Tech stocks have been regaining popularity after inflation fears dented many share prices in March this year. Whether they can see a repeat performance of their stellar growth during the pandemic remains to be seen. But it seems possible. After all, lockdown restrictions meant many businesses discovered new technological solutions.
There are two tech stocks already in my portfolio that look primed for long-term growth. And while they’re certainly not risk-free, I’m definitely considering buying more shares. Let’s take a look.
The rise of remote learning solutions
It’s no secret that having a talented workforce is essential for any business to succeed. But due to the pandemic, in-person training has been somewhat interrupted for the past year. Fortunately, Learning Technologies Group (LSE:LTG) was able to provide a solution.
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The tech stock offers a comprehensive collection of learning software and services designed to be integrated with existing training pipelines. This makes it easier for businesses to transition their training methods. It also enables employees to improve their knowledge from the comfort of their living rooms.
LTG has managed to achieve some impressive growth in recent years. The continual expansion of its offerings has enabled the management team to grow its revenue by an average of 36% per year for the last five years. At the same time, the bottom line moved out of the red, with a loss of £1.3m in December 2016 but a profit of £17.4m in December 2020.
As promising as this growth is, it’s not without its risks. Digital learning solutions is a highly competitive and fragmented market. Consequently, the tech stock has been pursuing an acquisitive growth strategy as the sector begins to consolidate. However, acquisitions can lead to a rapid increase in unexpected costs and potentially destroy value rather than create it. Suppose the management team make a series of bad purchases? In that case, not only will the balance sheet begin to suffer, but the share price will as well.
The tech stock behind e-commerce sales
I think it’s fair to say that the world’s dependence on e-commerce has exploded recently. With UK lockdown restrictions preventing roughly 750,000 stores from opening their doors, many consumers went online to shop. In fact, this behaviour change is a primary contributing reason to why 85,000 businesses across the UK launched an online store in 2020.
But this sudden surge in online marketplaces creates a new problem. How do these firms drive customers to their online storefronts as opposed to those of competitors? Enter dotDigital (LSE:DOTD). The tech stock provides a software solution that automates the marketing process of online businesses. In other words, it tracks customer behaviour and interaction on a website. This data is then used to generate personalised marketing material distributed through multiple channels, including email, text messages, and social media. The end result is a higher visitor-to-customer conversion rate and increased retention for repeat purchases in the future.
As exciting as this technology may be, there is a looming regulatory threat on the horizon. The rising issue of online privacy led to the formation of the General Data Protection Regulation Act (GDPR) in Europe. This legislation significantly improved individual privacy protection for consumers. But it also created new barriers for dotDigital to overcome. While the business did manage to adapt, any further restrictions may begin to impede its impressive growth.
