Technology stocks have noticeably taken the brunt of rising global inflation over the past six months. The Nasdaq Composite Index is down 15% from its November 2021 highs, and shares with extraordinarily high growth rates such as Tesla and Nvidia have suffered the steepest falls as their future financials are worth less in today’s money. However, I think there could be some bargains lurking in the software sector of the FTSE 350, ready to outperform once the newsflow turns positive. Let’s see if there are any good technology stocks for me to buy in April.
An auction that I’m bidding on
As a relative newcomer to the FTSE 350, Auction Technology Group (LSE: ATG) hasn’t had the easiest inaugural term. It made its stock market debut in February 2021. Since then, it has proven to be a company that can either outperform or underperform significantly.
Auction Technology Group specialises in providing online auction facilities to a global audience in a variety of niches — for example, antiques, art and fashion, as well as industrial and commercial equipment. As you can imagine, Covid-19 really boosted turnover into overdrive as in-person events were significantly reduced.
Revenue grew by over 100% compared to approximately 10% the year prior, and results have been strong since. The main caveat was that despite rising sales, costs grew proportionately and they failed to turn a profit. This remains my primary concern, but forecasts predict positive net profit for 2022 and if management can deliver, I might just make a late bid to buy the shares.
Software and sustainability
Another technology company that caught my eye was Aveva Group (LSE: AVV). With sustainability a top priority for every firm looking to both please shareholders and boost long-term prospects, Aveva’s services certainly look optimal for improving efficiency. Oil giants such as BP will be required to improve their operating efficiency and optimise their flexibility when adapting to a world fuelled by alternative energy. Aveva helps them and its other clients do just that.
By providing innovative engineering software, Aveva can reduce system decision-making time across supply chains and improve functional performance. Teamed with revenue growth of 47.9% and a forecast price-to-earnings ratio of only 22.8, relative to its three-year average of 33, I’m giving this company a good look at over the next few months.
Cyber security
The Darktrace (LSE: DARK) share price has plummeted by 55% since its October 2021 highs, and the company now trades at a market capitalisation of only £3bn. As a slightly more risk-averse investor, I do find the valuation slightly intriguing. Despite the lack of earnings and perhaps expensive price of its shares, Darktrace possesses something that is relatively rare for UK-based investors: a chance to invest in a reasonably large firm at the absolute cutting edge of technological advancement.
Darktrace pioneered the integration of AI and cybersecurity, sustaining a competitive advantage over larger peers for quite some time. With renewed cyber security interest as a result of the invasion of Ukraine, I’m going to wait on the sidelines but look slightly closer for now.
Before investing in any of these companies I’m going to see if central banks can restrain inflationary pressures. If they do, I’m interested.