We recently published a list of 10 best tech stocks to invest in during the dip. In this article, we are going to see where Pagaya Technologies Ltd. (NASDAQ:PGY) is relative to other best tech stocks to invest in during the dip.
Dan Romanoff, a senior equity research analyst at Morningstar, provided insight into the current state of the technology sector on October 1, 2024. His analysis highlights key challenges and opportunities for the sector. Romanoff said that after a robust start to 2024, the technology sector suffered a slump in the third quarter. Despite this downturn, software and services companies have continued to report solid quarterly results, even as their stock prices have remained relatively flat. Semiconductor companies, while showing potential for recovery, are currently negatively impacting the overall performance of the sector.
While discussing the sectoral ranking of the U.S. stock market based on third-quarter earnings season, Romanoff pointed out that the technology sector was the second-best performing sector over the past year, but the second-worst performer in the most economic sector . last quarter. Romanoff emphasizes that despite these fluctuations, there are positive long-term trends that could benefit the sector. He expressed confidence in several long-term growth drivers within technology, including cloud computing, artificial intelligence and the expansion of semiconductor demand. He said these factors are expected to support growth in the sector even amid near-term challenges.
Additionally, according to Romanoff, the Morningstar US Technology Index is up 32% over the past twelve months, outperforming the broader US stock market’s 24% gain. He notes that while the average U.S. tech stock is fairly valued with a modest margin of safety, the sector trades at a slight premium on a market-weighted basis. He identifies semiconductors and hardware as overvalued compared to software, which currently appears more attractive.
READ ALSO: 10 Best Small-Cap Stocks Ready to Explode and 10 Cheap NASDAQ Stocks to Invest in Now.
Romanoff also pointed out that generative AI is a major force in technology. Companies are increasingly integrating next-generation AI capabilities into their products and services. This trend is especially visible among cloud providers and semiconductor manufacturers. Despite some recent stock market declines for Nvidia, Romanoff believes there are still substantial investment opportunities in generative AI beyond just major players. He said he sees a 34% growth in spending on Gen AI networking equipment through 2028. Romanoff also pointed out that the use of chips and networking equipment has grown together between 2022 and 2024 and he expects this trend to continue until 2028.
To compile the list of the 10 best tech stocks to invest in during the dip, we used the Finviz stock screener and CNN. Using the screener, we shortlisted tech stocks that are down at least 25% year-over-year, but analysts see a rise of more than 25%. Once we had an aggregated list of the tech stocks that met our criteria, we next checked their upside potential for analysts at CNN. Finally, we ranked these stocks in ascending order of analyst upside potential. Please note that data was collected on November 25, 2024.
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Pagaya Technologies Ltd. (PGY): The FinTech powerhouse poised for a big comeback
A shot of the hands of a financial trader rapidly pressing buttons on a trading terminal.
Share price: $10.58
Performance to date: -32.18%
Analyst upside potential: 118.22%
Pagaya Technologies Ltd. (NASDAQ:PGY) is a financial technology company (FinTech) based in Israel. Simply put, the company uses cutting-edge technology, including data science, machine learning and artificial intelligence (AI), to help lenders quickly and accurately assess the creditworthiness of potential customers. AI technology allows lenders to evaluate customers’ credit in real time, helping them make informed decisions about who to approve for loans.
It offers solutions for different types of loans such as personal loans, car loans and credit card loans. They primarily serve credit institutions around the world, which allows them to expand their customer base while minimizing risk.
The company has focused on expanding its network base and partnerships. During its third quarter fiscal 2024 results, the company reported network volume of $2.4 billion, reflecting an 11% year-over-year increase. This growth was supported by existing partnerships, especially in personal lending, which grew by 15%, and in point-of-sale lending, which improved by 67% from the previous year. It achieved record revenue of $257 million, up 21% year over year, mainly due to a 24% increase in fee income.
Net losses remain one of the concerns for Pagaya Technologies Ltd. management. (NASDAQ:PGY), which is mainly due to non-cash expenses and one-time charges. The net losses have caused the stock price to drop 32.18% this year. However, CEO Gal Krubiner stated that the company is on track to achieve GAAP profitability and positive cash flow by 2025, driven by the effective execution of their 2024 strategy, which includes adding new partnerships and network volume.
Looking ahead, management expects full-year 2024 network volume between $9.5 billion and $9.7 billion, with expected total revenue between $1.01 billion and $1.025 billion. It’s one of the best tech stocks to invest in during the dip.
In short, PGY is in 1st place on our list of the best tech stocks to invest in during the dip. While we recognize PGY’s growth potential, our belief lies in the belief that AI stocks hold greater promise for delivering higher returns in a shorter time frame. If you’re looking for an AI stock that’s more promising than PGY but trades at less than five times earnings, check out our report on the cheapest AI stocks.
READ NEXT:8 Best Wide Moat Stocks to Buy Now And The 30 most important AI stocks according to BlackRock
Disclosure: None. This article was originally published on Insider monkey.
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