The last two decades have been dominated by tech stocks, and that trend is expected to continue indefinitely. In the past, tech stocks came with a high reward and equally high risk. However, the growing influence of technology across virtually every aspect of our lives has widened the field of options for investors to choose from, and small-cap tech stocks, in particular, can offer some major upside.
Here are the top four small-cap tech stocks that are poised to grow in 2020.
Zuora Inc. (NYSE:ZUO)
The subscription economy has been taking off in recent years with the rise of car share services like Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT), as well as subscription music and entertainment services like Spotify (NYSE:SPOT) and Netflix (NASDAQ:NFLX). In fact, the subscription economy has grown over 300% in the last seven years, creating a huge opportunity for companies operating in this industry.
One of the small-cap tech stocks that’s riding the wave is Zuora Inc. (NYSE:ZUO), a cloud-based subscription management platform provider that helps companies transition from one-time purchases to subscriptions. This is huge if you consider that 50% of the world’s largest enterprises will depend on their ability to create digitally-enhanced products, services, and experiences.
Since its IPO in 2018, Zuora hasn’t faired well in terms of share price due to sales troubles and growing pains. However, as more and more businesses look to transition to subscription models, the company’s software will soon become essential.
By 3 pm EST on December 30, Zuora was trading at $14.14 USD on the NYSE, but analysts see the company’s stock going much higher. The average 12-month price target from five Wall Street analysts is $19.80 USD, which suggests a possible upside of 40%.
Vonage Holdings Corp. (NYSE:VG)
Another one of the small-cap tech stocks expected to do well in 2020 is Vonage Holdings Corp. (NYSE:VG), a cloud-based communications service provider that has expanded significantly in the last six years.
Vonage has acquired several smaller companies, including iCore Networks, Over.ai, Nexmo, Telesphere, TokBox, NewVoiceMedia, SimpleSignal, and Vocalocity. Nexmo, in particular, has already offered the company some significant revenue growth, and Wall Street analysts expect this trend to continue. Although Vonage’s earnings have dropped this year due to all of its recent acquisitions, the company is expected to see an increase in 2020.
Of the 10 Wall Street analysts that have issued ratings for Vonage, three have given the company a hold rating, and seven are suggesting a buy. The average 12-month price target for VG is $13.83 USD, suggesting a possible upside of 94.79% from its current price of $7.10 USD.
Bandwidth Inc. (NASDAQ:BAND)
Bandwidth Inc. (NASDAQ:BAND) is a cloud-based communications platform as a service (CPaaS) provider that could be one of the top-performing tech stocks in its industry. The company handles in-app communications through its cloud-based APIs, but what really sets Bandwidth apart is that it runs its cloud services from its very own nationwide IP voice network, offering the company tighter control over its operating costs.
Bandwidth had an outstanding year in 2019, rapidly increasing its customer base and gaining higher dollar-based retention rates. The company also beat revenue forecasts in Q3 2019, bringing in $60.5 million USD compared to estimates of $58.78 million USD.
Six Wall Street analysts have given Bandwidth a consensus buy rating and offer the company an average 12-month price target of $74.50, which suggests a possible upside of 17.19%. Bandwidth is also a popular choice among industry giants, with Google (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), and RingCentral (NYSE:RNG) all using the company’s API.
InMode Ltd. (NASDAQ:INMD)
Despite being a newly listed small-cap tech stock, InMode Ltd. (NASDAQ:INMD) is already doing big things. The company has become one of the most successful IPOs of 2019, with its shares increasing by 183.86% since August.
Unlike the other cloud-based tech stocks on this list, InMode is focused on developing and manufacturing cutting-edge medical devices that use radio-frequency technology for minimally-invasive and non-invasive plastic surgery, gynecology, dermatology, otolaryngology, and ophthalmology procedures.
Last month, InMode reported record quarterly revenue of $40 million, a 57% increase from Q3 2018, and a net income of $16.2 million, which is up 87% year-over-year.
Since the beginning of the year, the company’s share price has gone from $13.57 USD to an impressive $38.52 USD, but some experts believe it could go as high as $48 USD in the next 12 months.
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