Tired of the same old investments that everyone else is snatching up? Then 2023 looks like a great time to try something new.
I’m about to show you a trio of promising technology stocks that most investors don’t know well. These hidden treasures may not be household names quite yet but have the potential to yield impressive returns in the long run. Furthermore, all of them are on fire sale right now.
If you’re ready to mix things up a bit, keep reading.
DigitalOcean is the biggest cloud computing name you never knew
If you know anything about cloud computing, you may have heard of DigitalOcean (DOCN 0.63%). This company helps businesses and developers manage their online operations.
With its platform, it’s easy to deploy and scale applications, websites, and services in the cloud. And with a global network of data centers at their fingertips, DigitalOcean’s users can choose the location that best meets their needs.
DigitalOcean is far from the only game in town. The company faces competition from a veritable ocean of smaller rivals, as well as the usual giants in the cloud computing market.
But DigitalOcean has stacked the deck in its favor by focusing on the very specific app developer market, while larger competitors such as Microsoft Azure, Amazon Web Services, and Alphabet‘s Google Cloud serve many masters. The cloud computing giants offer far more services and different virtual-machine options than DigitalOcean’s tight portfolio of highly specific options. The intentional simplicity allows DigitalOcean to charge lower fees without compromising on performance and service quality.
This company has built a position of leadership in its ultra-specific niche, with mighty financial results. In November’s third-quarter report, DigitalOcean’s sales rose 37% year over year. Adjusted earnings more than tripled from $0.12 to $0.38 per diluted share. And 15% of incoming revenues were retained as free cash flow, up from 12% in the year-ago report.
Customer counts skyrocketed and average revenue per user (ARPU) rose by 28%. In other words, business is booming.
At the same time, DigitalOcean’s share price fell by 70% in 2022, and the stock now trades at mild-mannered valuation ratios such as 20 times forward earnings and 15 times trailing free cash flows. We’re talking about a high-octane growth stock with profitable operations and bargain-bin share prices. DigitalOcean deserves a second look if you’re hungry for hidden gems in the tech sector.
Global-E makes the global e-commerce market tick
International logistics-expert Global-E Online (GLBE 1.32%) provides a platform that makes it easy for merchants to sell their products on the global market. From handling currency conversion to offering a range of local payment options, Global-E’s cloud-based services take care of all the tricky border-crossing details so merchants can focus on what they do best — selling their products.
Global-E has a long and impressive list of partners and platform integrations. The company may very well have played a role in your e-commerce experience without making its presence known.
Like DigitalOcean, Global-E runs a fast-growing and profitable business in a thriving target market. The increasingly digital nature of the retail industry sends more and more products and payments across international borders, and Global-E is there to take a small cut of the sales in return for simplifying and smoothing out a complicated process.
The reported results are nothing to sneeze at. Top-line sales increased by 79% year over year in the third quarter, accelerating from 52% in the second-quarter update. Taxable earnings have been printed in red ink in recent quarters, but Global-E produces a steady stream of positive cash flow.
Global-E’s market action mirrored DigitalOcean’s closely in 2022. Stock prices are down by roughly 70% in 52 weeks, and you can pick up shares for the eminently reasonable valuation of 8.3 times sales.
Fiverr is changing the world of work
Freelance-services reseller Fiverr International (FVRR 0.59%) is the go-to destination for freelancers and businesses alike. As an early leader in the gig economy, the company is rewriting the rules for doing business and finding work.
Fiverr is an easy-to-use platform that allows freelancers and clients to find and communicate with each other quickly and easily. Service providers have a robust set of tools for selling and marketing their trade, while buyers can compare prices and reviews across different freelancers.
Freelance services are rising in popularity for many reasons. For example, freelancing through Fiverr or other platforms can be a good alternative to a traditional 9-to-5 job for many people or a welcome side gig for others. On the other side of the equation, freelancers can provide high-quality products and services at a lower cost to a company than hiring traditional full-time or part-time workers.
Once again, we’re looking at a fast-growing business with positive cash flow, staring down a long-term future of tremendous growth. The gig economy sea change is here to stay, and only getting started.
Yet many investors saw Fiverr as a direct play on the early coronavirus lockdowns, and share prices have been plunging ever since the first COVID-19 vaccines became widely available. The stock price is down by 75% in the last year and 92% below the all-time highs of February 2021.
Any or all of these underappreciated growth stocks should serve your portfolio well in the long haul. It’s hard to go wrong when you’re buying shares of high-quality companies for pennies on the dollar.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Anders Bylund has positions in Alphabet, Amazon.com, and Fiverr International. The Motley Fool has positions in and recommends Alphabet, Amazon.com, DigitalOcean, Fiverr International, Global-e Online, and Microsoft. The Motley Fool has a disclosure policy.