Investors must always balance growth and stability in their portfolios. While employing defensive positions is essential, deploying capital in high-growth sectors like technology can be a formula that accelerates growth. This strategy adds an extra boost to portfolio returns. However, picking top tech stocks randomly is a recipe for disaster.
As an investor, you must carefully curate your choices, consider their strengths, and determine if experts agree with your assessment. To that end, I’ll discuss three top tech stocks with the potential for robust profits so you can determine whether they fit your investment strategy. Of course, just showing them isn’t enough; I’ll show you how I came up with the list.
First, I screened the market for tech stocks exhibiting the following criteria:
- Analyst Rating: Minimum strong buy rating from analysts,
- Analyst Coverage: Eight to sixteen analysts covering the stock. I wanted to get well-covered stocks, but not exceedingly popular ones,
- Revenue Growth: 30% or more in its last annual report,
- Gross Profit Growth: 30% or more in its last annual report,
- Trading Price: More than $10.
This stringent screen yielded a handful of companies. I arranged them from highest to lowest based on their revenue growth, and here are the results.
Evolent Health (EVH)
While the company may look like a healthcare stock at first glance, Evolent Health (NYSE:EVH) provides tech services that connects care companies and patients. Evolent recently penned a partnership with Machinify for exclusive assets, including a royalty-free license for Machinify Auth, an AI-powered platform that accelerates medical authorization.
The company’s efforts are evident in their recent financials.
In 2023, Evolent reported an impressive 45% year-over-year (YOY) revenue increase from $1.35 billion to $1.96 billion. Gross profits also increased by 45%. Evolent also secured four revenue-generating agreements for the year, leading to management upping 2024’s revenue guidance to $2.5 billion on the high end, representing a potential 21% YOY increase.
That said, operating expenses increased YOY, attributed to improved products and services.
With its improving financials, excellent outlook, and solid plans, Wall Street rates EVH stock as a “Strong Buy.” Investors looking for top tech stocks might want to watch EVH.
Astera Labs (ALAB)
Astera Labs (NASDAQ:ALAB) offers semiconductor-based connectivity solutions used in artificial intelligence and cloud infrastructure. The company’s Intelligent Connectivity Platform comprises semiconductor-based, mixed-signal, and high-speed connectivity products that integrate its software suite, microcontrollers, and sensors built from the ground up to support both cloud and AI infrastructures. Astera Labs recently demonstrated its GPU clusters intended to support the growing demand for AI workloads.
In 2023, Astera reported a 45% year-over-year revenue increase from $79.9 million to $115.8 million. Gross profit also rose 36%, while net income remained in the red. However, EPS improved from a 45 cent loss to a 25 cent loss.
Even its Q1 2024 showed strong follow-through, with revenue growing 269% year over year. The surge in AI infrastructure deployment drives the growth. With a projected Q2 revenue increase of 10 to 12% and strategic positioning in the AI infrastructure market, Astera has garnered Wall Street’s “Strong Buy” rating. If you are looking for an alternate AI play, you might want to check out ALAB as one of your next top tech stocks.
AppFolio (APPF)
Real estate has seen a boost in efficiency thanks to cloud technology and AI, brought about by tech company AppFolio (NASDAQ:APPF). AppFolio allows users to digitize critical operations and elevate workflows to the utmost efficiency.
The company has been on a strong growth trajectory for the last few years. AppFolio’s President and CEO highlights that the company’s performance is rooted in customer connections, exceptional service and continuous innovation. This approach has garnered significant attention from Wall Street, earning the company a “Strong Buy” rating.
If we look closer at its numbers over the years, we can see a steady pace of improvement. In 2023 alone, revenue grew 31% YOY and gross profit improved 37%. Appfolio made a turnaround profit of 8 cents per share compared to the previous year’s $1.95 loss. This impressive financial improvement ranks APPF as one of the top tech stocks to look out for, so keep an eye on it.
On the date of publication, Rick Orford 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.