business

3 unknown tech stocks that could explode in 2023


One of the most satisfying parts of investing is finding hidden gems that have gone unnoticed or unloved by investors, and leading them to substantial returns. Whether you’re looking for unknown tech stocks or dormant stocks from other sectors, the key is to focus on stocks that aren’t closely followed by analysts and institutions.

In 2022, S&P500 tech stocks are down 26.1% until September 20. This is the second worst performance in the sector behind only communication services with a drop of 36.4% since the beginning of the year.

The Invesco S&P SmallCap Information Technology ETF (NASDAQ:PSCT) tracks performance of the S&P SmallCap 600 Information Technology Capped Index. The ETF currently has 70 holdings.

To be eligible, they must have revenue growth of 25% or more and a small analyst following. A quick screen suggests I need to broaden my search to all tech stocks in the S&P1500.

Here are three that I believe could do great things in 2023.

ADTN Adtran Holdings $18.64
CLFD Free field $92.58
AZPN Aspen Technology $22,246

Adtran Holdings (ADTN)

Source: John-Fs-Pic / Shutterstock.com

Adtran Holdings (NASDAQ:ADTN) is a leader vendor of network and communications platforms, systems and services to broadband enterprises worldwide.

In August 2021, the company announced that it combine with ADVA Optical Networking, a German manufacturer of optical and Ethernet networking solutions to provide data, storage, voice and video services. The all-stock deal would see Adtran pay 759 million euros ($752 million) to acquire the company.

On July 15, 2022, the merger between the two companies was completed. Adtran shareholders own 54% of the merged entity, with ADVA shareholders owning 46%.

The new Adtran is expected to generate annual revenues of $1.3 billion, which will significantly increase the size and scale of the business. As a result, this company’s capabilities to provide its customers with the end-to-end solutions needed to compete and thrive in the global fiber expansion have improved significantly.

In August, he shared his Q2 2022 results. As the merger was not yet complete, ADVA’s results are not included in its financial statements. In terms of revenue, it increased revenue by 20.1% to $172.0 million. Sequentially, the company’s sales increased 11% in the first quarter of 2022. In terms of revenue, its operating profit in the quarter was $8.1 million, more than double from a year earlier.

As CEO Thomas Stanton said during his Q2 2022 conference call, the addition of ADVA gives Adtran a competitive position within a larger, addressable market.

In this case, one plus one could equal three.

Clearfield (CLFD)

communication technology for internet business.  global global network and telecommunication on earth

Source: greenbutterfly / Shutterstock.com

Free field (NASDAQ:CLFD) is one of the few unknown tech stocks to make hay in 2022. Year-to-date, this fiber-related activity is up 20.0% through September 21.

Founded in 1979the company started in June 2007 when current CEO Cheryl Beranek was appointed general director. She delivered the company’s profitable first quarter within three months of taking office. Prior to this profit, he hadn’t made any money for 20 years.

Part of his turnaround was renaming the company from APA Cables to Clearfield. However, it wasn’t the new name that got the company back on track. It was the launch of Clearview Cassette, a fiber management platform that enables broadband providers to scale their fiber deployment. Their products are considered some of the best in the industry.

When Beranek took over, Clearfield had $18.6 million revenue and lost $2.1 million. During its last financial year (end of the year in September), the turnover of the company was $140.8 million, with an operating margin of 18% and net income of $20.3 million. The keystone: the company’s net margin increased 178% year over year.

In Q3 2022, Clearfield’s revenue rose 84% to $71.3 million, while its net profit jumped 109% to $12.7 million. This company projects sales of $245 million in 2022 at the midpoint of its forecast. This is a 73.5% increase over last year.

No wonder it’s up 20% since the start of the year.

Aspen Technology (AZPN)

software stocks: coding software developer work with scrum and agile development augmented reality dashboard computer icons and code fork and release management with responsive cyber security

Source: Shutterstock

Aspen Technology (NASDAQ:AZPN) has eight analysts covering his stock. Of these analysts, four rate it as a hold and four rate this company as a buy, for an overall rating of overweight. At the time of writing, the consensus target price for AZPN stock is $226.80. This is almost precisely where it is currently trading.

Eight analysts covering this stock might seem like a lot. However, I made a selection of the 195 tech stocks in the S&P 1500, and according to S&P Capital IQ, 117 had more than 10 analysts covering those tech stocks. That’s 60% of all companies, meaning Aspen still falls somewhat into the “unknown tech stock” category.

Aspen Tech is renowned for providing industrial software to owners of infrastructure assets to operate them more safely and efficiently.

Aspen Tech’s business changed significantly in May when it merged with Emerson Electric (NYSE:EMR) OSI Inc. and geological simulation software companies. Emerson paid Aspen Tech $6 billion in the deal, which was passed on to its shareholders. After the merger, Emerson owned 55% of Aspen Tech.

The combined company will now have the scale to go after the $60 billion high growth industrial software industry.

Now that he’s linked to Emerson, his days of anonymity are probably behind him.

Over the past five years, AZPN stock has gained 252%, 12 times more than Emerson stock.

As of the date of publication, Will Ashworth had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.

Will Ashworth has been writing about investing full time since 2008. Publications where he has appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger and many others in the US and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

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