3 stocks you’ll want to buy as part of the tech sell

Tech investors have enjoyed some big gains over the past year, but some are starting to worry. Fears that rising bond yields and more government stimulus could eventually lead to inflation have scared some investors who invested their money in high-growth tech stocks during the pandemic.

But the recent tech sale shouldn’t worry long-term investors. The drop represents a great buying opportunity if you know where to look. We asked a few Motley Fool contributors for some great tech stocks to buy right now, and Shopify (NYSE: SHOP), Lemonade (NYSE: LMND), and Okta (NASDAQ: OKTA) at the top of their list. Here’s why.

Throw out the baby with the bathwater

Danny Vena (Shopify): With all the market madness we’ve seen over the past couple of weeks, it’s unclear if this is just a sector rotation out of tech stocks and into pandemic reopening games, or if we we are on the verge of a real market crash. “A rose by any other name would smell so sweet,” at least the saying goes.

Investors sell both good and bad companies, or throw the baby out with the bathwater. This creates compelling deals for companies in the tech industry. Shopify is a stock that investors should be buying right now.

When the e-commerce company announced its fourth quarter results in mid-February, numbers that characterized much of last year showed no signs of slowing down. Revenue of $ 978 million grew 94% year-over-year, while gross cargo volume (GMV) – or the value of products sold on its platform – climbed 99% to over $ 41 billion.

Those numbers were driven by subscription revenues which jumped 53% and commodity solutions which jumped 117%. At the same time, recurring monthly revenue increased 53% to $ 83 million, fueled by the high number of merchants who continued to join the Shopify platform, even after a record influx in the third quarter.

The company’s growing leverage began, as net income for the quarter rose to $ 124 million, from $ 0.8 million in the previous year quarter. This resulted in earnings per share of $ 0.99, up from $ 0.01. This illustrates that as Shopify continues to add more merchants and the value of those sales increases, an increasing amount of profit will drop to the bottom line.

It’s important to note that while the increasing adoption of e-commerce that has accompanied the pandemic may slow, it will not go away. The U.S. Department of Commerce said that in the fourth quarter of 2020, online sales grew 32% year over year and accounted for nearly 16% of total retail sales. Now that consumers have become accustomed to the ease and convenience of shopping online, there is simply no turning back the clock.

With Shopify down more than 23% from its recent highs, the stock looks downright cheap by comparison, offering investors the chance to get a top-tier business at a rare price.

Is the market deteriorating because of this sweet disruptor?

Brian Withers (Lemonade): Lemonade is tackling the established insurance industry with its disruptive customer service model powered by artificial intelligence and chatbots. Customers love that they can get quotes on insurance products (pets, renters, and landlords) in under two minutes and a third of all claims are paid instantly. But it goes even further by allowing its members to choose a charity to benefit from unused premiums not paid to claims at the end of the year.

This innovative model which puts the customer at the forefront is to capture market share. Its “in effect premiums,” or the sum of all annual premiums in effect at the end of the period, have increased 87% year over year. Customers grew 56% over the same period, while premiums paid annually per customer increased 87% and the gross loss rate improved. Even its quarter-to-quarter comparisons are solid amid the ongoing pandemic.

Data source: Lemonade. QOQ = quarter to quarter. YOY = year after year.

It looks like the company is pulling on all cylinders. So why has the stock fallen 50% from its all-time high since the start of the year? There are several reasons. First, tech stocks have been sold in the past few weeks, which has made some of the incredible gains of the past 12 months. Second, reported income actually declined 13% year over year to $ 20.5 million. This can be confusing for investors, but management explained that due to the change in business model on July 1, 2020, to use proportional reinsurance, this year-over-year comparison of income is not “not directly comparable”. Finally, the market may also have been disappointed with the outlook for the company, which was a bit lower than analysts’ expectations. Add it all up and savvy investors see a stock that is for sale today.

Overall, the company is executing its strategy well, winning over customers, expanding its offering and taking market share. Investors would do well to take advantage of today’s reduced share price with the mindset of holding for the next three to five years (or more). You will be glad you did.

Ignore the noise, this tech stock continues to grow rapidly

Chris Neiger (Octave): Okta, the identity and access management (IAM) company, experienced exceptional growth in 2020, and investors responded by pushing the company’s stock price up 120% last year. But the company’s stock price recently fell after Okta released its fourth quarter 2021 results.

Investors lowered the stock about 10% earlier this week, but the sell-off was a bit exaggerated. The company reported a 40% year-over-year increase in revenue in the quarter, to $ 234.7 million. It’s still very impressive growth and there’s probably more where it’s coming from. Okta management said fiscal 2022 revenue for the full year will increase by 30% at the high end of the forecast.

Investors are also concerned that Okta has just spent $ 6.5 billion to buy cloud identity startup Auth0. But the acquisition will help Okta expand its identity management business to new platforms and services that it is currently not reaching. Sure, that’s a big amount of money to spend, but it should help the company further tap into the $ 55 billion IAM market.

If investors step back and stop looking at short-term market volatility, they will see that Okta has had a fantastic year in fiscal 2021 and is still poised for further growth over the course of the year. of the coming year. On top of that, the company’s latest acquisition is expected to strengthen Okta’s position in the rapidly growing IAM market and help the company stay ahead of its competition.

This is why, for long-term investors, the recent drop in Okta’s stock price seems like a great opportunity to recover stocks.