Here, I’m going to highlight three software stocks that JP Morgan highlighted in its research note as Buys. Are they worth considering today?

Microsoft

Let’s start with mega-cap Microsoft (NASDAQ: MSFT). It has fallen to $400 after trading near $550 in late 2025.

I like this pick. To my mind, this company is one of the safer picks in software.

Why? Because it’s a really diversified business.

Not only is it a key player in business productivity software, but it’s also a global leader in cloud computing and video gaming.

Additionally, it’s a massive player in AI itself. Because it has a large stake in ChatGPT owner OpenAI.

Of course, there are risks. One big one is that a lot of its expected cloud growth is tied to OpenAI (customer concentration risk).

With the stock now trading on a forward-looking price-to-earnings (P/E) ratio of 21 (using next year’s earnings forecast) though, I’m bullish. I plan to buy more shares for my own portfolio soon and believe it’s worth a look.

ServiceNow

Next up is ServiceNow (NYSE: NOW). It has fallen from $200 to $100.

This is another good call, in my view. While this company isn’t very well known, it’s a really important player in the corporate world.

Today, it provides crucial operating software for a vast range of large companies (85% of the Fortune 500). From Apple to GSK, everyone is using its software.

In simple terms, it handles all the behind-the-scenes work. Think IT incidents, employee requests, and security cases.

Given how embedded its solutions are within large multinational companies, I doubt this company is going to be replaced by AI. Ultimately, I expect AI agents to work on top of its software.

A risk is pricing. Looking ahead, the group may have to adjust its pricing model as companies automate their operations and lay off staff.

I expect it to continue growing though. And with the P/E ratio now in the low 20s, I think it’s worth considering.

Zscaler

Finally, we have Zscaler (NASDAQ: ZS), a small, but fast-growing cybersecurity company. Its share price has fallen from $330 to $165 – a decline of about 50%.

Cybersecurity strikes me as an area of software that should be relatively immune to AI disruption. Because this is a really specialised field and I don’t think that companies will be able to simply ‘vibe code’ their own cybersecurity applications.

To my mind, it wouldn’t be worth the risk. Get it wrong and the company could potentially be out of business if hit by a major attack.

Of course, while this company has been able to generate prolific growth in recent years (five-year revenue growth of 520%), there are no guarantees that this will continue. This is a dynamic industry and threats are likely to evolve over time.

Any slowdown could hit the share price. Because the stock is priced for strong growth.

I’m bullish, however, and plan to buy more shares for my own portfolio in the weeks ahead. In my view, it’s worth a closer look.

The post The 2026 software apocalypse: 3 stocks down 25%+ to consider buying now, according to JP Morgan appeared first on The Twelfth Magpie.

But not every AI stock’s making headlines and seeing huge amounts of hype. Here’s a look at three lesser-known shares that are quietly making investors a fortune.

A vital data player

First up, we have Snowflake (NYSE: SNOW). It offers solutions that enable businesses to get their data structured properly for AI use.

Late last year, I named this as my top US growth stock for 2026. That call was pretty good – it’s up about 75% year to date. I still believe it’s worth considering however. Recently, a company insider said he’s expecting revenue to more than double in the next few years.

If the company can achieve that kind of growth, I’d expect the share price to be materially higher in a few years’ time.

A risk here is competition from rival Databricks. Not only could this company capture market share but if it does an IPO, it could steal investor capital.

I’m optimistic about the long-term outlook though. For my portfolio, this is now a core AI holding.

Specialised chip-making equipment

Next, we have Lam Research (NASDAQ: LRCX). It makes highly specialised machinery that’s critical for manufacturing the advanced chips that are used in AI.

It recently provided guidance that was above Wall Street’s estimates as chipmakers (like Taiwan Semi and Intel) ordered more of its equipment. So it clearly has momentum right now.

Now, this stock’s up about 120% this year (and more than 60% in three months). After that kind of run, I wouldn’t chase it as the valuation’s risen considerably.

If it was to drop back 10%-20% though (which it probably will do at some point), I think it could be worth considering. China remains a risk as the company generates a large chunk of revenues there, but the long-term growth story associated with semiconductor production looks compelling, in my view.

Top-notch cybersecurity

Finally, we have Zscaler (NASDAQ: ZS). It’s a fast-growing cybersecurity company that is helping companies manage AI-related threats

This stock is up about 80% this year. Yet despite these impressive gains, no one is really talking about it.

From an investment perspective, Zscaler’s higher up on the risk spectrum. Not only does it face intense competition from larger players like CrowdStrike and Palo Alto Networks but it’s only just turning profitable now.

