- The rally in the stock market is showing no signs of slowing down due to the AI boom.
- Amid the current backdrop, I used the InvestingPro Stock Screener to find cheap, undervalued companies with significant upside potential.
- As such, investors should consider adding PayPal, Zoom Video Communications, and Twilio to their portfolio.
In the dynamic world of technology investments, finding opportunities with significant upside potential is a priority for many investors.
Using the power of the InvestingPro Stock Screener - available for only $9 a month -, I have identified three attractive tech stocks with significant upside potential thanks to their strong fundamentals, promising growth prospects, and cheap valuations.
Source: InvestingPro
For investors seeking exposure to the dynamic tech sector, PayPal (NASDAQ:PYPL), Zoom, and Twilio (NYSE:TWLO) offer compelling investment opportunities with the potential for substantial returns in the months ahead.
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Let's explore what each company does, the tailwinds they're set to enjoy, and how they leverage AI technology to drive revenue growth and sales.
1. PayPal
PayPal has faced significant headwinds during the past year, with its stock price down almost 23% over the past 12 months amid concerns over growing competition in the digital payments industry from the likes of Apple (NASDAQ:AAPL), Google (NASDAQ:GOOGL), Block (NYSE:SQ), and Affirm (NASDAQ:AFRM).
Source: InvestingPro
Yet, beneath the surface, PayPal reveals resilient strengths and characteristics, making it a compelling option amid the current market environment. With its user-friendly interface and global reach, the company has become synonymous with digital payments, facilitating millions of transactions each day across borders and currencies.
Indeed, PayPal’s profit, revenue, and total payment volume have all continued to grow in recent quarters despite the uncertain climate. Additionally, the mobile payments processing giant’s shift toward embracing newer revenue streams, including the surge in buy-now-pay-later (BNPL) options, offers a major diversification advantage.
Source: InvestingPro
As seen above, InvestingPro paints a mostly positive picture of PayPal’s financial health, highlighting its robust profitability outlook and attractive valuation. ProTips also mentions that management has been aggressively buying back shares in recent months.
It should be noted that PYPL stock is extremely cheap according to the quantitative models in InvestingPro and could see an increase of 40.7% from Thursday’s closing price of $58.50.
That would bring shares closer to their Fair Value price of $82.30.
Source: InvestingPro
At current valuations, the San Jose, California-based fintech leader has a market cap of $62.7 billion.
2. Zoom Video Communications
Widely viewed as one of the biggest winners of the Covid pandemic, Zoom Video Communications (NASDAQ:ZM) has fallen out of favor amid reduced demand for its cloud-based video conferencing and collaboration solutions as more employees return to working from the office.
Source: InvestingPro
Nonetheless, as hybrid work continues to shape the future of the business world, the video-conferencing company’s growth prospects remain strong, despite recent headwinds.
With its user-friendly platform and robust features, Zoom remains one of the leading solutions for remote work, virtual meetings, and online events. Additionally, the company has been leveraging artificial intelligence to deliver AI-powered features designed to attract new customers in a competitive market landscape.
Source: InvestingPro
As ProTips point out above, Zoom has several tailwinds that are expected to drive its stock higher in the coming months, with highlights including consistently increasing earnings per share, impressive gross profit margins, and a healthy balance sheet.
Taking that into consideration, now could be a good time to snap up shares as ZM is currently trading at a bargain valuation, according to the InvestingPro model, which implies potential upside of 38.7% over the next 12 months.
Such a move would take Zoom’s stock to $92.98 from last night’s closing price of $67.03.
Source: InvestingPro
At current valuations, the San Jose, California-based video-conferencing specialist has a market cap of $20.6 billion.
3. Twilio
Twilio is a cloud communications platform that enables developers to integrate voice, messaging, and video capabilities into their applications. Shares have underperformed the high-flying Nasdaq 100 over the past year due to worries over a big slowdown in its growth in the near term.
Source: InvestingPro
Yet, Twilio's dominant market presence and cheap valuation may present a promising prospect for long-term investors. Twilio is widely viewed as one of the leading names in the communication platform-as-a-service (CPaaS) sector and counts big names like Uber (NYSE:UBER), Airbnb (NASDAQ:ABNB), DoorDash (NASDAQ:DASH), eBay (NASDAQ:EBAY), Instacart (NASDAQ:CART), and Reddit as customers.
With its API-driven approach, Twilio empowers developers to build customized communication solutions that enhance customer engagement and drive business outcomes. Furthermore, Twilio has been introducing AI-powered chatbots and virtual assistants into its services to provide advanced customer engagement solutions.
Source: InvestingPro
As noted above, ProTips underscores numerous favorable factors poised to propel Twilio's upward trajectory, such as strong profitability prospects and a robust financial position. Additionally, it points out Twilio's management's proactive share buyback initiatives in recent months.
With its cutting-edge AI-driven customer engagement solutions set to drive future growth, the average ‘Fair Value’ price target for TWLO stock implies 37.5% upside over the next 12 months according to insights from InvestingPro.
Such a move would elevate the shares to $84.06 from Thursday’s closing value of $61.15.
Source: InvestingPro
At current valuations, the San Francisco, California-based cloud communications software and services provider has a market cap of $11.1 billion.
Be sure to check out InvestingPro to stay in sync with the market trend and what it means for your trading. As with any investment, it's crucial to research extensively before making any decisions.
InvestingPro empowers investors to make informed decisions by providing a comprehensive analysis of undervalued stocks with the potential for significant upside in the market.
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Disclosure: At the time of writing, I am long on the S&P 500, and the Nasdaq 100 via the SPDR S&P 500 ETF (SPY (NYSE:SPY)), and the Invesco QQQ Trust ETF (NASDAQ:QQQ). I am also long on the Technology Select Sector SPDR ETF (NYSE:XLK).
I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies' financials.
The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.