Here’s 1 FTSE tech stock to snap up before soars!

Jabran Khan details a FTSE growth stock which has cheapened recently, like many other tech stocks.

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One FTSE AIM stock I’d add to my holdings right now is dotDigital (LSE:DOTD). Here’s why.

Digital marketing

dotDigital provides cloud-based marketing solutions that allow businesses to automate their advertising and marketing campaigns. This is by sending tailored content across a multitude of channels such as social media, email, and text messages. The changing face of retail and rise of e-commerce has meant there is lots of demand for such services. 

As I write, the dotDigital share price is trading for 140p. At this time last year, the shares were trading for 190, which is a 26% drop over a 12-month period. The shares have lost 50% since September 1, when the shares were trading for 291p. 

FTSE stocks have risks

Macroeconomic uncertainty and a stock market correction have led to a sell-off in tech stocks and stocks in growth markets. Although I believe this is a temporary issue, no one can predict how long this issue could last and how far certain shares could drop. A significant share price drop for dotDigital in recent months could continue in the short to medium term, in my opinion.

The tech sector is extremely competitive and many firms are vying for market share and overall market dominance. With the rise in e-commerce and the need for digital marketing, dotDigital could see its performance, growth, and returns affected by competitors in its space. Furthermore, shares are currently trading with a price-to-earnings ratio of 38, which could still be considered expensive. There is also the chance that growth is already priced into the higher share price.

Why I like DOTD shares

My investing mantra has always been to invest for the long term. Despite the current bearish attitude in the market when it comes to growth stocks, I am always on the lookout for the best FTSE growth stocks in burgeoning markets. I believe dotDigital could grow in the coming years from the rising demand for digital marketing services. It currently possesses some lucrative strategic partnerships with leading tech names such Shopify, Adobe, and Microsoft Dynamics. I believe these partnerships will help attract new business and boost growth in the longer term.

dotDigital also has a good track record of performance. I do understand that past performance is not a guarantee of the future, however. Looking back, I can see revenue and gross profit have increased year on year for the past four years. Coming up to date, the company released an interim report at the end of January for the six months ended 31 December 2021. Recurring revenue increased by 22% compared to the same period last year and overall revenue increased by 10%. Cash generation increased and full-year guidance is currently expected to be met.

FTSE stocks that make me a passive income through dividend payments are firmly on my radar, especially those in a growth market, like dotDigital. I do understand dividend payments can be cancelled, however. At current levels, DOTD’s yield is just under 1%.

Overall, I like dotDigital shares and I’d happily add them to my holdings at current levels. The stock market correction has made them cheaper, presenting an opportunity for me. I’d expect the shares to eventually head back on an upwards trajectory as economic uncertainty fades, although this could take some time.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended dotDigital Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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