Choosing the right stocks is critical for generating significant long-term returns. To help find potential winners to buy and hold, investors can screen for names that Wall Street rates as "strong buy" or "outperform."
A consensus “strong buy” rating typically indicates that analysts believe the company will outperform its peers in the sector, or the overall market, over the long haul. More specifically, and more to the point for investors, this top-tier rating often reflects analysts' belief that the company's financial performance is set to improve dramatically, thereby boosting its stock price as a result.
Let’s take a closer look at why Wall Street rates these three tech stocks a “strong buy” now.
#1. Amazon
It's no surprise that Amazon (AMZN) is rated a "strong buy" by analysts. Amazon.com, one of the world's largest e-commerce and cloud computing companies, has dominated the stock market for more than two decades. Over the last 20 years, the stock has returned a staggering 9,280%.
Amazon began as an online bookstore, and has since grown into a global tech conglomerate, with diverse business operations including e-commerce, entertainment, cloud computing, and artificial intelligence (AI).
Valued at $1.8 trillion, Amazon’s stock has gained 18.2% year-to-date, compared to the S&P 500 Index’s ($SPX) gain of 17.5%.
While its e-commerce business continues to drive growth, Amazon Web Services (AWS) remains a cornerstone of Amazon's business, generating $26.3 billion in sales in the second quarter, a 19% increase year on year.
In the second quarter, total revenue increased by 10% to $148 billion, while earnings increased by an impressive 93.8% YoY to $1.26 per diluted share.
Amazon has been heavily investing in AI technologies to grow its existing business. While the e-commerce industry continues to expand, the rate of growth may slow as the market matures. As a result, the company has been looking into expansion opportunities in healthcare, entertainment, and autonomous vehicles. The company's substantial cash balance of $73.3 billion and free cash flow balance of $53 billion should allow it to pursue new growth opportunities.
Furthermore, in the second quarter, the company signed new AWS agreements with numerous companies, including Commonwealth Bank of Australia, Eli Lilly (LLY), GE HealthCare (GEHC), NetApp (NTAP), Scopely, ServiceNow (NOW), and others.
Analysts expect Amazon’s earnings to increase by 62.7% in 2024, and by 22.6% in 2025. Trading at 30 times forward 2025 earnings, the stock might be a tad expensive. However, its already successful e-commerce business, diverse revenue streams, and strategic growth initiatives are expected to boost earnings in the future.
Out of 45 analysts covering the stock, 42 have a “strong buy” rating, while three recommend a “moderate buy.” Its mean target price is $225.05, which implies an upside potential of 25.2% from current levels.
Plus, its high target price of $251 suggests that the stock could rise as high as 39.5% over the next 12 months.
#2. Braze
Braze (BRZE) is the second “strong buy” stock on my list. Braze, founded in 2011, is a leading customer engagement platform that has quickly gained traction in the technology and marketing sectors.
Valued at $4.4 billion, Braze provides a comprehensive solution for businesses to create personalized customer experiences across multiple channels, such as mobile, email, and the web.
Braze stock has dipped 17.8% YTD - lagging the broader market's gain, and presenting a buying opportunity on the dip.
Braze's financial performance has been characterized by strong revenue growth, which increased 33.1% YoY in the first quarter of fiscal 2024 to $135.5 million, with a 34% growth in subscription revenue. Total customers increased 12.6% YoY to 2,102. Its remaining performance obligations (RPO), or revenue to be recognized in the future, totaled $657.3 million.
Profitability remains a challenge as the company invests in expanding its operations. However, the adjusted net loss narrowed to $0.05 per share, down from $0.13 in the year-ago quarter.
Braze has continued to innovate by introducing new features and integrations, including the launch of the new Braze Data Platform.
The company is focused on expanding its presence in key international markets, such as Asia-Pacific, the Middle East and Africa, Europe, and Latin America, where demand for customer engagement solutions is increasing. This expansion is expected to boost future revenue.
Analysts expect Braze’s revenue to grow by 22.9% in fiscal 2024 and by 20.6% the next year, with a profit of $0.23 projected for fiscal year 2025.
Out of 18 analysts covering Braze stock, 16 have a “strong buy” rating, while two recommend a “moderate buy.” Its mean target price is $61.35, which implies an upside potential of 40.2% from current levels.
Plus, its high target price of $80 suggests that the stock could rise as high as 82.8% over the next 12 months.
While Braze is not yet profitable, its focus on growth and market expansion may soon reverse its fortunes, which supports Wall Street's bullish view on the stock.
#3. Asure Software
Asure Software (ASUR) is a small-cap company that focuses on cloud-based human capital management (HCM) and workforce management solutions. The company offers a set of tools designed to streamline HR processes for small and medium-sized businesses.
Small-cap stocks are often riskier compared to their larger-cap counterparts, but they also generally have more room to innovate and grow relative to bigger, more established companies.
Valued at $221.4 million, ASUR stock has fallen 11.6% YTD, compared to the overall market's gain.
Revenue increased 18% YoY to $27.5 million in the second quarter, excluding employee retention tax credit revenue (ERTC). Recurring revenue of $27.1 million increased 18% YoY. The rise in recurring revenue is an important metric for SaaS companies, as it shows the stability and predictability of future cash flows.
However, the company has been focused on improving operational efficiency and investing in growth, resulting in a net loss of $4.4 million for the quarter.
Asure has a history of strategic acquisitions to broaden its product portfolio and customer base. It recently acquired an applicant tracking system technology company, which will enhance Asure's tools for small and medium-sized businesses.
Furthermore, it has a strategic partnership with MyHRScreens. This collaboration will "expand access to comprehensive background screening solutions to small and mid-sized businesses," according to the company.
Analysts expect Asure’s revenue and earnings to grow by 5.1% and 12.8% in 2024. Revenue and earnings could further increase by 11.1% and 16.8%, respectively, in 2025.
Out of seven analysts covering ASUR stock, five have a “strong buy” rating, while one recommends a “moderate buy,” and one rates it a “hold.” Its mean target price is $14.38, which implies an upside potential of 70.8% from current levels.
Plus, its high target price of $20 suggests that the stock could rise as high as 137.5% over the next 12 months.
Despite being a smaller player in a highly competitive market, Asure's focus on small and medium-sized businesses, combined with recurring revenue growth and product enhancements, positions it for future success.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
