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4 Lesser-Known Tech Stocks Rated Strong Buy

The technology sector’s rally since the onset of the COVID-19 pandemic has helped some lesser-known tech companies attract significant investor attention. As providers of the most needed products and services amid the pandemic, tech companies such as RingCentral (RNG), Zscaler (ZS), HubSpot (HUBS) and Pegasystems (PEGA) have gained enormous popularity, and we believe their stocks are positioned to keep moving higher.

Society’s  increased dependence on technology since the coronavirus pandemic took hold helped the technology sector significantly outperform the broader market in 2020. This can be seen in the Vanguard Information Technology Index Fund’s (VGT) 43.4% gain in 2020 versus the S&P 500’s 18.2%.

Led by household name companies like Amazon.com, Inc. (AMZN) and Apple Inc. (AAPL), the tech wave has taken the stocks of many lesser-known sector participants to unprecedented highs. Their products and services are seeing  a large uptick in demand because they are facilitating business functionality and social connectedness  amid the pandemic.

RingCentral, Inc. (RNG), Zscaler, Inc. (ZS), HubSpot, Inc. (HUBS), Pegasystems, Inc. (PEGA) are three lesser-known stocks that delivered exceptional returns in 2020 and we think are positioned to continue  performing well this year based on a continuing  increase in demand for their offerings.

RingCentral, Inc. (RNG)

RNG provides software-as-a-service solutions for enterprise communications. The company’s primary offering is the RingCentral Office. RNG’s stock has gained 114.5% over the past year.

RNG’s U.K. subsidiary recently received the United Kingdom National Cyber Security Centre’s (NCSC) Cyber Essentials Plus certification, which will raise the company’s profile and should help it  build trust with amongst its clients. The company  also recently partnered with Stack8 to bring cloud communications solutions to multinational enterprise customers.

For the quarter ended September 30, 2020, RNG’s revenue grew 30% compared to the same period last year. Its  ARR grew 36% during the same period.

RNG is expected to see revenue growth of 25.5% for the quarter ended December 31, 2020 and 23.1% in 2021. Its EPS is estimated to grow 21.9% in 2021 and at a rate of 1% per annum over the next five years.

How does RNG stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

B for Peer Grade

A for Overall POWR Rating

The stock is also ranked #3 of 60 stocks in the Software – Business industry.

Zscaler, Inc. (ZS)

ZS provides cloud security solutions to businesses globally. The company’s solutions find application in airlines, consumer goods, retail, financial service, healthcare, and more. ZS’s stock has returned 288.9% over the past year.

ZS has extended its partnership with VMWare, which will help organizations simplify their security practices in today’s dynamic workplace. The company has also launched ZScaler Cloud Protection, which automates security for workloads on and between cloud platforms.

For the quarter ended October 31, 2020, the company saw a 52% rise in revenue compared to the same period last year. The company’s calculated billings grew 64% during the same period.

ZS’s revenue is estimated to increase 41.9% in 2021 and 30.8% in 2022. Its  EPS is expected to rise 58.3% in 2021 and 60.2% per year over the next five years.

ZS’s strong fundamentals are reflected in its POWR Ratings. It has a “Buy” rating with an “A” for Trade Grade. It is ranked #11 of 26 stocks in the Software – Security industry.

HubSpot, Inc. (HUBS)

HUBS provides a cloud-based inbound marketing service. The company is also involved in the development of a software platform for sales services. HUBS’s stock price has increased 132.9% over the past year.

The company has launched a new pricing model called marketing contacts that allows clients to  pay only for marketing to the contacts that they select. It is  a more price-effective model than the one previously used. HUBS has also launched several upgrades to its Sales CRM called Sales Hub Enterprise. Some of the new features include custom objects, sophisticated sales reporting, and advanced permissions.

For the quarter ended September 30, 020, HUBS saw a growth in total revenue of 32%. The company’s total customers grew 39% during the same period.

HUBS’s revenue is expected to grow 23.1% for the quarter ended March 31, 2021 and 22.3% in 2021. Its  EPS growth is expected to be 20% in 2021 and 20% per annum over the next five years.

It is no surprise that HUBS has a “Strong Buy” in our POWR Ratings systems with a grade of “A” in Trade Grade and Buy & Hold Grade. In the 60-stock Software - Business industry, HUBS is ranked #6 stock.

Pegasystems, Inc. (PEGA)

PEGA is involved in the development of software to automate complex and dynamic business processes in the U.S. and internationally. The company specializes in the Customer Relationship Management (CRM) and Business Process Management (BPM) segments. PEGA’s stock has gained 68.1% over the past year.

The company recently launched Pega RPA Auto-Balancing, which is the industry’s first Robotic Process Automation feature that automatically distributes workloads between an organization’s bots. The company also recently introduced Value Finder, which helps organizations identify neglected customers and design special offers for them.

For the quarter ended September 30, 2020, PEGA saw a 4% increase in total revenue  compared to the same period last year. The Pega Cloud ACV was up 57% during the same period.

PEGA is estimated to see revenue growth of 13.8% for the quarter ended December 31, 2020 and 17.5% in 2021. The company is expected to see an EPS growth of 157.6% in 2021 and 8% per annum over the next five years.

It is no surprise that PEGA has a “Strong Buy” in our POWR Ratings systems with a grade of “A” in Trade Grade and Buy & Hold Grade. In the 60-stock Software – Business industry, PEGA is ranked #10.

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RNG shares were trading at $390.08 per share on Monday morning, up $2.13 (+0.55%). Year-to-date, RNG has gained 2.93%, versus a 1.09% rise in the benchmark S&P 500 index during the same period.



About the Author: Aaryaman Aashind

Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks.

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