Taking a long-term view though, I see a ton of potential. Because AI’s going to dramatically increase the threat landscape for businesses.

“We are rapidly expanding our AI security portfolio to address the emerging risks of AI models and applications.”
Zscaler CEO Jay Chaudhry

It’s worth noting that the company recently forecast annual revenue above Wall Street estimates. It seems a rise in cybercrime, and the rapid adoption of generative AI, have prompted companies to increase investments in cybersecurity to safeguard their digital infrastructure and data.

Given this momentum, I believe the stock’s worth considering today.

The post 3 AI growth stocks that are quietly making investors a fortune appeared first on The Twelfth Magpie.

However recently, they seem to have stalled (the Roundhill Magnificent Seven ETF is actually down year to date). The good news is that there’s a new wave of Nasdaq tech stocks coming through today. These growth stocks are delivering big gains for investors right now and they appear to have plenty of growth potential looking ahead.

Five soaring Nasdaq stocks

In the table below, I’ve highlighted five Nasdaq stocks that have delivered fantastic gains in 2025. All are tech focused and growing rapidly.

Of the five, Zscaler‘s (NASDAQ: ZS) delivered the biggest gains. Year to date, it’s up 67%.

As you can see from the market-cap column, most of these companies are far smaller than the Mag 7 companies (where the average market-cap is about $2.4trn). Zscaler has the smallest market-cap at $47bn – less than 2% the size of Apple’s market-cap.

The smaller size of this cohort could be considered a positive. Generally speaking, the smaller a company is, the easier it is for it to double in size.

Scalable businesses

Now, I’m not saying that all these tech stocks are Buys today. A few look a little risky at current levels, given their valuations.

Palantir, for example, currently trades at about 73 times this year’s sales forecast. That’s a sky-high valuation and it’s pricing in a lot of future growth.

But all appear to have a lot of long-term growth potential. In most cases, the companies are very scalable – a factor that has helped the Mag 7 companies have success over the last decade.

It’s worth noting that there are some other very scalable US tech stocks that aren’t listed on the Nasdaq that are doing well in 2025 including the likes of Uber and Snowflake. Year to date, both are up more than 20%.

I’m bullish on cybersecurity

Of the five Nasdaq stocks listed, I only own two of these stocks today. These are the cybersecurity companies – CrowdStrike and Zscaler.

I believe the cybersecurity industry is going to balloon in size over the next decade. And I see these two companies as a good way to capitalise on the industry growth.

I’ve covered CrowdStrike a few times recently at The Motley Fool so let’s zoom in on Zscaler here. It offers an advanced cloud-based cybersecurity platform (that leverages the power of AI) and is growing rapidly.

Over its last five financial years, its revenue’s climbed from $303m to $2,168m – growth of over 600%. This financial year (ending 31 July) sees Wall Street expect its revenue to come in at $2,658m – growth of 23%.

It’s worth noting that last month, the company posted strong quarterly results and raised its guidance for FY2025 revenue and earnings. On the back of this guidance upgrade, lots of analysts increased their price targets for the stock.

Now, one downside to this stock is that its profits are still small. This is likely to result in share price volatility at times.

Another issue to be aware of here is that cybersecurity is a dynamic industry. Threats are always evolving and cybersecurity products can become obsolete quickly.

I believe this stock’s worth considering on pullbacks, however. Over the next five years, I think it should do well.

The post As the ‘Magnificent 7’ stall, here’s the next wave of high-growth Nasdaq tech stocks delivering big gains appeared first on The Twelfth Magpie.

Here, I’m going to highlight two US-listed growth stocks that I believe have a ton of potential and are worth considering today. Over the next 10 years, I wouldn’t be surprised to see these stocks deliver the same kind of returns as Amazon and Apple have over the last decade.

This industry is forecast to grow 10-fold

One industry I’m really bullish on today is cybersecurity. In today’s digital world, no company or government organisation can afford to ignore it.

Over the next decade, the industry is expected to grow significantly as organisations move to protect themselves against digital threats. According to McKinsey, it could be a $2trn industry in the not-too-distant future (around 10 times its current size).

An industry leader

Now, one stock in this industry I’m really excited about is CrowdStrike (NASDAQ: CRWD). It serves companies worldwide and is growing at a rapid pace (revenue growth of 21% is expected this financial year) thanks to the effectiveness of its cloud-native Falcon platform.

This stock has had a great run in recent years. But the company’s market cap is still relatively small at around $86bn. To put that figure in perspective, Amazon currently has a market cap of $2trn. So, there’s plenty of room for growth here, in my view.

