We recently compiled a list titled 8 Tech Stocks with Biggest Upside Potential According to Analysts. In this article, we will look at where Nextracker Inc. (NASDAQ:NXT) ranks among tech stocks with the biggest upside potential according to analysts.
In the opening months of 2024, the information technology and communication services sectors aided the rest of the broader equities in the US. As per BNP Paribas Asset Management, while the performance of certain segments might seem overextended, such dynamic moves resulted in businesses delivering healthy fundamental results and guiding for continued improvement. Cutting-edge technologies are being used to bring about change throughout verticals such as healthcare, finance, manufacturing, and retail. The resulting benefits will improve productivity and efficiency, customer experiences, and profitability.
As of now, generative artificial intelligence (AI) continues to strongly impact several enablers and beneficiaries of this technology, with their stock prices similarly benefiting. Resultantly, the valuation multiples stretched, implying an acceleration in future earnings growth. The firm also believes that some of these companies are expected to meet or exceed the growth implied by their multiples, with others disappointing and experiencing a price correction.
The firm also believes that AI workloads remain the area of rapid growth which continues to contribute to the broader improvement in revenues from the cloud businesses. Some US tech giants, or hyperscalers, can be the obvious winners from this reacceleration. However, there remain numerous corollary beneficiaries possessing significant upside potential. Notably, networking software and equipment can be tagged as one area in which growth rebounds quicker than expected.
Trends Likely to Support Companies
Edge Computing and Platform Engineering are likely to be critical technologies to support companies in improving their profitability numbers. Edge computing tends to process data near the source or point of its generation to save bandwidth and decrease the response latency. This is important for applications requiring to process data proactively in real-time, like autonomous vehicles, industrial automation, and smart cities.
According to MarketsandMarkets, the global edge computing market should touch USD 15.7 billion by 2025, demonstrating a CAGR of ~34.1%. This growth is expected to be fueled by increased adoption of cloud-like agility, innovation, and flexibility in edge computing infrastructure. While the adoption of edge computing continues to be led by manufacturing, healthcare, and telecommunication industries, market experts believe that this demand will increase as a result of faster and more reliable data processing.
The next trend that is likely to revolutionize the technology space is Platform Engineering. This involves scalable and integrated platforms of technology through solutions catering to a vast set of applications. These solutions are the ones providing the base for developing software affordably. Gartner predicts that, by 2026, ~80% of large software engineering organizations will establish platform engineering teams as internal providers of reusable services, components, and tools for application delivery. This implies a rise from 45% in 2022. Therefore, Platform Engineering will help organizations scale their business operations and the overall support of other applications.
Software and IT Services Should Drive Growth
Gartner expects that global IT spending should grow 6.8% in 2024, reaching USD 5 trillion. The software and IT services segments will lead this growth and account for about half of the expected total spending. Cybersecurity should be one of the critical drivers of growth in the software segment. This comes after ~80% of technology executives told Gartner that they continue to plan to increase spending in this area as a result of concerns stemming from AI adoption which might increase vulnerabilities for IT security.
Our methodology
To list the 8 Tech Stocks with Biggest Upside Potential According to Analysts, we conducted extensive research and sifted through several online rankings. After extracting the list of 20-25 stocks, we selected the following 8 tech stocks with biggest upside potential. Finally, we ranked the stocks according to their potential upside, as of October 4. We also mentioned the hedge fund sentiments around each stock, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Nextracker Inc. (NASDAQ:NXT)
Expected Upside Potential: 69.45%
Number of Hedge Fund Holders: 39
Nextracker Inc. (NASDAQ:NXT) offers solar tracker and software solutions for utility-scale and distributed-generation solar projects in the US and internationally.
Nextracker Inc. (NASDAQ:NXT)’s recent acquisitions of Ojjo and Solar Pile International should enhance its geotechnical capabilities. Also, the company’s focus on domestic manufacturing in the US should be underscored by the planned delivery of a product having 100% domestic content in early 2025. Wall Street analysts remain optimistic about the company’s backlog, with 80% anticipated to be fulfilled over the upcoming 8 quarters. Nextracker Inc. (NASDAQ:NXT) remains optimistic about the role of AgriPV and grid-enhancing technologies in the renewable energy sector. The company has been responding to supply chain cost inflation through hybrid strategy and design innovations.
Irrespective of the US election outcome, Nextracker Inc. (NASDAQ:NXT) is expecting continued growth, with acquisitions and domestic manufacturing to be the primary drivers. The analysts believe that the company’s focus on domestic content and innovations in AgriPV, together with the strategic use of the 45x manufacturing credit, places it well amidst increased supply chain costs.
In Q1 2025, Nextracker Inc. (NASDAQ:NXT) saw healthy execution, characterized by strong demand dynamics for solar trackers in both the US and international markets. For FY 2025, the company expects revenue in the range of $2.8 billion – $2.9 billion and GAAP net income of $363 million – $393 million. The company’s recent launch of NX Foundation Solutions is a move focused on optimizing solar project development for numerous soil conditions. Nextracker Inc. (NASDAQ:NXT)’s rapid integration of patented technologies from Ojjo and Solar Pile expands its product offerings, addressing utility-scale developers witnessing diverse ground conditions.
Cantor Fitzgerald reissued an “Overweight” rating on the shares of Nextracker Inc. (NASDAQ:NXT), setting a price target of $55.00 on 2nd August.
Overall NXT ranks 3rd on our list of the tech stocks with the biggest upside potential according to analysts. While we acknowledge the potential of NXT as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than NXT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published on Insider Monkey.