As internet access expands globally, the tech sector continues to thrive, fueled by groundbreaking innovations in AI, cloud computing, and cybersecurity. These advancements are transforming learning platforms, search engines, and legal and compliance solutions, driving the industry's growth and impact.
Hence, investors might consider investing in fundamentally robust tech stocks such as Chegg, Inc. (CHGG), LegalZoom.com, Inc. (LZ), and trivago N.V. (TRVG), all priced under $10, which could potentially skyrocket.
The rapid growth of global internet users, especially via smartphones, is driving demand for convenient, accessible solutions. Companies are responding with innovations in travel navigation, education technology, and customer service platforms. This surge in internet usage is transforming these markets, fueling growth and opportunities within the tech industry.
Moreover, Gartner predicts a 9.7% rise in IT services spending, reaching $1.52 trillion this year, as businesses leverage the internet through digital expansion, subscription commerce, generative AI personalization, and interactive Progressive Web Apps. Consequently, the global internet services market is expected to grow at a 4.4% CAGR, reaching $733.79 billion by 2031.
Considering these conducive trends, let’s assess the fundamentals of the abovementioned tech stocks.
Stock #3: Chegg, Inc. (CHGG)
CHGG operates a direct-to-student learning platform that helps learners build essential life and job skills to accelerate their path from learning programs internationally. Its subscription services include Chegg Study, Tinger Gold, DashPash Student services, Chegg Writing, Chegg Math, Chegg Study Pack, and Busuu.
On August 5, 2024, CHGG announced a partnership with Max, adding the Max with Ads plan to its Perks program for U.S. Chegg Study and Study Pack subscribers. This allows students to stream popular shows and movies as part of their subscription.
In terms of the trailing-12-month gross profit margin, CHGG’s 73.40% is 98.1% higher than the 37.05% industry average. Its 8.58% trailing-12-month levered FCF margin is 67.1% higher than the 5.14% industry average. Moreover, CHGG’s 13.90% trailing-12-month Capex / Sales is 369.5% higher than the 2.96% industry average.
CHGG’s revenues for the second quarter ended June 30, 2024, were $163.15 million. Likewise, its adjusted EBITDA stood at $44.10 million. The company’s non-GAAP net income and non-GAAP EPS were $26.50 million and $0.24, respectively. CHGG’s total current assets as of June 30, 2024, were $433.55 million, compared to $414.84 million as of December 31, 2023.
Street expects CHGG’s EPS for fiscal 2025 to increase 17.3% year-over-year to $0.99. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past month, the stock has declined 8.6% to close the last trading session at $1.92.
CHGG’s POWR Ratings reflect strong prospects. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #38 out of 53 stocks in the B-rated Internet industry. It has an A grade for Value and a B for Growth. Click here to see CHGG’s ratings for Momentum, Stability, Sentiment, and Quality.
Stock #2: LegalZoom.com, Inc. (LZ)
LZ operates an online platform for legal and compliance solutions. The company's platform offers products and services, including business formations, creating estate planning documents, protecting intellectual property, completing certain forms and agreements, providing access to independent attorney advice, and connecting customers with experts for tax preparation and bookkeeping services.
On June 25, 2024, LZ announced a partnership with BusinessLoans.com to enhance access to capital for small businesses. This collaboration will integrate BusinessLoans.com’s funding solutions within the LZ’s platform, offering streamlined loan options and financial support to entrepreneurs.
In terms of the trailing-12-month gross profit margin, LZ’s 63.40% is 102.4% higher than the 31.33% industry average. Likewise, its 12.35% trailing-12-month levered FCF margin is 89.7% higher than the 6.51% industry average. Furthermore, its 1.68x trailing-12-month asset turnover ratio is 114.3% higher than the 0.78x industry average.
In the second quarter ending June 30, 2024, LZ’s revenue increased 5% year-over-year to $177.36 million. Its gross profit rose 8.2% from the previous year to $113.75 million. Additionally, the company’s non-GAAP net income was $18.81 million, and its non-GAAP net income per share remained flat year-over-year at $0.10.
For the quarter ending September 30, 2024, LZ’s revenue is expected to increase marginally year-over-year to $167.45 million. LZ’s EPS for the same quarter is expected to grow 24.1% year-over-year to $0.15. It surpassed the consensus EPS and revenue estimates in three of the four trailing quarters. The stock has gained 10.2% over the past month to close the last trading session at $6.48.
LZ’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It is ranked #10 in the same industry. It has an A grade for Quality and a B for Value. To see LZ’s Growth, Momentum, Stability, and Sentiment ratings, click here.
Stock #1: trivago N.V. (TRVG)
Headquartered in Düsseldorf, Germany, TRVG, together with its subsidiaries, operates a hotel and accommodation search platform in the United States, Germany, the United Kingdom, and internationally. It offers an online meta-search for hotels and accommodations through online travel agencies, hotel chains, and independent hotels.
On July 30, 2024, TRVG announced a strategic investment in AI-driven travel tech platform Holisto to enhance its "trivago Book & Go" service, aiming for improved conversion rates and a consistent user experience. This partnership will leverage Holisto's technology to optimize hotel rate aggregation and provide better deals for TRVG’s travelers.
In terms of the trailing-12-month asset turnover ratio, TRVG’s 0.90x is 81.3% higher than the 0.50x industry average. Similarly, its 97.55% trailing-12-month gross profit margin is 90.7% higher than the 51.15% industry average.
During the second quarter, which ended June 30, 2024, TRVG’s total revenue, came in at €118.56 million ($130.75 million). Similarly, its net total other income stood at €987 thousand ($1.09 million). In addition, as of June 30, 2024, its total current assets came in at €191.38 million ($211.05 million), compared to €187.93 million ($207.25 million) as of December 31, 2023.
For the quarter ending September 30, 2024, TRVG’s revenue is expected to increase 3.5% year-over-year to $172.59 million. Its EPS for fiscal 2025 is expected to increase 735.9% year-over-year to $0.05. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past month, the stock has declined 8.3% to close the last trading session at $1.88.
TRVG’s robust fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Value, Sentiment, and Quality. Within the Internet industry, it is ranked #9. To access the additional POWR Ratings of TRVG for Growth, Momentum, and Stability, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
LZ shares were trading at $6.74 per share on Thursday afternoon, up $0.26 (+4.01%). Year-to-date, LZ has declined -40.35%, versus a 18.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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