The tech industry has been by far the fastest growing industry over the past 20 years, with tech stocks driving much of the stock market hype and frenzy. Over the years, technology has become a major driver of growth in a wide range of markets. Not only are the big tech giants continuing to expand relentlessly, but we're also seeing the ripple effects of technological innovation accelerating other industries. Sectors such as healthcare, manufacturing, and transportation are being reshaped by advances in artificial intelligence, robotics, the Internet of Things, and more.
With major changes underway, I think now is a good time to invest in lesser-known tech stocks before they catch Wall Street's attention. The technology industry is creating new companies and opportunities at an unprecedented rate. While the spotlight is shining brightly on Big Tech, there are many up-and-coming technology companies that are still flying under the radar. These stocks remain unknown, overlooked, and undervalued by most investors. However, there is great potential for future growth if the management team can operate effectively and take advantage of the huge market opportunity. Here are seven such tech stocks.
Tech stocks: X-FAB Silicon Foundries (XFABF)
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X-FAB Silicon Foundry (OTCMKTS:XFABF) is a leading foundry group for analog and mixed-signal semiconductor applications. The company specializes in manufacturing and selling analog/mixed-signal ICs, micro-electromechanical systems, and silicon carbide products for the automotive, medical, industrial, communications, and consumer sectors worldwide. The company also provides design support for electronic design automation platforms. Despite the boom in the semiconductor industry, XFABF stock has been underperforming recently. The stock is down 42% from its August 2023 peak, largely due to a slowdown in the auto industry, which forms core demand. High interest rates have led people to make fewer large purchases, leading to a significant drop in demand for automotive chips.
However, as we are likely at a cyclical low, we believe the current entry point could lead to explosive returns. If interest rates eventually turn around after falling, stocks could rise further. The valuation here looks very cheap relative to growth, trading at just 6x P/E. Its three-year revenue growth rate is 28.4%, which is higher than 84% of its semiconductor peers. The company's annual revenue growth rate over the next 3-5 years is expected to be 19%, higher than 92% of semiconductor companies. guru focus XFABF's fair value is expected to be $24.4 by the end of 2027. I see the stars aligning for a significant rebound.
Drone Shield Limited (DRSHF)
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Drone Shield Limited (OTCMKTS:DRSHF) has experienced explosive growth in recent months, increasing by 343% over the past six months. When you look into what this innovative company does, it's easy to see why. DroneShield develops, commercializes, and markets hardware and software technologies for drone detection and security. As tensions rise and drones are likely to be the future of warfare, DroneShield has great potential as a pure application in this field. If it continues to win more government contracts, its valuation could rise quickly. If growth continues, it could potentially increase five times from current levels.
Our three-year revenue growth rate of over 90% is higher than 99% of our peers, and we expect DroneShield to continue its rapid expansion as it wins more defense contracts. We are a cutting-edge company operating in an important growth industry. We're already seeing big moves, but there's more to come as drone technology becomes more important to governments around the world. DroneShield will be in the right place at the right time to take advantage of it.
Tech stocks: Nagaro (NGRRF)
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Nagaro (OTCMKTS:NGRRF) is a digital engineering company that provides services such as AI and data analysis, which are one of the hottest areas today. Unfortunately, the same cannot be said for stocks. NGRRF is down almost 70% from its peak and is gradually declining. However, I expect the company to stabilize and recover in the coming months as double-digit revenue growth resumes. Revenue is expected to rise from $1.1 billion in 2024 to $3 billion in 2033, making it a modest but attractive valuation for a tech stock.
Trading at a P/E ratio of 18x, I expect margins to expand from the current 5.7% net margin as economic conditions improve and EPS expands. If Nagarro starts running again, he could see big returns. While waiting, the future dividend yield is also attractive at 2.83%. This overlooked stock could make a big comeback if technology recovers. With digital engineering expertise across AI and analytics, Nagarro is well-positioned for the future. Currently trading at $73, guru focus We expect the fair value to be $347 by the end of 2027.