It’s worth pointing out that CrowdStrike has plenty of competition. Recently, Palo Alto Networks has been enhancing its cybersecurity offering to compete with the company.

And that’s not the only risk for investors. Another is weakness in the high-growth area of the stock market (the stock has fallen recently as sentiment towards growth stocks has cooled).

Taking a long-term view, however, I’m really excited about the potential here. I’ve been buying the stock for my own portfolio recently while it has been trading under $350.

Growing fast

Another cybersecurity company that I believe has bags of potential and is worth considering is Zscaler (NASDAQ: ZS). It also offers a cloud-based platform and is growing at a breakneck speed (revenue growth of 22% is expected for the current financial year).

This company has had a lot of success in recent years. Today, it serves over 7,500 customers, including 30% of the Forbes Global 2000.

But it’s still pretty small. Currently, it has a market cap of just $30bn, meaning that it’s less than a hundredth of the size of Apple (which has a market cap of $3.3trn today).

Looking ahead, I think Zscaler could get significantly bigger as it wins more customers and sells extra services to existing ones. But as with CrowdStrike, the company is facing plenty of competition so there are no guarantees it will have success.

I’m bullish

I’m convinced, however, that cybersecurity is an industry with massive potential. And I’m clearly not the only one with this view.

Just recently, Google-owner Alphabet announced the acquisition of cybersecurity business Wiz for $32bn. This suggests that the Big Tech company sees cybersecurity as a major source of growth.

The post Could buying these growth stocks today be like buying Amazon or Apple 10 years ago? appeared first on The Twelfth Magpie.

A.G. Barr

What it does: A.G. Barr is a drinks company. Its main product is Irn Bru and it has recently added Boost via an acquisition.

By Stephen Wright. Shares A.G. Barr (LSE:BAG) fell after the latest trading update. Narrower margins meant profits came in lower than expected.

I think, however, this is a short-term issue and the long-term picture looks much more positive. That’s why I’ve taken the opportunity to buy the stock for my portfolio.

My investment thesis for A.G. Barr is based on two ideas. One is that margins are going to expand as the company completes its integration of Boost Drinks, which should boost(!) profitability. 

The other is the price-to-earnings (P/E) multiple is going to increase as a result. Right now, the stock is trading at a P/E ratio below its 10-year average and I expect this to  improve if profits grow.

A.G. Barr has recently changed its CEO, which makes the strategy a little uncertain going forward. But I think there’s enough margin of safety in the stock at the moment to make it worth the risk.

Stephen Wright owns shares in A.G. Barr.

Alphabet  

What it does: The owner of Google and YouTube, Alphabet is one of the largest technology companies in the world. 

By Edward Sheldon, CFA. Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) shares have pulled back sharply in recent months and I’ve been buying the dip. 

There are a few reasons the stock has fallen. One is that regulators, including the US Department of Justice, are targeting the company due to its dominance. Another is that there are some concerns that Google’s search business could be disrupted by ChatGPT and other generative AI applications. 

These are both genuine risks. However, after the pullback, I reckon a lot of uncertainty is priced in. In my view, the valuation (the P/E ratio is in the low 20s), and risk/reward proposition, now look attractive. 

Looking ahead, I’m convinced that Alphabet has plenty of growth potential. Today, YouTube revenues are growing at an impressive rate as are cloud computing revenues. And in the long run, Waymo’s self-driving taxis – which are on the roads in some US cities already – could provide a whole new source of revenue. 

Overall, I’m excited about the outlook for this stock. 

Edward Sheldon owns shares in Alphabet .

Aston Martin Lagonda

What it does: Founded in 1913, Aston Martin is a luxury sports car manufacturer that designs, engineers and produces sports cars in Warwickshire, and sells them worldwide.

By Harvey Jones. I thought long and hard before buying shares in James Bond car maker Aston Martin Lagonda (LSE: AML). Then stupidly, I went ahead and did it anyway.

I’d been monitoring the FTSE 250 stock on and off for years, watching the shares fall until I didn’t think they could fall anymore.

First-half results disappointed, as Aston Martin’s results usually do, but on 24 July the board flagged up a big second-half recovery and I thought why not?.

On 16 September I dived in and exactly two weeks later my shares crashed 33% after the board warned full-year profits would decline due to supply chain disruption and weak demand in China. So no second-half recovery, then.

No worries, I’m sure it’ll happen next year. Or the year after that. I won’t sell but it could be a long wait before I recoup my big early loss, assuming I ever do. 

I don’t think the global economy or luxury demand is about to roar into life, while Aston Martin still has to make the shift into electric motors. I’m bracing myself for a bumpy ride.

