As the earnings season unfolds, emerging tech stocks are capturing increased attention. While mega- and large-cap tech stocks propelled markets to record highs in the first half of 2024, they now face challenges, creating an opening for the next generation of tech innovators.
These emerging tech stocks, often flying under the radar, present significant growth potential.
While the Nasdaq 100 led by the “Magnificent 7” has surged 13% in 2024, the VictoryShares Nasdaq Next 50 ETF (NASDAQ:QQQN), a fund which offers exposure to up-and-coming tech players beyond the giants, has returned under 8%. This highlights the significant growth potential of these lesser-known players.
Savvy investors know that timing is crucial, and as stellar earnings results come in, these emerging tech stocks could see substantial gains. Now, let’s look at our three top emerging tech stocks to keep on your watch list in August.
Gen Digital (GEN)
When exploring emerging tech stocks, Gen Digital (NASDAQ:GEN) stands out this earnings season. Known for brands like Norton, Avast and LifeLock, the company is co-headquartered in Arizona and the Czech Republic.
The software company focuses on innovation in cybersecurity, online privacy and identity protection. With the cybersecurity market expected to expand from $172 billion in 2023 to over $562 billion by 2032, Gen Digital is ideally positioned for growth.
In its latest earnings report for the fourth quarter of fiscal 2024 (ending March 29, 2024), Gen Digital reported revenue of $967 million, a 2% year-over-year increase. Diluted earnings per share was 53 cents, up 15%. This marked the fifth consecutive year of organic growth and record profitability. Gen Digital has also expanded its share buyback program to $3 billion.
GEN stock gained 14% year-to-date in 2024 and offers a 1.9% dividend yield. The shares are trading at 11.8x forward earnings and 4.4x sales. Analysts’ 12-month median price forecast of $26.45 suggests a modest 1.4% upside potential. With its next earnings release on August 1, GEN stock is likely to be choppy in the days ahead. However, Gen Digital is worth considering for its growth potential and strong performance.
Open Text (OTEX)
Next up on today’s list of emerging tech stocks is Open Text (NASDAQ:OTEX). The Canadian company delivers a comprehensive suite of enterprise information management solutions. Its software aids businesses in capturing, managing and securing information, and it has a strong presence in healthcare, finance, and technology.
In its third quarter fiscal 2024, Open Text posted revenues of $1.4 billion, marking a 16% increase from the previous year. This growth highlights strong customer demand for offerings and new artificial intelligence (AI) capabilities. Adjusted diluted EPS reached 94 cents, up 28.8% from the previous year.
OpenText recently repaid $2 billion in debt, enhancing its capital flexibility. This positions the company to pursue cloud-based mergers and acquisitions and further organic growth. In May, Open Text acquired Pillr, a cloud-native managed detection and response (MDR) platform, and added it to its cybersecurity offerings. This acquisition targets managed security service providers with advanced features like API integrations and bundled products to better combat evolving cyberthreats.
Despite these positive developments, Open Text shares have declined 26% so far in 2024. Meanwhile, OTEX stock offers a 3.2% dividend yield. The stock trades at appealing valuations of 8.8x forward price-to-earnings (P/E) and 1.5x price-to-sales (P/S) ratios. Analysts have set a 12-month median price target of $40, implying a 27% potential upside. Open Text will report the fourth-quarter fiscal year 2024 financial results on August 1.
SS&C Technologies (SSNC)
Today’s final pick among the top emerging tech stocks is SS&C Technologies (NASDAQ:SSNC), which provides software products and services for the financial services and healthcare industries. The company addresses needs in securities accounting, front-to-back-office operations, performance analytics, regulatory reporting and healthcare information.
On July 25, SSNC announced its earnings for the second quarter. The company achieved a record adjusted revenue of $1.45 billion, a 6.5% increase from a year ago. Adjusted diluted EPS rose 17.6% to $1.27, reflecting strong profit growth. SSNC also unveiled a $1 billion stock repurchase program, reinforcing its commitment to long-term shareholder value.
Recently, SSNC entered a strategic partnership with Marlborough’s Investment Fund Services, establishing a “center of excellence” for fund administration in the U.K. SS&C Technologies will handle fund accounting and transfer agency services, enhancing efficiency with advanced technology. Additionally, the company launched a global contact center platform to improve client engagement across various sectors.
So far in 2024, SSNC stock returned more than 18%, while offering a 1.3% dividend yield. Currently, the shares trade at 13.5x forward P/E and 3.2x sales multiples. Wall Street analysts project a 12-month median price forecast of $77 for SSNC stock, indicating a nearly 7% potential upside from current levels.
On the date of publication, Tezcan Gecgil 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.