Key Points
- Tech stock prices have been slashed by double-digits as uncertainty rises throughout the market, but it may have created fantastic buying opportunities
- One UK tech stock is enabling e-commerce stores to automate their marketing campaigns
- Another business is watching its revenues fly as demand for e-learning solutions remains strong, despite the pandemic slowly coming to an end
It’s been a rough couple of months for tech stock investors. With uncertainty growing in the markets, shares carrying lofty valuations have been punished quite harshly. But in some circumstances, investors may have gone overboard with their selling activity.
I’ve spotted two tech stocks that have suffered double-digit declines over the last five months, despite the businesses seemingly performing rather well. This, to me, looks like a buying opportunity, so let’s explore.
The tech stock driving online sales
With the adoption of e-commerce being accelerated courtesy of the pandemic, the number of online stores has skyrocketed. After all, thanks to platforms like Shopify, setting up an online retail business no longer has the massive barriers to entry that it used to.
But the increased level of competition is making it challenging for businesses to acquire new customers. That’s where dotDigital (LSE:DOTD) steps in. The company provides a cloud-based marketing platform that enables businesses to automate their advertising campaigns. By sending custom-tailored content across social media, email, and text messages, curious website visitors can be more easily converted into paying customers.
A lot of the group’s recent tumble is attributable to its high valuation. Even today, the tech stock still trades at a lofty price-to-earnings ratio of 45. And if further uncertainty enters the market, the recent volatility will likely continue.
However, given that the global market for digital advertising is expected to reach $786bn (£584bn) by 2026, I think this is a risk worth taking for my portfolio due to the potential reward.
Is the era of remote learning over?
The pandemic is ongoing. But with vaccines being distributed worldwide, normality is slowly returning to the working lifestyle. This has led to many investors believing Learning Technologies Group (LSE:LTG), a provider of e-learning solutions, could soon be in trouble.
Yet despite these fears and the subsequent decline of its share price, the company seems to be thriving. In its latest trading update, its performance came in better than analyst expectations, with revenues reaching as high as £254m. That’s nearly double what was generated at the height of the pandemic.
To me, this looks like demand for the company’s services remains elevated, despite the easing of lockdown restrictions. I will admit, it’s too soon to tell whether the boost in performance can be sustained in the long term. And if growth does begin to slow once the pandemic ends, it could send the tech stock further in the wrong direction.
But having said that, I remain optimistic. Why? Because e-learning solutions have introduced considerable cost savings for businesses that I doubt many are keen to give up. And that’s why I believe LTG’s recent tumble could be an excellent buying opportunity for my portfolio.