Harvey Jones owns shares in Aston Martin.

Aviva

What it does: Aviva is one of the UK leading financial services providers, as well as a big player in Ireland and Canada.

By Royston Wild. Aviva’s (LSE:AV.) share price has leapt to six-year peaks above 500p recently. But on paper it still looks remarkably cheap, so I’ve increased my stake for the second time since early June.

The FTSE 100 insurer trades on a forward price-to-earnings growth (PEG) ratio of 0.5. A reading below 1 indicates that a stock is undervalued.

On top of this, the prospective dividend yield is a mighty 7.2%. That’s more than double the Footsie average of 3.5%.

Aviva’s shares have increased as expectations for multiple interest rate cuts have strengthened. On the downside, this leaves the company at risk of sharply reversing if the Bank of England fails to deliver what the market expects.

But I don’t care. I invest for the long term, and reckon Aviva’s share price will rise much higher from current levels. I predict that steady demographic changes, allied with growing interest in financial planning, will drive demand for its products through the roof.

A strong balance sheet should allow Aviva to effectively exploit this opportunity, too. Its Solvency II capital ratio has moved further above 200% in 2024.

Royston Wild owns shares in Aviva.

Logistics Development Group

What it does: Logistics Development Group is an investment vehicle that, through a subsidiary, owns stakes in listed and private businesses.

By Christopher Ruane. I own a few penny shares in my portfolio already and recently added another one: Logistics Development Group (LSE: LDG).

The company’s operating subsidiary owns stakes in businesses like Finsbury Food Group and Alliance Pharma.

An activist shareholder has requisitioned a general meeting, hoping shareholders will vote for the firm to stop making new investments and prioritise returning cash to shareholders.

This is an unusual investment for me but I see potential value. The share has been trading at a significant discount to net asset value. At the end of May, net assets were £99m, of which net cash was close to £32m. The current market capitalisation is £64m.

The general meeting could help close that valuation gap. One risk when selling unlisted investments is whether their paper valuation can actually be achieved in the market. But I think the current Logistics Development Group share price looks like a bargain.

Christopher Ruane owns shares in Logistics Development Group.

Next

What it does: Next is a retailer selling clothing, homeware and beauty products both online and in its 800 stores.

By James Beard. The Economist recently described Next (LSE:NXT) as a “boring brand”. And yet record revenue and earnings for the year ended 27 January 2024 (FY24) shows that slow and steady sometimes wins the race.

In FY25, it expects to do better with a pre-tax profit of £995m. It therefore trades on a reasonable 15.9 times forward earnings.

As well as growing organically, it’s been building equity stakes in other fashion retailers. It plans to further expand overseas and hopes to generate additional income from licensing its brands and technology platform to third parties.

And with approximately 60% of its revenue being generated online, it’s successfully managed to embrace the internet.  

But there are potential challenges. Fashion consumers are notoriously fickle. And a lacklustre British economy could also impact sales.

However, I think the company’s well positioned to continue to grow which is why I recently added the stock to my portfolio.

James Beard owns shares in Next.

Next

What it does: A multinational retailer of clothing, footwear, accessories, and homeware with 700 stores worldwide.

By Mark David Hartley. At almost £100 a share, Next (LSE: NXT) is one of my more pricey investments. But it’s also the largest clothing retailer by sales in the UK with a well-established brand, diverse product range and rapidly growing online presence. It has a history of consistent financial performance and a relatively reliable dividend track record. The company’s focus on own-brand products gives it greater control over margins and pricing, and its online platform provides a significant source of revenue and growth potential.

Retail is highly competitive, though, and economic downturns or changing consumer habits could negatively impact sales. Additionally, its reliance on online sales could be affected by technological disruptions or increased competition from other e-commerce platforms. Even fluctuations in the British pound could impact Next’s international operations and financial results. But with a price-to-earnings ratio of 14.7, I think the current price offers good value and has room to grow.

Mark David Hartley owns shares in Next.

Windward

What it does: Windward’s AI platform leverages advanced machine learning and behavioural analytics to provide real-time insights and predictive intelligence for the maritime industry.

By Ben McPoland. I recently added to my holding in Windward (LSE: WNWD) after the small-cap stock dropped 25%. The £117m company helps organisations mange risk on the high seas. Unfortunately, there’s a lot more of that these days with wars raging and geopolitical conditions worsening.

The firm said it had made a strong start to H2, winning two new government customers for a total of $1.9m of annual contract value (ACV). This adds to the $37.2m of ACV it reported in H1, which represented 35% year-on-year growth.

