The Nasdaq may have reached a turning point. During the five trading sessions during the third week of April, the Nasdaq Composite fell by almost 6% and Nvidia fell by 14%.
The good news is that the pullback was a healthy correction rather than a sign of a permanent decline. This ensures that more technology shares can be purchased. With lower stock prices and many technology stocks showing signs of a rebound, this could be an excellent time to buy these three stocks.
DigitalOcean
DigitalOcean (NYSE: DOCN) is a cloud infrastructure provider aimed at small and medium-sized businesses. With DigitalOcean’s market cap under $3 billion, major competitors love it Amazon And Microsoft tend to overshadow it.
However, DigitalOcean offers two things that its megatech companies cannot without undermining their business models: price transparency and the DigitalOcean community.
The published prices ensure that small businesses purchase only the services they need, saving money for customers who are often on a tight budget. Additionally, the community provides customers with documentation and access to other DigitalOcean customers. Customers who cannot afford a full-fledged IT department can therefore rely on this network to solve problems.
Granted, DigitalOcean faced unique problems. Small companies go bankrupt more often than larger companies, which leads to more turnover. The stock also fell last year after the company announced a CEO change. While that created uncertainty, Paddy Srinivasan brings years of SaaS leadership experience that could reinvigorate the company.
Despite the challenges, growth is robust. DigitalOcean reported revenue of $693 million in 2023, up 20% from the previous year. The company also earned $19 million in net income in 2023, better than the previous year’s $28 million loss.
Although the company has a high price-to-earnings ratio due to its new profitable status, its forward price-to-earnings ratio is only 20. Given that favorable valuation, the competitive niche and growing need for cloud services could lead to outsized returns as it boosts its profitability . continued expansion.
Sea limited
Sea limited (NYSE: SE) is a Southeast Asian conglomerate specializing in gaming, e-commerce and fintech. Amid the e-commerce leadership in Southeast Asia, it is a popular mobile game Free fireand a fast-growing fintech segment, the stock has thrived during the 2021 bull market.
Nevertheless, as shares started to fall in late 2021, the company’s problems increased. A ban on Free fire in India, failed market entries outside Southeast Asia and competition with TikTok are among the many challenges.
However, Free fire is about to return to India as it addresses security concerns. Furthermore, apart from a continued presence in Brazil, Shopee’s e-commerce arm has mainly focused on the core Southeast Asia region, investing heavily in logistics in this area.
The current share price is about 80% below its all-time high, and could be closer to a financial recovery than some might think. Although its $13 billion revenue grew just 5% in 2023, its struggles in the Garena gaming segment overshadowed Sea’s successes in e-commerce and fintech.
Additionally, the $163 million profit was its first annual profit. Analysts believe the improvements will continue as they predict earnings growth of 116% this year and a 163% increase in 2025.
Sea is unlikely to sustain triple-digit earnings growth in the long term. However, with a fast growth rate for two of the three segments and a forward price-to-earnings ratio of 37, investors might want to consider Sea Limited while it’s still a bargain.
Shopify
Shopify (NYSE: STORE) thrived in e-commerce by allowing merchants to sell without having to rely on the Amazons of the world. While many companies offer ecommerce platforms, Shopify stands out for its easy-to-use, customizable platform.
Additionally, a comprehensive ecosystem that includes payments, inventory management, email marketing and many other features helps it support an estimated 10% of all e-commerce transactions.
Admittedly, its ecosystem expansion may have gone too far when it tried to enter the logistics business, a move that left the company with net losses. Yet Shopify has since reversed course and sold that business, allowing it to return to profitability.
For 2023, revenue of just under $7.1 billion rose 26% from 2022 as the company continued to attract more sellers to its platform. Despite a $1.3 billion impairment charge from the sale of its logistics business, Shopify still earned $152 million in total revenue for the year, well above its $3.5 billion loss in 2022.
Looking ahead, Shopify expects revenue growth in the low 20s percent range, which will likely lead to significant profit growth. The forward price-to-earnings ratio of 69 may seem pricey, and the high valuation may have led to a sell-off in recent weeks.
Nevertheless, the five-year average forward earnings multiple is 85. That alone shows the optimism about Shopify’s future and now could be a good time to add shares.
Should You Invest $1,000 in DigitalOcean Now?
Consider the following before purchasing shares in DigitalOcean:
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Will Healy holds positions in DigitalOcean, Sea Limited and Shopify. The Motley Fool holds positions in and recommends Amazon, DigitalOcean, Microsoft, Nvidia, Sea Limited, and Shopify. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
3 Top Tech Stocks to Buy Now was originally published by The Motley Fool