Aehr Test System (AEHR)
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I have previously mentioned that the auto industry is facing a number of challenges due to interest rate hikes and the resulting weak demand. As a result, companies whose main customer source is the automotive sector have suffered as well. Aehr test system (NASDAQ:AEHR) is one such company. Aehr Test Systems is a global provider of test systems for burn-in and testing of logic, optical, and memory integrated circuits. They specialize in wafer level and package component geometry testing. The company's systems are used in a variety of fields including silicon carbide (SiC), gallium nitride (GaN), and optical photonics. Automotive chips are the core of the company's business, and the stock is down 79% from its peak in September 2023.
That said, we believe AEHR could recover in the coming quarters as interest rates rise and demand for automotive chips rises again. In any case, I would like to warn you that this company does not have the most reliable management team. He expects growth to remain flat next year, although his guidance has been lowered twice in the past two months. Therefore, bleeding may occur in a short period of time. But over the long term, AEHR remains a bargain. Once interest rates are lowered and EV sales start to increase, there is a non-zero chance that multibaggers will be profitable within 24 to 36 months. The company is a highly profitable company with a net profit margin of 21.4%, so the net profit margin will not be zero anytime soon.
Tech stocks: Naspers (NPSNY)
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Naspers (OTCMKTS:NPSNY) is a multinational company operating in the consumer Internet industry. We invest in advertising, food delivery, payments, fintech, education, health, and e-commerce. This stock's performance isn't as bad as his AEHR, but it's lackluster. Stock prices have been up and down over the past few years, but have been mostly flat since 2017.
However, I believe the core fundamentals are strong and the market is significantly undervaluing the stock. Many other analysts agree with me here. The company is expected to see a 115% EPS rebound this year and 14% growth next year, as well as double-digit sales growth going forward. Additionally, this company has $20 billion in cash against his $16.2 billion in debt. Debt burdens cause significant pain from interest payments, but as interest rates fall, this should also provide a tailwind.
The company owns a large amount of stock tencent holdings (OTCMKTS:Chehi) and other listed, marked-to-market non-operating assets are also expected to recover significantly in the coming years. The dividend is also modest at 0.27%. Gurufocus puts the fair price at $127 by the end of 2026. The current price is just $34, so we don't see much downside risk from here.
Ubiquity (UI)
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ubiquity (New York Stock Exchange:UI) is a technology company that manufactures and sells wireless data communications and wireline products for businesses and homes. The company's industry-leading products are integrated into an incredible software interface with scalable, license-free cloud management. This is another stock that has fallen significantly, but it could bottom out soon and bring about a big rally. There's definitely some short-term risk here, but if you're chasing big gains over the long term, short-term downside risk shouldn't matter that much.
The company has very strong margin and profitability metrics, with a dividend yield of 2.3%. Growth is expected to resume next year, with EPS rebounding 26% and revenue increasing 18.5%. This means it's paying just 13 times its expected 2025 EPS. Once the broader telecom industry recovers, I believe it will perform much better than analysts expected. Most carriers are in debt and struggling to pay interest. But once the cash is freed up after the rate cut, there should be a strong resurgence in growth. guru focus The fair value of the stock is estimated to be $309.
Tech Stock: Xinyi Solar Holdings (XISHY)
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Xinyi solar (OTCMKTS:west west) is a manufacturer of solar glass. We specialize in the production of solar glass and the development of solar power plants. The company supplies solar glass products to major solar module manufacturers around the world. As of December 2023, the company has six major solar glass production bases.
Although the overall solar sector is in a downturn, many solar companies are starting to bottom out, and there is significant runway for growth over the long term. Xinyi's stock price has also fallen, but as sales and profits continue to grow at a very high rate, I believe that it may bottom out and recover soon. Sales he increased by almost 30% through 2023. Net profit margin fell by 15.4%, but he expects it to recover soon as revenue continues to grow rapidly.
Analysts expect sales to increase 26.5% this year and 22% next year. The expected dividend yield is also 4.15%, so paying a P/E ratio of 11 times seems very cheap. His future 3-5 year earnings growth rate is higher than 93% of his peers. All that is needed now is for margins to recover.
On the date of publication, Omor Ibne Ehsan did not have (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com Publishing Guidelines.