The biggest risk here is that the business is still loss-making. However, management expects that to change over the next couple of years. On 10 October, CEO and co-founder Ami Daniel said: “We are laser-focused on achieving profitability while continuing to execute against our product roadmap to deliver an enhanced offering for our customer base.”

Speaking of customers, Windward has already attracted blue-chip names like BP, Shell, and Interpol. And adoption of its recently launched MAI Expert, a proprietary generative AI agent, has been strong, with six existing and several new commercial customers signing up.

At the end of June, the company had a cash balance of $13.8m.

Ben McPoland owns shares in Windward.

Yu Group

What it does: Yu Group is an independent supplier of gas, electricity, water and metering services to UK business customers.

By Roland Head. I recently bought some Yu Group (LSE: YU.) shares after this £270m company reported a 60% rise in half-year revenue and a 52% increase in earnings per share.

Changing energy prices can affect revenue and profits at utilities. But I was excited to see this financial growth was backed by a big increase in Yu’s customer base.

The company says that the number of meter points supplied rose by 82% to 72,300 during the first half of this year. This was paired with a 110% increase in the equivalent volume of energy supplied to 1.0TWh.

Smaller energy suppliers have a chequered record in the UK. Many have failed in recent years. I think Yu will need to stay disciplined as it expands to avoid the risk of financial problems.

However, with the stock trading on seven times earnings and offering a 4% yield, I think Yu shares could do well if growth continues.

Roland Head owns shares in Yu Group.

Zscaler

What it does: The company focuses on cloud-based cybersecurity solutions primarily for enterprise customers.

By Oliver Rodzianko. I recently invested in Zscaler (NASDAQ:ZS) as its valuation has become significantly more attractive. For example, its forward price-to-sales (P/S) ratio is currently 58% below its five-year average, making it a compelling opportunity.

Zscaler’s investment potential is further supported by a consensus of 39 analysts, forecasting a 21% growth in revenue by fiscal 2026, following an equal 21% growth estimated for 2025. Additionally, the consensus price target suggests a 28.5% gain over the next 12 months.

However, the company has not yet reported any official net income, though it’s nearing profitability. Any delays in reaching this milestone could result in further losses, as the stock is already down 19.5% year-to-date.

That said, cybersecurity is a rapidly growing industry, and I wanted to be part of it. While valuations in this sector tend to be high, Zscaler offered the most attractive option I could find.

Oliver Rodzianko owns shares in Zscaler.

The post 10 stocks that Fools have been buying! appeared first on The Twelfth Magpie.

The technology sector has been volatile globally across the last few months. So has there been — or does there continue to be — an opportunity to consider buying undervalued stocks in quality businesses? Let’s find out…

Advanced Micro Devices

What it does: AMD designs high-performance processors and graphics cards, competing with Nvidia in PCs, servers, and gaming.

By James Fox. Advanced Micro Devices (NASDAQ:AMD) stock has pulled back from peaks.

It’s still expensive on near-term metrics, trading at 44,6 times forward earnings, but growth-adjusted metrics have become much more attractive – the price-to-earnings-to-growth ratio is 1.06, representing a 41.6% sector discount.

The big growth opportunity is in the artificial intelligence (AI) and data centre segment, where it currently plays a very distant second fiddle to Nvidia. 

To date, it has followed a different approach to Nvidia, focusing on the development of high-performance chipsets rather than a ‘full stack’ offering (hardware plus software). 

However, there are several reasons to think AMD might claim more market share. The Santa Clara firm claims supremacy in AI inferencing and recent acquisitions may aid its software offering. 

Moreover, Nvidia is experiencing some delays with next-generation Blackwell chips and this may present a window of opportunity for competitors. 

However, it would be remiss of me not to highlight that this is a fast-moving sector. Failure to keep up with Nvidia or ahead of Intel could be disastrous for those all-important growth forecasts.

James Fox owns shares in Advanced Micro Devices

Alphabet

What it does: Alphabet is a conglomerate with a vast tech empire. It owns Google, YouTube, Android, DeepMind, Fitbit, and more.

By Charlie Carman. Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) comfortably beat Wall Street estimates in its second-quarter earnings.

A 14% rise in revenue to $84.7bn exceeded the consensus forecast of $84.2bn. Earnings per share of $1.89 also eclipsed expectations of $1.84.

Despite these stellar numbers, Alphabet’s share price has declined recently. There are three key reasons investors could consider today an attractive entry point.

First, despite initial fears, AI-powered large language models like ChatGPT have barely dented Google’s dominance in internet search.

