The technology industry stands out as a cornerstone of the modern economy, with the global technology market predicted to reach $11.5 trillion by 2026, expanding at a compound annual growth rate of 7.8%. This momentum is driven by rapid advancements in areas such as artificial intelligence (AI), cloud computing and cybersecurity, as well as the growing demand for digital transformation across industries.
In the rapidly evolving technology sector, standout stocks such as Dayforce Inc (DAY) with its robust human capital management (HCM) platform, travel technology leader Sabre Corporation (SABR) and advanced payroll and HR solutions provider Paylocity Holding Corporation (PCTY) exemplify the diversity and growth potential of the tech industry.
Not only do these stocks offer attractive growth opportunities for tech-seeking investors, they're also among the most reasonably valued in booming sectors, according to Morningstar data. Plus, Wall Street analysts agree that these stocks are poised for double-digit gains over the next 12 months.
No. 1 Tech Stock: Dayforce
Founded in 1992 and headquartered in Minneapolis, Dayforce Inc (DAY), formerly Ceridian, is revolutionizing HR with a global footprint spanning the United States, Canada, Europe, the Middle East, Africa and Asia Pacific. Dayforce delivers a leading cloud HCM platform that integrates HR, payroll, tax, workforce management, benefits and talent intelligence.
Dayforce serves the diverse needs of small businesses and large enterprises alike, and also offers payroll services and specialized support sold through direct and third-party channels, underpinning its $8 billion market cap.
Dayforce shares have plummeted 25.4% in 2024. The company's shares are currently trading 33.8% below its 52-week high of $75.53, hit on Sept. 12.
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Given the weak share price, the company's stock is currently trading at 58.11 times forward earnings and 5.27 times sales, significantly lower than its closest peers such as Workday (WDAY), which trade at 116.34 and 7.65, respectively.
DAY's stock price fell 6% on May 1, despite the company reporting better-than-expected first-quarter earnings. Revenues increased 16.4% year over year to $431.5 million, beating expectations by 1.3%. Net income per share was $0.43, up 38.7% year over year and beating expectations by 2.2%.
As of March 31, Dayforce had 6,575 clients, up 6.4% from a year ago. Of particular note, Dayforce's recurring revenue per client increased 19.2% in the 12 months ended March 31, to $150,362.
However, shares fell after Dayforce's second-quarter revenue and EBITDA guidance was disappointing, signaling slowing revenue growth. The company forecasts second-quarter revenue of $414 million to $419 million, indicating annual growth of 13.8% compared to 21.5% a year ago. Adjusted EBITDA is expected to increase 12.3% to $108 million to $113 million, down from last year's 59.2% growth rate.
Management stood by its outlook for full-year revenue of $1.73 billion to $1.74 billion and adjusted EBITDA of $484 million to $499 million. Analysts tracking Dayforce expect EPS to rise 35.4% to $0.88 in fiscal 2024 and 27.3% to $1.12 in fiscal 2025.
Dayforce has carved out a niche for itself in the software applications sector, building a narrow moat, according to Morningstar analyst Emma Williams. Williams sees Dayforce as a core player in the HCM market, leveraging its agile cloud solutions over legacy systems. Despite competitive pressures, Dayforce's strategic focus on large enterprises and continued innovations such as the Dayforce Wallet point to strong revenue potential, Williams said.
Additionally, Morningstar projects Dayforce's stock price will reach $86 per share, implying a 71.9% upside potential.
DAY has an overall consensus rating of Moderate Buy. Of the 16 analysts covering the company, 8 recommend a Strong Buy, 1 suggests a Moderate Buy, while the remaining 7 recommend a Hold.
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The average analyst price target for Dayforce is $72.80, suggesting an upside potential of 45.5%.
Stock Number 2: Sabre Corporation
Founded in 2006, Texas-based Sabre Corporation (SABR) is a leading global software and technology company for the travel industry. Operating through its Travel Solutions and Hospitality Solutions divisions, Sabre connects travel suppliers and buyers through its extensive marketplace.
With a market cap of $993 million, the company offers a range of SaaS and hosted solutions including reservation systems, commercial and operational products, and data-driven intelligence. Serving airlines, hotels, car rentals and more, Sabre is at the forefront of innovation and is revolutionizing the way the world travels.
Sabre shares have fallen 21.2% over the past 52 weeks and are down 40% since the start of the year. The stock is currently trading 54.2% below its 52-week high of $5.76.
