11 High Growth IT Stocks to Buy
In this article, we discuss 11 high growth IT stocks to buy. If you want to see more stocks in this selection, check out 5 High Growth IT Stocks to Buy.
The technology industry faced challenges in 2022 due to factors such as higher interest rates, a sluggish economy, and a shift away from pandemic-related consumer habits. Despite these difficulties, there is still optimism for the future as there are indications of sustained excellence, steady expansion, and favorable valuations. Franklin Templeton anticipates that businesses will carry on with their Digital Transformation endeavors in 2023, albeit at a more gradual rate, despite the deceleration of rate hikes and economic activity. This is because such investments are vital for generating necessary productivity gains, particularly in an inflationary setting. Franklin Templeton has identified prospects in high-caliber firms that operate like platforms and are indispensable to their clients' operations. These firms include enterprise software and IT services companies, as well as subcategories such as Secure Cloud and Software-as-a-Service (SaaS), Artificial Intelligence (AI)/Machine Learning, Future of Work, and Cybersecurity.
On the other hand, Franklin Templeton expects more ambiguity in the realm of consumer technology as the effects of COVID-19 gradually recede, energy costs increase in Europe, and global economic activity slows down. The firm thinks that certain sectors, including consumer IT hardware, gaming, eCommerce, and digital advertising, may require more time to rebound. Franklin Templeton ultimately believes that Digital Transformation is still in the nascent phases of development, with long-term continuous growth prospects that will persist beyond the present economic cycle.
According to Wall Street analysts, Microsoft Corporation (NASDAQ:MSFT)’s latest uninspiring quarterly forecast indicates more gloom to come for the technology industry, as the tech giant cautioned that its customers were hesitant to spend money in a turbulent economic environment. This warning from Microsoft Corporation (NASDAQ:MSFT), which is the second most valuable company in the United States, follows a significant decline in client spending that prompted prominent tech companies, such as Amazon.com, Inc. (NASDAQ:AMZN) and Meta Platforms, Inc. (NASDAQ:META), to reduce jobs and conserve funds. During a Q4 earnings call, Microsoft CEO Satya Nadella and other company executives used the words "caution" and "cautious" at least six times.
While Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Meta Platforms, Inc. (NASDAQ:META) are among the biggest tech firms in the world, we discuss the top high growth IT stocks in this article.
We used a stock screener and filtered for IT companies with year-over-year quarterly revenue growth of more than 20%. From the resultant dataset, we selected the IT stocks with the highest revenue growth rates as of the end of the third and fourth quarter of 2022, according to the latest data available for each firm. The list is arranged in ascending order of the year-over-year quarterly revenue growth rate.
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High Growth IT Stocks to Buy
11. EPAM Systems, Inc. (NYSE:EPAM)
Number of Hedge Fund Holders: 34
Quarterly Revenue Growth YoY as of September 29, 2022: 24.10%
EPAM Systems, Inc. (NYSE:EPAM) is a Pennsylvania-based provider of digital platform engineering and software development services worldwide. The company offers engineering services, customization, cross-platform migration, implementation, integration, and infrastructure management services.
On February 16, EPAM Systems, Inc. (NYSE:EPAM) reported a Q4 non-GAAP EPS of $2.93, beating market estimates by $0.25. Fourth quarter revenue of $1.23 billion came in line with Wall Street consensus. The company expects revenues will be in the range of $1.200 billion to $1.210 billion for the first quarter of 2023, reflecting a year-over-year growth rate of approximately 3%.
Darrin Peller, an analyst at Wolfe Research, downgraded EPAM Systems, Inc. (NYSE:EPAM) from Outperform to Peer Perform, and has not provided a price target. In a research note, the analyst informed investors that due to higher interest rates and an approaching recession, the criteria for recommending stocks has become stricter. He continues to adopt a barbell approach to coverage, picking stocks that fall under growth, core/GARP, and value.
According to Insider Monkey’s third quarter database, 34 hedge funds were long EPAM Systems, Inc. (NYSE:EPAM), compared to 36 funds in the last quarter. Stephen Mandel’s Lone Pine Capital is the leading position holder in the company, with 1.2 million shares worth $450.2 million.
In addition to Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Meta Platforms, Inc. (NASDAQ:META), EPAM Systems, Inc. (NYSE:EPAM) is one of the top tech stocks on the radar of smart investors.
Here is what White Falcon Capital Management has to say about EPAM Systems, Inc. (NYSE:EPAM) in its Q3 2022 investor letter:
“Half of the portfolio had positive realized and unrealized gains for the year. Out of these, EPAM Systems and Maxar were the largest positive contributors to performance. In addition, our weight in the commodity sector, including the precious metals hedge, produced substantial positive returns.