Second, the cloud computing division has strong momentum. Quarterly revenues climbed 29%, crossing the $10bn mark for the first time.

Third, the company’s forward price-to-earnings (P/E) ratio of 18.1 is the lowest among the ‘Magnificent Seven’. On this metric, the stock looks cheap.

Granted, ongoing antitrust litigation creates uncertainty for the investment outlook, posing risks to share price growth. But, as Warren Buffett once said, it can be wise to be greedy when others are fearful.

Charlie Carman owns shares in Alphabet. 

Alphabet 

What it does: The owner of Google and YouTube, Alphabet is one of the world’s largest technology companies. 

By Edward Sheldon, CFA. Alphabet (NASDAQ: GOOG) (NASDAQ:GOOGL) shares have been hit hard in the recent tech sell-off. As I write this, they’re more than 20% off their 2024 highs. 

After this fall, I think the Big Tech stock is offering quite a bit of value. Currently, the forward-looking price-to-earnings (P/E) ratio (using the 2025 earnings per share forecast) is just 17. 

That strikes me as low for this technology company. After all, this is a business with a great track record and plenty of future growth potential. 

Now, it’s worth noting that there is some uncertainty with this stock. One issue is that new generative AI applications (such as ChatGPT) are a threat to its search revenues. 

Another is that regulators are targeting the company due to its dominance. Recently, the US Department of Justice has been taking aim at Google for operating a monopoly in digital advertising. 

All things considered, however, I believe the shares are too cheap. At current prices, I’m tempted to add to my position. 

Edward Sheldon owns shares in Alphabet 

NCC Group

What it does: NCC Group provides cybersecurity services, including digital protection and risk management.

By Royston Wild. Cyber security specialist NCC Group (LSE:NCC) was already looking cheap before the recent market reversal. Today I think it could be considered a bona-fide bargain.

City analysts think annual earnings here will surge 120% this financial year (to May 2025). Consequently, NCC’s shares trade on a corresponding price-to-earnings (P/E) ratio of 19.6 times.

That’s pretty attractive compared to the super valuations on many US and UK tech stocks. But this is not all.

The FTSE 250 company deals on a prospective price-to-earnings growth (PEG) multiple of 0.2. Any reading below one implies that a stock is undervalued.

Sales disappointed last year as tough economic conditions hit business spending. Things could remain difficult for NCC, too, if the US slumps into recession.

However, a recent sales recovery is a positive omen looking ahead, with constant currency sales at Cyber Security increasing 6% between November and May. 

I think profits here could rocket over the long term as the problem of cyber warfare steadily grows, and that buying in today could prove a shrewd move.

Royston Wild does not own shares in NCC Group.

ZScaler

What it does: Develops and provides network services and cybersecurity tools for businesses globally.

By Mark David Hartley. ZScaler (NASDAQ: ZS) collapsed 22% within the first week of September as the US tech industry underwent a heavy period of selling. Unlike competitor Fortinet, it was hit hard by the selloff. The crash wiped out all of the past year’s gains, bringing it back to October 2023 prices. In total, it’s down over 50% from its all-time high, giving it a lot of room to grow if the economy recovers.

Despite the volatility, the company is popular among investors. But high expenses have left it unprofitable for several years. And despite revenue of $2.17bn, the shares are still worth 12 times its revenue per share. Usually, that would mean the $170 price is very high. Yet still, analysts forecast an average 12-month price target of $215, up 25% from the current price. That would bring it closer to the price it was trading at in March this year.

Mark David Hartley owns shares in ZScaler and Fortinet. 

The post 5 tech stocks that look cheap after the selloff appeared first on The Twelfth Magpie.

Aviva

What it does: Aviva is a market leader in several financial services segments, including life and general insurance.

By Royston Wild. I’ve been seeking ways to boost my dividend income. And Aviva (LSE:AV.), with its 7.6% dividend yield, fits the bill perfectly.

The business doesn’t have a long and unbroken record of payout growth. Unlike, say, Legal & General, Allianz or MetLife, it was forced to cut the dividend during the depths of the pandemic.

But dividends have grown strongly since then, and a Solvency II capital ratio of 206% as of March suggests Aviva has the financial firepower to continue raising rewards. Indeed, City analysts expect dividends to keep moving northwards through to 2026 at least.

One drawback is that the firm has a limited geographic footprint compared to some of its peers. A slimmed-down company with a focus on the UK, Ireland and Canada has limited opportunities to grow earnings compared with its globetrotting rivals.

But I’m confident Aviva will still be able to deliver impressive results as populations in its markets rapidly age.

