Analysts love these small tech stocks for their growth potential.
Tech stocks have lagged behind the overall market in 2022 as investors grow increasingly concerned about the negative impact of rising interest rates. Small-cap tech stocks can be risky, volatile investments given the unpredictability of new technologies. In addition, many small-cap tech companies are competing with larger, more established companies that can outspend them. Large-cap tech stocks get most of the attention on Wall Street, but small-cap tech stocks may be better buys for risk-tolerant investors seeking larger returns. Here are seven of Bank of America’s top tech stock picks with market caps of about $2 billion or less.
CI&T Inc. (ticker: CINT)
CI&T is a Brazilian digital strategy, design and software engineering provider. Analyst Jason Kupferberg says CI&T is a digital information technology leader in the Americas. In addition, the stock trades at about 21 times forward earnings, a very attractive valuation for a tech stock with the growth profile CINT enjoys. The company reported impressive 66% revenue growth in the first quarter, including 55.4% growth in financial services, its largest segment. Kupferberg says CI&T’s margins will improve over time. Bank of America has a “buy” rating and $17 price target for CINT stock, which closed at $9.02 on Aug. 19.
Expensify Inc. (EXFY)
Expensify is a software vendor specializing in expense management products for small and medium-size businesses. The company recently reported 48,000 net new customers in the second quarter, its strongest quarter of customer growth since 2019. Analyst Koji Ikeda says Expensify has potential to generate attractive growth and profitability in a wide range of economic conditions, making it a compelling long-term investment. Ikeda says a rebound in business travel to pre-pandemic levels will help Expensify reach its target of between 25% and 35% annual revenue growth. Bank of America has a “buy” rating and $26 price target for EXFY stock, which closed at $20.89 on Aug. 19.
Enfusion Inc. (ENFN)
Enfusion is a software company that specializes in back-office workflows for the investment management industry. Enfusion added 50 net new customers in the second quarter, including nine institutional asset managers and one seven-figure deal. Ikeda says Enfusion is gaining target market share, and its return to positive free cash flow in the quarter demonstrates the leverage of the company’s business model. In addition, Enfusion recently launched Enfusion Express for smaller funds, which Ikeda says will help expand the company’s reach and potentially accelerate its bookings growth. Bank of America has a “buy” rating and $17 price target for ENFN stock, which closed at $14.33 on Aug. 19.
TaskUs Inc. (TASK)
TaskUs is a U.S. digital outsourcing services provider. After pricing its June 2021 initial public offering at $23 per share, the stock hit an all-time high above $85 in late 2021, only to fall all the way back to under $15 today. Despite the underperformance, Kupferberg says TaskUs has delivered a solid financial performance since going public, including 36.9% revenue growth in the second quarter. Kupferberg says TaskUs should comfortably outgrow its peer group given its client base’s impressive growth profile. Bank of America has a “buy” rating and $28 price target for TASK stock, which closed at $14.71 on Aug. 19.
BigCommerce Holdings Inc. (BIGC)
BigCommerce is a digital commerce software vendor. Ikeda says secular growth in digital commerce is a tailwind for BigCommerce as more businesses embrace e-commerce and business-to-business sales strategies. BigCommerce reported impressive 39.1% revenue growth in the second quarter, and Ikeda says the business will become profitable as it scales. The company reported 38% enterprise accounts growth and 68% enterprise annual recurring revenue growth in the second quarter. Looking ahead, Ikeda says the company’s conservative guidance also creates potential for beat-and-raise quarters. Bank of America has a “buy” rating and $26 price target for BIGC stock, which closed at $18.36 on Aug. 19.
MeridianLink Inc. (MLNK)
MeridianLink provides loan and mortgage origination software for lenders. Ikeda says the company is well positioned to gain share in a $7.8 billion market. He says MeridianLink has potential for low- to mid-teens organic revenue growth and earnings before interest, taxes, depreciation and amortization margins of greater than 40%, making it a rare “Rule of 50+” investment opportunity within the software space. MeridianLink reported 6.6% revenue growth in the second quarter, and its 15% consumer segment growth was particularly impressive given the weak auto market. Bank of America has a “buy” rating and $26 price target for MLNK stock, which closed at $18.01 on Aug. 19.
Zeta Global Holdings Corp. (ZETA)
Zeta Global is a marketing technology platform that specializes in customer data, marketing and advertising. Zeta’s revenue was up 28.4% in the second quarter, while scaled average revenue per user was up 19% to about $355,000. Ikeda says Zeta is on track to grow its sales capacity by 20% in 2022, and management’s recent earnings call commentary suggests the company has healthy pipeline activity. Ikeda says Zeta’s guidance is conservative, and the company’s recently announced $50 million stock buyback is bullish. Bank of America has a “buy” rating and $9 price target for ZETA stock, which closed at $6.46 on Aug. 19.
7 top small-cap tech stocks to buy now:
— CI&T Inc. (CINT)
— Expensify Inc. (EXFY)
— Enfusion Inc. (ENFN)
— TaskUs Inc. (TASK)
— BigCommerce Holdings Inc. (BIGC)
— MeridianLink Inc. (MLNK)
— Zeta Global Holdings Corp. (ZETA)
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Update 08/22/22: This story was published at an earlier date and has been updated with new information.