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2 Cheap Tech Stocks to Buy Right Now

The Motley Fool
The Motley Fool
 2022-01-20

Before the last few months of 2021, the words "cheap tech stocks" may have sounded odd. But a massive sell-off in the tech sector has made many strong businesses much more affordable. It's easy to be scared out of investing in a business that has had its stock price crushed, but long-term investors will ignore that and look at how the business is performing to make investment decisions. Here are two successful tech companies with shares much cheaper than they have been in a while.

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Image source: Getty Images.

1. PayPal

With the proliferation of fintech companies that have come to the public markets over the past few years, it's easy to overlook PayPal (NASDAQ: PYPL) . However, passing over PayPal as an investment would be a mistake , as the company still holds an important place in the industry and investors' portfolios.

Q3 2021

Change (YOY)

Revenue

$6.2 billion

13%

Earnings per share

$0.92

7%

Net new active accounts added

13.3 million

15%

Payment transactions

$4.9 billion

22%

Total payment volume

$310 billion

26%

Payment transactions per account

44.2

10%

Data source: Company Filings.

As this chart shows, PayPal put up a strong third quarter. What this chart doesn't show are the headwinds the company faced. Total payment volume, up 22% compared to Q3 of 2020, includes a 45% decline as the company moved away from its partnership with eBay . Without that decline, the total payment volume would have been 31%.

PayPal has some big plans for the future as well. Customers will be able to use PayPal's Venmo payment app at checkout on Amazon beginning this year. Venmo grew its total payment volume 36% in Q3, so this partnership should boost that already strong growth.

International expansion is also a priority for PayPal. With the recent acquisition of Paidy, PayPal will have an increased presence in Japan, the world's third-largest e-commerce market. In a smaller move, PayPal is also expanding its cryptocurrency offerings in the United Kingdom.

What makes PayPal cheap? At this writing, PayPal trades for 34 times its forward earnings and seven times its forward sales. Both of those metrics are the lowest they've been since mid-2020 and more than 35% lower than they were one year ago. PayPal is still a leader in the fintech space and is as cheap as it's been in a long time.

2. Fiverr

Fiverr (NYSE: FVRR) is a leader in the gig economy space. It has a platform that helps freelance workers connect with employers in an easy, frictionless manner. After skyrocketing to over $320 in early 2021, the stock has come crashing down and is currently trading at a 69% discount from where it was one year ago. Despite the market sell-off, Fiverr is still a strong company in a growing industry. The global gig economy is estimated to be worth $347 billion. Considering Fiverr's revenue for the first nine months of 2021 was $218 million, there's a lot of opportunity ahead.

Q3 2021

Change (YOY)

Revenue

$74.3 million

42%

Active buyers

4.1 million

33%

Spend per buyer

$234

20%

Take rate

28.4%

140 basis points

Data source: Company Filings.

Fiverr is growing both its revenue and its user-based metrics. Digging in a bit more, active buyers and spend per buyer have each grown sequentially in every quarter for the past two years. More impressively, Fiverr's take rate of 28.4% is significantly higher than its main competitor Upwork (NASDAQ: UPWK) , which has a take rate of 14.2%. If the market opportunity is as large as is predicted, Fiverr is positioned to benefit.

While Fiverr is not yet profitable, it is free-cash-flow positive and has been able to use that cash to make two important acquisitions. In October of 2021, Fiverr acquired online learning company CreativeLive in order to improve its Fiverr Learn platform, which is designed to provide opportunities for freelancers to sharpen their skills. This was followed up a few weeks later with an acquisition of Stoke Talent, which will help Fiverr engage with larger customers and help buyers onboard workers and manage their freelance talent. Both of these acquisitions make sense and should be accretive to Fiverr's business.

Much like PayPal, Fiverr has seen its stock get hammered even as its business has been doing well. Fiverr is trading for eight times its forward sales, which is a multiple 75% lower than where it was a year ago and close to its mid-2020 level. The gig economy is here to stay and steadily growing. Fiverr is a leader in this space and is selling for a significant discount, making it a screaming buy right now.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeff Santoro owns Amazon, Fiverr International, and PayPal Holdings. The Motley Fool owns and recommends Amazon, Fiverr International, and PayPal Holdings. The Motley Fool recommends Upwork and eBay and recommends the following options: long January 2022 $1,920 calls on Amazon, long January 2022 $75 calls on PayPal Holdings, short January 2022 $1,940 calls on Amazon, and short January 2022 $82.50 calls on eBay. The Motley Fool has a disclosure policy .

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