was down 57% from the lofty prices of late 2021. Keep in mind that most of its head-to-head competitors had bounced back from that multiyear price drop, led by a 28% three-year gain for The Trade Desk (TTD 0.94%) and a 31% jump in Alphabet's (GOOG +3.56%) (GOOGL +3.57%) share prices.
But PubMatic wasn't invited to that recovery gala, and its stock was changing hands at the modest valuation of 23.5 times free cash flow or 27.4 times forward earnings estimates. A steady stream of positive earnings surprises just wasn't enough to impress investors.
The company reported earnings on Feb. 27, crushing Wall Street's average earnings estimates as usual. But investors shrugged off that bullish sign and focused on a slight revenue miss instead. PubMatic's stock closed the next day 24% lower.
NASDAQ: PUBM
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To be fair, management also painted a disappointing revenue target for the next quarter. The midpoint of PubMatic's top-line guidance stopped at $62 million, well below the $66.2 million analyst consensus at the time.
But that's a short-sighted approach to PubMatic's business results. Fourth-quarter sales were up 15% from the year-ago period if you exclude positive and negative one-time effects like last year's political ad sales and a large but unnamed ad-buying customer's updated ad-bidding habits. This client was the last major customer to make this specific bidding change, so PubMatic's bidding platform is now more consistent and predictable.
This unnamed bidder was the last to stop relying on so-called second-price ad spot auctions. That's an auction process where the winning bidder pays the second-highest bid plus one cent. Every significant ad buyer has shifted their exclusive focus to first-price PubMatic auctions instead, where the final payment is the highest bid. This adjustment has made the ad-spot auctions more conservative, generally resulting in lower payments.
But all that is in the rearview mirror, as the last customer made this change in the first quarter of 2024. The next report will lap this game-changing move in year-over-year comparisons, and I expect PubMatic's revenue growth to stabilize beyond that milestone.
Meanwhile, the digital advertising market continues its return to normalcy. All things considered, PubMatic stock looks like a great buy at today's deep-discount price.
Bill Holdings: Down 43% in 2025
Cloud-based financial services for small and medium businesses may not sound exciting, but Bill Holdings generates fantastic revenue growth in that market.
The stock traded at an average forward price-to-earnings ratio of 59.5 in the two years leading up to February's second-quarter report. The price-to-free-cash-flow ratio averaged 58.2 in the same time span.
Bill Holdings smashed analyst expectations across the board. The company has a habit of setting up modest guidance and following through with stronger actual results.
The second quarter was no exception to this rule. Bill Holdings beat the Street's guidance-based earnings and revenue estimates, while all the forward-looking guidance targets were roughly in line with then-current analyst averages.
NYSE: BILL
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But the stock still crashed 35% the next day and 55% over the next five weeks. Shares are now trading at just 24 times forward earnings and 18 times trailing free cash flow. Bill Holdings is an impressive high-growth business targeting a massive market, and I think the stock deserves a richer valuation.
Fellow Motley Fool contributor Anthony Di Pizio thought Bill Holdings was too cheap in November 2024. It's much more affordable now, and its artificial intelligence-infused services are more promising than ever. Anthony agrees in a recent article. Investors should focus on the company's improving profits rather than its stabilizing revenue growth, as its business plan matures with a sharper focus on bottom-line gains.