Royston Wild owns shares in Aviva and Legal & General.

Burberry

What it does: Burberry operates within the global personal luxury market, with a presence in over 140 countries and territories around the world.

By Andrew Mackie. The Burberry (LSE: BRBY) share price has had a miserable 12 months. It’s down a whopping  55%, and languishes at levels not seen since 2016. With sentiment in the stock so low, I couldn’t resist adding some shares to my ISA portfolio in the last week.

It’s not hard to see why the company has struggled. In the US, a key market, pandemic-fuelled stimulus payments have long been spent, and elevated inflation has altered the spending patterns of even affluent consumers.

However, ultimately, I see these challenges as relatively short-term. After all, this is an iconic British brand that traces its roots back to the 1850s.

Its core business strategy of building what it describes as a new “creative expression” is, I believe, the right one. In a crowded marketplace, brand marketing is likely to become a clear differentiator. Its one-month takeover of Harrods, together with a new animation of the famous Burberry Check, are but two examples.

I have not invested in the expectation of an instant turnaround. But taking a contrarian stance is in my DNA.

Andrew Mackie owns shares in Burberry.

Burberry Group

What it does: Founded in 1920, the FTSE 100 group makes luxury British clothing, bags, accessories and fragrances, and is best known for its trenchcoats and cashmere scarves.

By Harvey Jones. I’d wanted to buy shares in Burberry Group (LSE: BRBY) for years, but I’m glad I didn’t. They’ve crashed 54.63% in the last 12 months, the second worst performer on the FTSE 100 after St James’s Place. 

And that’s when I swooped.

I love buying shares as a big discount, especially when they’re paying much higher income as a result. Burberry’s trailing yield is now a thumping 5.87%.

I didn’t catch the share price right at the bottom, but came pretty close.

However, in the race to bag a bargain, I underestimated what a mess management has got itself into.

Sales have slumped in China. Ad campaigns have backfired. The famed Burberry check is not as aspirational as it was. Fashionistas just aren’t that into it.

So here’s what I’m going to do. Sit tight and wait. Reinvest my dividends. Be patient. I bought Burberry shares at a reduced price and I’m confident they’ll come good. Given time.

Harvey Jones owns shares in Burberry.

Diageo

What it does: Diageo is in the spirits business. It makes some of the best-selling products in a number of categories.

By Stephen Wright. Even the best businesses find their share prices under pressure from time to time. Diageo (LSE:DGE) is a good example of this at the moment. 

A falling share price means the stock trades at a price-to-earnings (P/E) ratio of around 18 and the dividend yield is above 3%. That’s unusually cheap by the company’s standards.

The concern is that rising interest rates might cause a durable shift away from the premium drinks that make up the bulk of Diageo’s portfolio. But I think investors are overreacting. 

Sales of Guinness have been holding up well in a difficult environment, which illustrates the resilience of the overall product lineup. And a cut in interest rates looks to be getting closer.

If that happens, I expect the stock to rally from its current levels. That’s why I’m buying as much as I can with the price where it currently is.

Stephen Wright owns shares in Diageo.

Hostelworld

What it does: Hostelworld is an online accommodation booking platform that focuses on the hostel market.

By Christopher Ruane. Hostelworld (LSE: HSW) seems to have put the difficult pandemic years firmly behind it.

The budget accommodation booking platform generated record revenue last year. Operating costs continued to decline as a percentage of that revenue, something I think shows the economies of scale an online platform can achieve as marginal costs decline.

It swung back into the black, reporting an after-tax profit of €5.1m. That puts it on a price-to-earnings ratio of 45, which looks expensive. However, if the business continues to perform strongly, I think earnings growth could outstrip revenue growth due to the platform’s scalability.

The company says 2024 began with “strong momentum”. Several directors dipped into their own pockets last month to buy shares.

The threat of a sudden unexpected downturn in travel demand, as we witnessed during the pandemic and its associated government-imposed restrictions, remains a key risk for Hostelworld. But I like its strong, niche position and the economies of scale its business model offers.

Christopher Ruane owns shares in Hostelworld.

Legal & General

What it does: Legal & General is a financial services and asset management company. 

By Ben McPoland. I added to my holding in Legal & General (LSE: LGEN) after shares of the insurer fell 7% in mid-June. The drop came after the new CEO set out plans to restructure the business into three core units and increase shareholder returns between 2024 and 2027.

Specifically, the firm announced a £200m share buyback and 5% dividend growth for 2024, followed by 2% growth per year alongside further share repurchases. It’s aiming for 6%-9% compound annual growth in operating earnings per share over these three years.