EPAM Systems is an IT services company. We initiated a position in EPAM after it sold off when Russia invaded Ukraine. The concern was that EPAM had a large part of its workforce in Ukraine, Belarus and Russia. Until then, EPAM had been a high quality compounder whose stock price had gone up 10x in the previous 10 years. It was a strong company that had come across some temporary headwinds and our analysis (Q1 2022 letter) confirmed that the risks are manageable. We bought the stock at $210 per share in Q1 and sold about a quarter of our position in the $400-450 range in Q3. EPAM remains a top 10 position and closed the year at $330 per share.”
10. ExlService Holdings, Inc. (NASDAQ:EXLS)
Number of Hedge Fund Holders: 19
Quarterly Revenue Growth YoY as of September 29, 2022: 24.50%
ExlService Holdings, Inc. (NASDAQ:EXLS) is a New York-based operates as a data analytics, and digital operations solutions company in the United States and internationally. It runs through Insurance, Healthcare, Analytics, and Emerging Business segments. In Q3 2022, ExlService Holdings, Inc. (NASDAQ:EXLS)’s revenue of $361.35 million climbed 24.5% year-over-year, beating market estimates by $16.02 million.
On December 15, JPMorgan analyst Puneet Jain raised the firm's price target on ExlService Holdings, Inc. (NASDAQ:EXLS) to $195 from $190 and kept an Overweight rating on the shares. The analyst adjusted ratings and estimates as part of the 2023 forecast for IT and business process outsourcing services, assuming weaker demand in the first half of 2023 due to indications of companies tightening their budgets. He predicted that growth stocks will perform better in 2023 than they did in 2022. However, Jain warned that the revenue estimates by industry analysts for 2023 may be overly optimistic.
According to Insider Monkey’s third quarter database, 19 hedge funds were long ExlService Holdings, Inc. (NASDAQ:EXLS), compared to 12 funds in the prior quarter. Israel Englander’s Millennium Management is the largest stakeholder of the company, with 468,525 shares worth $69 million.
Here is what Bernzott Capital US Small Cap Value Fund has to say about ExlService Holdings, Inc. (NASDAQ:EXLS) in its Q1 2022 investor letter:
“ExlService Holdings (NASDAQ:EXLS): After approximately four years of ownership, this provider of offshore business process outsourcing solutions was sold from the portfolio as it achieved fair value. During our period of ownership, the stock almost tripled in value and significantly outperformed the Russell 2000 Value index.”
9. Paymentus Holdings, Inc. (NYSE:PAY)
Number of Hedge Fund Holders: 12
Quarterly Revenue Growth YoY as of September 29, 2022: 26.00%
Paymentus Holdings, Inc. (NYSE:PAY) was founded in 2004 and is based in Redmond, Washington. The company provides technology and solutions for bill payment through a cloud-based platform. Their services include electronic bill presentation and payment, customer communication, and self-service revenue management. These solutions are available to billers through a software-as-a-service technology platform. Paymentus Holdings, Inc. (NYSE:PAY)’s Q3 2022 revenue of $128.2 million increased 26.1% year-over-year, beating estimates by $6.94 million.
On January 9, Jeff Cantwell, an analyst at Wells Fargo, downgraded Paymentus Holdings, Inc. (NYSE:PAY) from Equal Weight to Underweight and lowered the price target to $8.50 from $10. He predicts that 2023 will be more difficult than 2022 for Paymentus Holdings, Inc. (NYSE:PAY). He anticipates that the market environment will be challenging in the first half of the year, but slowing inflation and a shift in Fed policy will lead to increased risk-taking in the space by the second half.
According to Insider Monkey’s Q3 data, 12 hedge funds were long Paymentus Holdings, Inc. (NYSE:PAY), compared to 6 funds in the prior quarter. Anand Parekh’s Alyeska Investment Group is the largest stakeholder of the company, with 1.38 million shares worth $13.4 million.
Here is what ClearBridge Investments has to say about Paymentus Holdings, Inc. (NYSE:PAY) in its Q2 2021 investor letter:
“The new issue market remains an attractive source of new ideas and we participated in four IPOs in the latest period. Paymentus is a payment company using invoicing in more consumer-friendly channels. The company’s services allow a utility to send a customer a text message to connect a bank account and pay their bill. Paymentus is expanding its streamlined payment process to SMBs like gardeners and local merchants.”
8. Sabre Corporation (NASDAQ:SABR)
Number of Hedge Fund Holders: 41
Quarterly Revenue Growth YoY as of December 30, 2022: 26.10%
Sabre Corporation (NASDAQ:SABR) is a Texas-based company that provides software and technology solutions for the travel industry worldwide. It operates in two segments, Travel Solutions and Hospitality Solutions. On February 15, Sabre Corporation (NASDAQ:SABR)’s Q4 revenue of $631.18 million climbed by 26.1% from the prior-year quarter, but fell short of Wall Street estimates by $34.41 million.
