3 Tech Stocks to Buy Beyond the Mega-Cap Heavyweights

Stocks to buy

The Magnificent Seven stocks continue to generate a fair amount of ink in the media. And for good reason. The seven mega-cap tech stocks were responsible for nearly two-thirds of the benchmark S&P 500 index’s 24% gain in 2023. Six of the seven stocks can be found among the 10 largest companies in the world based on market capitalization. The stocks dominance and influence is unquestioned.

That said, there are many smaller tech stocks that are equally appealing and have the potential to offer investors big gains. While these stocks don’t get nearly as much attention, they have proven to be steady outperformers capable of boosting a portfolio’s returns. Here are three tech stocks to buy beyond the mega-cap heavyweights.

Adobe (ADBE)

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There’s a buy-the-dip opportunity in Adobe (NASDAQ:ADBE) after the software company’s stock slid lower following lackluster forward guidance that disappointed Wall Street. ADBE stock is down 10% on the year. A number of analysts are urging investors to see the drop in share price as an opportunity to buy this tech stock. Morningstar just reiterated its price target of $610 a share, implying 18% upside from current levels.

The company behind popular products such as Photoshop and Illustrator reported strong financial results for fourth quarter 2023. Adobe announced earnings per share (EPS) of $4.48 versus $4.38 that was expected among analysts. Revenue came in at $5.18 billion compared to $5.14 billion that was anticipated. What’s really hurting the stock is that OpenAI has come out with “Sora,” a competing AI platform that can generate videos based on written prompts. However, analysts say these fears are overdone.

CrowdStrike (CRWD)

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Shares of cybersecurity firm CrowdStrike (NASDAQ:CRWD) have been on fire lately. CRWD stock surged 21% higher in one day recently after the company reported Q4 2023 financial results, which crushed Wall Street estimates. In the last 12 months, CrowdStrike’s stock has increased 141%, making it a top-performing tech stock. Additionally, the company has set itself apart from the rest of the cybersecurity pack.

Most recently, CrowdStrike reported EPS of 95 cents compared to the Wall Street expectation of 82 cents. The company’s full-year 2023 revenue rose 36% from 2022 levels to reach $3 billion. In terms of guidance, CrowdStrike expects revenue of $902 million to $906 million in the current first quarter. Management reiterated their goal of achieving $10 billion in annual recurring revenue by 2030.

Block (SQ)

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The stock of digital payments firm Block (NYSE:SQ) could be a good way to play the rally this year in cryptocurrencies, specifically Bitcoin (BTC-USD). This is because Block is one of the largest corporate owners of BTC in the world. The company currently owns 8,038 Bitcoin valued at about $520 million. Block reported a surprise Q4 2023 profit, sending its share price up 16%, due largely to a gain in its Bitcoin holdings.

The company formerly known as “Square” reported a profit of 45 cents per share, which was much better than Wall Street forecasts of a 57 cent loss. The surprise profit was due almost entirely to a $207 million gain in the company’s Bitcoin holding during the quarter. The company also said that it made $66 million in profit on Bitcoin sales through its Cash App, a banking platform, which was a 90% increase from a year earlier. Year-to-date, SQ stock is up 10%.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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