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The stock is trading at 0.34 times expected sales, a discount to its industry average and the past five-year average.
Sabre reported better-than-expected first-quarter results on May 2. The company's revenue rose 5% year over year to $782.9 million, driven by a strong mix of travel suppliers and increased global bookings. The company also narrowed its adjusted loss per share to $0.02, down 88.9% year over year, below expectations.
Sabre signed and extended agreements with major airlines, including LATAM, Southwest (LUV) and Emirates, during the quarter, laying the foundation for steady revenue growth. Looking ahead, Sabre expects revenue to be approximately $3.04 billion and adjusted EBITDA to be approximately $520 million in fiscal year 2024.
Analysts who track SABR expect the company's losses to fall 60.6% to $0.28 per share in fiscal 2024 before rolling over to GAAP earnings of $0.13 per share in fiscal 2025.
Morningstar analyst Dan Wasiorek expects Sabre to maintain its dominance as a global distribution system (GDS) for the next decade. Despite economic uncertainty and fluctuations in corporate travel demand, Sabre's strong network of airline content and technology solutions give the company a strong position in the market, the analyst said. The firm estimates a fair value of $5 per share for SABR, implying an impressive 89.4% upside potential from current price levels.
SABR stock has an overall consensus rating of “Hold.” Of the 6 analysts recommending the stock, 1 has recommended a “Strong Buy” and the remaining 5 have given it a “Hold” rating.
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Analysts' average price target is $3.42, suggesting the stock could see upside of 29.5% from current price levels.
Stock No. 3: Paylocity Holdings
Paylocity Holding Corporation (PCTY) was founded in 1997 and has been pioneering cloud-based HCM and payroll software solutions across the U.S. Paylocity simplifies payroll and compliance with payroll and tax services, providing seamless automation and management.
The company's comprehensive suite includes employee experience solutions tailored for various sectors such as talent management, time and attendance, business services, healthcare, technology, etc. With a commitment to innovation and customer satisfaction, Paylocity serves both for-profit and non-profit organizations, streamlining their operations and enhancing workforce management with cutting-edge HR technology.
Paylocity shares have fallen 25.4% over the past 52 weeks and are down 16.3% in 2024. The company's shares are trading 40.2% below their 52-week high of $230.52, reached on July 31.
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In terms of valuation, the company's stock is trading at 35.25 times expected earnings and 6.69 times sales, well below its average over the past five years.
Paylocity shares rose nearly 12% on May 3 after the company reported third-quarter results that beat Wall Street expectations for both sales and profits. Revenues increased 18.1% year over year to $401.3 million, driven by a 17% increase in recurring and other income. EPS was $2.21, up 27% year over year and beating expectations by 11.7%.
As of March 31, Paylocity boasted $492.7 million in cash and cash equivalents and a debt-free balance sheet, reflecting robust profitability and strong cash flows, coupled with a $500 million share repurchase program authorized by its board of directors.
Paylocity expects fourth-quarter revenue to be in the range of $347.8 million to $351.8 million, which would represent growth of about 13% year over year. The company expects adjusted EBITDA to be in the range of $104.1 million to $107.1 million for the quarter.
For the full year, Paylocity expects revenue to reach $1.393 billion to $1.397 billion in fiscal 2024, representing annual growth of about 19%. Adjusted EBITDA is expected to be between $489.5 million and $492.5 million.
Analysts who track Paylocity expect the company's earnings to reach $3.95 per share in fiscal 2024, up 47.9% from the previous year, and to grow another 7.1% to $4.23 per share in fiscal 2025.
Morningstar analyst Williams sees Paylocity in a strong position in the payroll and HCM space, citing a comprehensive platform that integrates payroll with customizable add-on modules for things like talent management and benefits administration. Williams predicts Paylocity has the potential to grow its market share by capitalizing on industry consolidation and growing demand for outsourced HR solutions, leveraging module adoption and strategic acquisitions to meet evolving customer needs.
Morningstar estimates PCTY's fair value per share at $205, implying an upside potential of 48.6%.
Paylocity shares have an overall consensus rating of Moderate Buy. Of the 18 analysts covering the stock, 10 have rated it a Strong Buy, 2 have given it a Moderate Buy, and the remaining 6 have recommended a Hold.
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Analysts' average price target is $192.06, indicating a 39.2% upside potential from current price levels.
On the date of publication, Sristi Suman Jayaswal did not hold (either directly or indirectly) any positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. For more information please see Barchart's disclosure policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
