3 Technology Stocks Set to Outperform This Quarter

Key Points

• A few stocks in the technology sector can still offer double-digit runs for the next quarter. 
• Wall Street analysts agree with their EPS growth forecasts and price targets, as fundamental tailwinds are also at work to help these names. 
• Markets are willing to pay premium valuations for these stocks, which are justified by all of these trends to provide bullish momentum.

Most investors are under the impression that lower interest rates coming from the Fed might mean lower returns. While that might be true for some industries and companies, some in the technology sector seem to have a chance at another outperforming rally before the year is over.

Now that the market is placing most – if not all – premium valuations on the sector, investors can count on the ease of bullish price action and momentum to carry a select group of stocks forward and above the rest. Of course, the best candidates for this trend would be those stocks that also command premium valuations and expect to see above-average earnings per share (EPS) growth for the next 12 months.

Fitting this list and having enough fundamental tailwinds to help them are the three main companies. SentinelOne Inc. NYSE: S is part of a cybersecurity play, a space that is ripe for demand and upside; then there is CyberArk Software Ltd. NASDAQ: CYBR to accompany SentinelOne in identity security. Finally, CoStar Group Inc. NASDAQ: CSGP provides analytics and artificial intelligence services to the financial and real estate sector.

SentinelOne Stock is Attracting New Institutional Buyers

This cybersecurity stock now trades at 78% of its 52-week high price, meaning it has enough room to move up before the year ends, and that’s one scenario that some institutional investors are starting to bet on recently. But before investors find out who’s been buying the stock, here’s what Wall Street has to say.

Analysts at JMP Securities now see a price target of $33 a share for SentinelOne stock, implying a 37.5% upside from where it trades today. Leaning on this potential market-beating return, Eminence Capital boosted its holdings in SentinelOne stock by 24.2% as of August 2024, bringing its net investment up to $144.3 million today.

More than that, SentinelOne trades at a forward P/E ratio of 127.1x compared to the rest of the computer software’s average valuation of 27.0x today, and there’s a reason for the premium markets are paying today. Wall Street analysts think that the company can push for up to $0.19 EPS for the next 12 months, significantly higher than today’s $0.03.

Even bearish traders have decided to step away from the market to avoid taking on losses, given all of this bullish evidence for the near term. Investors can gauge this trend from the company’s 9.2% decline in short interest over the past month.

CyberArk Software Stock Poised for Double-Digit Upside

When it comes to price momentum, CyberArk stock takes first place on this list as it now trades at up to 95% of its 52-week high. There has to be a reason for the market to bid up the price of this company near its high, and investors are here to find out before they consider a potential buy.

Starting with Wall Street sentiment, analysts at Jefferies Financial Group now expect the company to go as high as $330 a share. To prove these valuations right, the stock would need to rally by as much as 17.8% from today’s prices, but the bullish sentiment doesn’t stop there for the company.

Compared to the rest of the computer software industry’s average 6.3x price-to-book (P/B) valuation, CyberArk trades at a much higher 14.9x premium to command the premium the company deserves ahead of the next quarter. On a forward P/E basis, an 83.7x valuation also goes way above the industry’s average 27.0x valuation.

To justify these prices, Wall Street analysts have forecasted the company’s EPS at $3.35 for the next 12 months, a significant jump of 46.3% from today’s $2.29 EPS. Just like SentinelOne, some other institutional investors have also found a home in CyberArk Software stock.

Handelsbanken Fonder decided to boost its position by 5.2% as of October 2024, netting its allocation as high as $52.5 million today, to show investors another piece of bullish evidence to consider in the coming quarters.

CoStar Group Stock Also Rides Institutional Buying Trend

The same firm that decided to buy CyberArk stock, Handelsbanken Fonder, also boosted their investment in CoStar Group stock by 2.2% as of October 2024, netting their position at $8.6 million to place a heavier weight on their bullish view for the computer software industry.

These buyers weren’t the only ones willing to make their bullish opinions public for CoStar Group stock. Analysts at Needham & Co. recently boosted their price targets to $107 a share. Given that the stock trades at 74% of its 52-week high, there is more than enough room for the company to deliver on this implied 45% upside that Wall Street has called for.

Trading at a forward P/E of 58.3x today calls for another premium over the rest of the computer software’s 27.0x average valuation. More than that, as costs are rising for virtually every business in the economy, CoStar’s streamlining and technology services might see more demand in the coming months.

This might be why the market is willing to pay a 12.4x price-to-sales (P/S) ratio today, above the industry’s 6.5x average P/S valuation. Considering that the company’s revenue is mainly made up of subscriptions, investors might prefer these business models to cushion out any potential volatility in the rest of the S&P 500.