The market either didn’t think this was ambitious enough and/or wasn’t happy with the reduced dividend growth starting in 2025. Personally, I’m encouraged that management committed to the payout as well as international growth, particularly in the US.

Seeking out business opportunities overseas does come with execution risk, of course, and much more competition. But it’s a risk worth taking to potentially reignite growth, in my opinion.

After the share price dip, the stock is offering a massive 9.4% forward dividend yield (as I write). I found that too tempting to turn down. 

Ben McPoland owns shares in Legal & General.   

Pinterest

What it does: Pinterest is an American social media platform that focuses on image sharing and idea discovery.

By Muhammad Cheema. After rising by 82% over the last year, is it too late to buy Pinterest (NYSE:PINS) shares? Well, I’m betting it isn’t after recently adding to my position.

The company has experienced a rollercoaster of fortunes since it went public in 2019. Initially, growth soared when the pandemic struck. But it subsequently decelerated when global economies began reopening.

However, high growth has been resurgent as of late as the company has focused on making its site more shoppable. For example, recent quarterly revenue increased by 23% year on year while monthly active users hit a new high of 518 million, growing by 12% over the same period.

When it has competitors, such as Meta, who have been accused of copying its rival’s ideas, there is a risk. However, this isn’t a big concern as other social media platforms, such as TikTok, and Instagram are seen as somewhat controversial. Pinterest on the other hand isn’t, which should help it maintain its competitive edge in its niche.

Muhammad Cheema owns shares in Pinterest.

Sage 

What it does: Sage is a provider of cloud-based accounting and payroll solutions with a focus on small- and medium-sized businesses. 

By Edward Sheldon, CFA. Sage (LSE: SGE) shares have experienced quite a large pullback lately and I’ve been buying on the dip, boosting my holdings. 

This is not a cheap stock, even after the recent pullback. However, to my mind, it has the potential to generate strong returns over the next five to 10 years. 

As a provider of cloud-based accounting software, Sage is very well positioned to prosper from the digital transformation trend going forward. As companies move away from old-school accounting processes towards cloud-based software, it should benefit. 

But that’s not the only reason I’m drawn to the company. I also like the fact that it has a high level of recurring revenues and a high return on capital (a key measure of profitability). Generally speaking, companies with these attributes tend to be good long-term investments. 

One risk with this stock is an economic downturn. This could hurt smaller businesses and lower demand for accounting software.  

Taking a long-term view, however, I think Sage shares should do well for me. 

Edward Sheldon owns shares in Sage.

Scottish Mortgage Investment Trust

What it does: Scottish Mortgage is a Baillie Gifford fund that aims to own the most exciting growth companies across the world.

By Charlie Keough. With it down over 40% from its all-time high, I decided to open a position in Scottish Mortgage Investment Trust (LSE: SMT). It’s a stock I’ve had on my watchlist for a while. There are a few reasons why.

Firstly, its shares look cheap. The trust trades on a 10.3% discount to its net asset value. That makes Scottish Mortgage look like good value for money at £9.97 a share. With nearly 100 companies in its holdings, I’m also a massive fan of the diversification it offers.

There are a few risks. To begin, 26.2% of its portfolio consists of private companies. Valuing these businesses can sometimes be difficult. What’s more, with a heavy focus on growth stocks, any signs of a delay in rate cuts could negatively impact its price.

But just like me, management invests for the long term. The trust has been gaining momentum recently. It’s up 13.8% this year already. I’m hoping it can keep up this form going forward.

Charlie Keough owns shares in Scottish Mortgage Investment Trust.

Zscaler

What it does: Zscaler is a Californian cybersecurity company that offers cloud security services to enterprise businesses.

By Mark David Hartley. I recently bought shares in Zscaler (NASDAQ: ZS) as part of a broader portfolio aimed at profiting from the artificial intelligence (AI) boom. With a heavy reliance on cloud-hosted databases, artificial intelligence has created a huge demand for cloud security. As an IT professional, Zscaler’s ‘zero-trust’ approach to cybersecurity appeals to my personal beliefs and understanding of how this technology should operate.

But it’s not alone in the industry. ZScaler faces tough competition from larger and more established players like Palo Alto Networks and Fortinet. At 13.7 times, its price-to-sales (P/S) ratio is significantly higher than the industry average of 4.3. It will need to seriously up its sales if it hopes to meet investor expectations, or shares could fall soon. Still, analysts are positive, with good consensus on a 12-month price target 25% higher than currently. If AI doesn’t end up killing us all, it might pay off.

Mark Hartley owns shares in Zscaler.

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