It hasn’t been an easy year for technology investors. The Nasdaq-100 stock market index, which is weighted toward the tech sector, has lost over 27% of its value in 2022. But that’s less than half the loss of the crypto sector, which has shed over 56% of its total market capitalization since the start of January.
Risk appetite has been dampened by high inflation and rising interest rates, which have forced investors to reconsider their economic growth expectations. In many cases, this presents an opportunity to put money to work at heavily discounted asset prices, but being selective is key.
Here are two technology stocks that are growing rapidly, and which could be trading at much higher prices in the long term. On the other hand, there’s one cryptocurrency that has lost 86% of its value from its all-time high, but investors still shouldn’t touch it.
One stock to buy: SentinelOne
More companies are shifting their operations online every day using cloud technology, and they’re quickly learning the importance of protecting their digital assets. Cybersecurity is, therefore, a booming industry at the moment. An estimate by Cybersecurity Ventures suggests the sector will see $1.75 trillion in sales between 2021 and 2025, and SentinelOne (S 2.80%) is bringing protection into the modern age with advanced technologies like artificial intelligence.
Since just about every business needs some level of cybersecurity right now, it’s important for providers to deliver simple platforms that are easy to use. SentinelOne has built a fully autonomous solution that can respond to and neutralize threats without human intervention. Also, it has designed a single dashboard for full visibility over the entire network to keep all of an organization’s teams on the same page.
So far, more than 8,600 businesses have given SentinelOne the tick of approval and its net retention rate continues to climb, reaching 137% in the recently reported second quarter of fiscal 2023 (ended July 31). It means existing customers are spending 37% more with the company right now than they were at the same time last year.
It helped SentinelOne generate $103 million in revenue during Q2, which was a 124% jump compared to the same quarter last year. Additionally, its annual recurring revenue soared 122% year over year to $439 million, implying sales are likely to remain elevated at least in the near term. The company isn’t making a profit just yet, but it has a strong balance sheet to continue funding its proactive investments in growth. With SentinelOne stock trading down 68% from its all-time high, now might be a good time to buy the dip.
A second stock to buy: Bill.com
Bill.com (BILL 5.02%) is a software provider that helps small to mid-sized businesses manage their accounts payable workflow. But thanks to its acquisitions of Invoice2go and Divvy in 2021, it now covers the accounts receivable side, too, and offers a budgeting and expense management platform.
Small businesses, particularly those without full-time bookkeeping staff, can sometimes struggle to manage the messy paper trail that comes with receiving invoices. Bill.com provides a way to streamline the process through its digital inbox, where a business can store all of its incoming invoices and pay them with a single click. Plus, thanks to integrations with leading accounting software, it can also record each transaction in the books automatically.
On the flip side, Invoice2go allows businesses to create invoices, issue them, and track incoming payments. It rounds out Bill.com’s offering and makes it a holistic business-to-business payments management solution.
Overall, Bill.com had 401,100 business customers at the end of the fourth quarter of fiscal 2022 (ended June 30), but it has only scratched the surface of what could be a global addressable market of 70 million. In dollar terms, that opportunity could equal $125 trillion in annual payment volume, which is far above the $227 billion Bill.com has processed over the last four quarters.
Bill.com stock might be trading down 57% from its all-time high right now, but Wall Street predicts some big upside as the company continues to grow into its significant potential.
The cryptocurrency to sell: Shiba Inu
Speaking of payments, cryptocurrency investors have always been optimistic about their favorite tokens one day serving as a substitute for traditional money. But in most cases, widespread adoption simply hasn’t happened, and Shiba Inu (SHIB 1.23%) is one of the worst performers in that area. A mere 659 merchants around the world accept the meme token as payment for goods and services — for context, over 100 million merchants are in the Visa payments ecosystem.
There’s a long list of reasons for Shiba Inu’s lack of adoption. The token has been incredibly volatile, rising by 43,800,000% during 2021 and then declining by 64% so far in 2022. It’s nearly impossible for businesses to manage their cash flow with a currency that swings in value so wildly. Plus, cryptocurrencies are loosely regulated compared to traditional currencies, which means there’s almost no recourse if Shiba Inu tokens are lost or stolen.
It leaves Shiba Inu’s main purpose as a vehicle for speculation, but even that use case has left investors wary recently. There are currently 589 trillion Shiba Inu tokens in supply, which makes it really difficult to sustain upward momentum — in other words, rising from its current price of $0.000012 per token to a price of $1 is practically impossible, because it would make Shiba Inu the most valuable asset on Earth by a wide margin.
The Shiba Inu community is supporting some recent initiatives by developers such as burning tokens to reduce that enormous supply figure down to something more reasonable. It could pave the way for future gains, but it may take a ludicrous amount of time at the current pace.
For now, there really isn’t a use case for Shiba Inu that warrants owning it for anything more than a speculative bet — and the current market environment certainly isn’t favorable to such assets.