On January 11, BofA analyst Victor Cheng downgraded Sabre Corporation (NASDAQ:SABR) to Underperform from Buy with a price target of $7, down from $11. The analyst has expressed concern about the high leverage of the company in light of rising interest rates, which he believes poses more downside risk for the stock. He informed investors that he estimates a growth rate of only 3% in airline IT and believes that Sabre Corporation (NASDAQ:SABR) will find it difficult to remain competitive given its liquidity issues, ongoing IT transformation, and the need for deeper cost cuts.
According to Insider Monkey’s Q3 data, 41 hedge funds were bullish on Sabre Corporation (NASDAQ:SABR), compared to 38 funds in the prior quarter. Terry Smith’s Fundsmith LLP held the largest position in the company, comprising 22.7 million shares worth $117 million.
7. FiscalNote Holdings, Inc. (NYSE:NOTE)
Number of Hedge Fund Holders: 10
Quarterly Revenue Growth YoY as of September 29, 2022: 33.50%
FiscalNote Holdings, Inc. (NYSE:NOTE) is a Washington-based technology and data company that provides important legal data and insights worldwide. The company uses artificial intelligence, machine learning, and similar technologies along with analytics, workflow tools, and expert research. FiscalNote Holdings, Inc. (NYSE:NOTE) is one of the top high growth IT stocks, with year-over-year quarterly revenue growth of 33.5% as of September 29, 2022.
On January 27, FiscalNote Holdings, Inc. (NYSE:NOTE) revealed that it has acquired Dragonfly Eye, a provider of geopolitical and security intelligence based in the United Kingdom. Dragonfly offers actionable data and analysis via its Security Intelligence and Analysis Service subscription platform and API, which are both proprietary and delivered via software-as-a-service. According to unaudited figures for 2022, Dragonfly Eye generated revenue of around £6 million, with the majority of that revenue coming from annual recurring sources. Additionally, the acquisition of Dragonfly is expected to have a positive impact on FiscalNote's adjusted EBITDA.
EF Hutton analyst Michael Albanese on December 14 assumed coverage of FiscalNote Holdings, Inc. (NYSE:NOTE) with a Buy rating and a $9 price target. The analyst believes that FiscalNote's SaaS model for governmental and regulatory information services presents the company with a substantial and growing market opportunity. The company has a blue-chip client base and high customer retention, according to the analyst. He also believes that FiscalNote's "land-and-expand" strategy will enable the company to generate additional revenue by cross-selling and up-selling to existing clients.
According to Insider Monkey’s data, 10 hedge funds were long FiscalNote Holdings, Inc. (NYSE:NOTE) at the end of September 2022, with combined stakes worth $150 million.
6. Clarivate Plc (NYSE:CLVT)
Number of Hedge Fund Holders: 41
Quarterly Revenue Growth YoY as of September 29, 2022: 43.80%
Clarivate Plc (NYSE:CLVT) is a London-based information services and analytics company, offering information and analytics for the discovery, protection, and commercialization of scientific research, innovations, and brands. In Q3 2022, Clarivate Plc (NYSE:CLVT)’s revenue of $635.7 million climbed 43.8% year-over-year, but missed estimates by $7.31 million.
On February 6, Morgan Stanley analyst Toni Kaplan downgraded Clarivate Plc (NYSE:CLVT) to Equal Weight from Overweight with a price target of $12, up from $11. This decision was made due to the stock's fair valuation after experiencing a 34% increase this year. The analyst expressed concern about the uncertainty surrounding Clarivate's ability to successfully turn their business around. Additionally, the analyst noted that the company has high leverage, and there are no immediate events to boost the shares' value in the near future.
According to Insider Monkey’s Q3 data, 41 hedge funds were long Clarivate Plc (NYSE:CLVT), compared to 31 funds in the earlier quarter. Leonard Green’s Leonard Green & Partners held the largest position in the company, with 116.6 million shares worth over $1 billion.
Like Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Meta Platforms, Inc. (NASDAQ:META), elite hedge funds are piling into Clarivate Plc (NYSE:CLVT) for tech exposure.
Madison Funds made the following comment about Clarivate Plc (NYSE:CLVT) in its fourth-quarter 2022 investor letter:
“Clarivate Plc (NYSE:CLVT) maintains industry leading positions selling data and analytics to the academic, scientific, and intellectual property markets. The business model is attractive given its multi-year subscription contracts that provide predictable recurring revenue. However, management’s efforts over the past few years to enhance organic growth via various initiatives have not met expectations. Further, greater-than-expected acquisition activity has extended the balance sheet. With new management at the helm, there is potential for improved execution on organic growth expansion, although this will likely take some time, and the outcome is far from certain. Thus, we stepped aside and allocated the funds to better ideas.”
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Disclosure: None. 11 High Growth IT Stocks to Buy is originally published on Insider Monkey.