With the major equity indices still struggling amid the banking sector fallout, the concept of acquiring high-risk, high-reward tech stocks might seem reckless. Despite debate about what the troubles in the financial industry really mean, it’s a tough time for speculators. With the world grappling with high inflation and geopolitical flashpoints, safe (or safe-ish) investments carry a premium.
Nevertheless, buying into the blood on the streets may yield significant rewards down the line. As well, at some point, speculators believe that the most compelling enterprises should deliver groundbreaking solutions. Therefore, high-risk, high-reward tech stocks have their place, so long as you know what you’re doing.
Olo (OLO)
Based in New York City, Olo (NYSE:OLO) represents a business-to-business company that operates as a Software as a Service (SaaS). Specifically, the company’s platform allows customers to place restaurant orders from multiple origination points. Olo also provides restaurants with order analytics and other services. Since the start of the year, OLO gained almost 18% of its equity value.
On paper, OLO doesn’t seem like such an irresponsible wager. After all, the company features a stout balance sheet. In particular, its cash-to-debt ratio pings at 22.39 times, above 72.39% of the software industry. Also, its Altman Z-Score runs at a lofty 9.64, indicating a very low risk of bankruptcy over the next two years.
However, the company’s operating and net margins sit well below breakeven. And in the trailing year, shares tumbled nearly 42%, making it one of the high-risk, high-reward tech stocks available. Still, let’s end on a positive: Wall Street analysts peg OLO as a consensus moderate buy. Their average price target comes out to $9.67, implying over 25% upside potential.
Himax Technologies (HIMX)
Based in Taiwan, Himax Technologies (NASDAQ:HIMX) is a leading supplier and fabless semiconductor manufacturer. Aside from the obvious geopolitical risk stemming from Taiwan’s troubled relationship with China, Himax also suffers from market concerns. Yes, since the beginning of the year, HIMX gained over 24% of its equity value. However, in the trailing year, it’s down 28%.
Still, if you can look past the noise, HIMX represents one of the high-risk, high-reward tech stocks to buy – with an emphasis on the latter reward component. Conspicuously, despite the challenges, Himax features a solid balance sheet with an Altman Z-Score of 3.25. This tally indicates a relatively low risk of imminent bankruptcy. Operationally, the company benefits from strong revenue and profit margins. This combo leads to a return on equity (ROE) of 26.71%, reflective of a high-quality business. Finally, Robert W. Baird’s Tristan Gerra pegs HIMX as a buy. Further, the expert anticipates HIMX hitting $10, implying nearly 27% upside potential.
Riskified (RSKD)
Hailing from Israel, Riskified (NYSE:RSKD) is an SaaS company that specializes in combating and preventing fraud and chargebacks. Obviously, with the always-increasing volume of cybercrimes, Riskified features a relevant business profile. However, it’s one of the high-risk, high-reward tech stocks because of its choppy market performance. While RSKD gained over 16% so far this year, it’s down almost 15% in the trailing year.
Further, the questions don’t just stop on the charts. Conspicuously and ironically, Riskified also features significant risks on the bottom line. Most glaringly, its operating and net margins sit well in negative territory. As well, its three-year EBITDA growth rate pings at 95.7% below parity, ranking worse than 97.28% of the competition. However, on the plus side, RSKD benefits from a stable, cash-rich balance sheet. Also, its Altman Z-Score hits 4.83, indicating low bankruptcy risk.
Lastly, covering analysts peg RSKD as a consensus moderate buy. Their average price target stands at $7, implying nearly 31% upside potential.
VTEX (VTEX)
Billed as a highly flexible and low-maintenance platform, VTEX (NYSE:VTEX) apparently builds, manages, and delivers profitable e-commerce businesses with more agility and less risk. Basically, the company helps online enterprises expand quickly and efficiently. Though it offers an intriguing service, VTEX slipped more than 4% since the January opener. In the past 365 days, it’s down 42%, thus making it one of the high-risk, high-reward tech stocks.
At the same time, it’s not as terrible as the market performance suggests it is. Let’s get the ugly out of the way first: VTEX suffers from operating and net margins that sit well below breakeven. Further, it’s not the most attractively valued entity despite the market loss. On the other hand, Vertex benefits from a cash-rich balance sheet with low bankruptcy probability. As well, its three-year revenue growth rate pings at 36.2%, above 88.35% of the software industry. In closing, analysts peg VTEX as a unanimous strong buy. Their average price target stands at $5.50, implying over 46% upside potential.
Vizio (VZIO)
A manufacturer of flat-screen television sets, Vizio (NYSE:VZIO) presents fundamental challenges. As a commoditized product, Vizio always runs the risk of encountering pricing pressures. So far this year, VZIO rose to the challenge, gaining over 20% of equity value. However, in the past 365 days, it’s a bit lackluster, declining nearly 9%.
Still, for those seeking high-risk, high-reward tech stocks, VZIO may be an intriguing contrarian prospect. Financially, Vizio brings some challenges to the table. Perhaps most noticeably, its net margin of 0.02% below breakeven reflects the high-pressure commoditized nature of TV manufacturing. As well, it also suffered from the Covid-19 pandemic, judging from the three-year revenue growth rate of 1.2% below zero.
On the positive side, Vizio features no debt. Along with an Altman Z-Score of 4.31, the company offers a surprisingly confident profile. Turning to Wall Street, analysts peg VZIO as a unanimous strong buy. Moreover, their average price target stands at $13.33, implying over 51% upside potential.
IonQ (IONQ)
A quantum computing hardware and software firm, IonQ (NYSE:IONQ) is currently developing a general-purpose trapped ion quantum computer and software to generate, optimize and execute quantum circuits. Since the start of the year, IONQ gained a blistering 48% in equity value. So, why does it rank among high-risk, high-reward tech stocks?
Largely, it has to do with the trailing-year loss of almost 59%. And this “performance” reflects on the aspirational nature of IonQ. In the TTM period, the company only generated revenue of $8.97 million while posting a net loss of nearly $104 million. You can see the problem here.
On the positive side of the ledger, IonQ enjoys a strong balance sheet. Its cash-to-debt ratio pings at a lofty 71.42 times. Also, its Altman Z-Score of 18.04 indicates extremely low bankruptcy risk. Looking to the Street, analysts peg IONQ as a consensus moderate buy. Enticingly, their average price target comes out to $8, implying 56% upside potential.
Marqeta (MQ)
Headquartered in Oakland, California, Marqeta (NASDAQ:MQ) offers a modern card-issuing protocol that empowers innovators to change the world, according to its website. Specifically, Marqeta instantly issues and processes card payments with its open application programming interface (API) platform. Though it appears relevant, MQ suffered a loss of over 32% of equity value since the Jan. opener.
Plus, it gets worse. In the trailing year, it’s down nearly 65%, making it one of the high-risk, high-reward tech stocks. Justifying the pessimism, Marqeta’s operating and net margins sit in negative territory. Also, it appears overvalued against an enterprise-value-to-EBITDA multiple.
On the flip side, Marqeta commands a strong balance sheet. For example, its cash-to-debt ratio stands at 130.73 times. Also, its Altman Z-Score of 4.83 reflects low bankruptcy risk. Lastly, analysts peg MQ as a consensus moderate buy. Their average price target hits $6.87, indicating 73% upside potential.
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On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.