Over the past few months, there has been a massive selloff in high-growth tech stocks. This selloff is mainly the result of the Federal Reserve raising interest rates. In general, higher interest rates are bad for high-growth companies. This means that many pre-revenue new tech stocks have gotten slammed. What’s interesting is that a handful of profitable companies have fallen as well.

Now, with dozens of new tech stocks down over 50%, it’s possible that the pendulum has swung too far the other way.

During the COVID-19 pandemic, many tech stocks likely got overbought. Now, in the face of rising rates, many of them are getting oversold. With that in mind, let’s take a look at a few profitable tech companies that might be getting unjustly sold.

Top new tech stocks to buy.

New Tech Stocks to Buy

No. 3 Coinbase (Nasdaq: COIN)

Coinbase is one of the world’s leading cryptocurrency exchanges with over 89 million users. It went public in May 2021 and is down almost 50% from its all-time high. Interestingly, since going public, Coinbase’s business has not slowed down at all.

In 2021, it reported total annual revenue of $7.84 billion. It also reported a net income of $3.62 billion, which gives it a cushy profit margin of 46%. For such a young company, this level of profitability is already impressive.

However, Coinbase trades at a P/E ratio of just 12. This hardly makes it a growth stock at all. In fact, a P/E of just 12 makes it technically cheaper than major value stocks. For example, P&G, J&J, and Coca-Cola all trade near 20-30. This low valuation could be because investors expect Coinbase’s revenue to decrease.

The biggest criticism of Coinbase’s business is that it’s overly reliant on transaction fees. Critics say that increased competition will force Coinbase to these fees. Eventually, it may even be forced to remove fees altogether. After all, trading stocks is almost entirely commission-free. It shouldn’t be too long until crypto trading is free all well. When this happens, it could kill Coinbase’s business.

This is is definitely a risk for Coinbase. However, Coinbase is already getting ahead of this by expanding its product portfolio. In its most recent report, Coinbase outlined new products that it already offers or plans to offer. A few main ones include:

  • Staking
  • Earn
  • Custody
  • NFTs
  • Institutional tools

On top of that, this fear of transaction fees falling to zero might be ill-advised.

The Biggest Criticism Makes No Sense

Commission-free stock trading is made possible through payment for order flow. This is a process that involves charging market makers to transact stock orders, instead of charging the investor. It works for stocks, but wouldn’t necessarily work for crypto. This is because cryptocurrency has no market makers. The entire point of crypto is that it’s decentralized and doesn’t require a financial middleman.

With that said, we are in the very early stages of Web3. It’s possible that some type of system could emerge that allows for commission-free trading. However, at this point it just feels very unlikely.

If you believe in the long-term prospects of crypto then Coinbase should be at the top of your list of new tech stocks to buy.

No. 2 Roku (Nasdaq: ROKU)

Roku is a great example of one of the new tech stocks that crashed for almost reason. Well, again the main reason is that it was an overbought pandemic stock. In 2020, its stock soared basically soared because people were forced to quarantine. Now, its stock is slumping because the world is opening back up. But, through the ups and downs, Roku’s core business has stayed solid.

If you don’t know Roku, it makes streaming dongles that plug into your TV and give you access to all the major streaming services. Roku also makes Roku TVs and owns The Roku Channel.

Roku hit several major annual milestones in 2021. It recorded record revenue, gross profit and revenue per user. Here are a few other major stats from its report:

  • Total net revenue of $2.765, up 55% YOY
  • Gross profit of $1.41 billion, up 74% YOY
  • Added 8.9 million accounts during the year
  • One streaming platform in U.S, Canada and Mexico by hours streamed.

At a quick glance, Roku’s not at all a stock you’d expect to be down 70% in the past couple of months.

Roku’s founding vision also still has plenty of room to play out. Roku believes that all TV will end up being streamed. The dozens of streaming platforms currently in existence support this belief.

Yet, there is still a huge gap between viewership and advertising budgets. Corporations still haven’t shifted their ad spend to streaming services. When they do, Roku will be well-positioned to absorb it.

The biggest downside of Roku’s business was its Q4 profit drop. In 2021, Q4 net income fell 64% to $23.7 million. But, Q4 revenue still spiked 33% to $865 million. A 70% stock price drop seems to present a good buying opportunity for Roku.

New Tech Stocks No. 1 Etsy (Nasdaq: ETSY)

Etsy is an eCommerce platform that focuses on vintage handmade goods. Its stock is down about 50% from its all-time high as I write this. There are two reasons why Etsy is one of the top new tech stocks to watch.

It’s The Anti-Amazon

Everyone knows that Amazon dominates eCommerce. It has mastered the customer experience and can sometimes get you your package in a matter of hours. However, in order to offer this high level of customer service, Amazon is ruthless. This ruthlessness translates to poor working conditions, low pay, and even replacing workers with robots altogether.

Right now, there is a growing “anti-corporate” sentiment among younger consumers. Consumers don’t just want to keep contributing to Jeff Bezos’ mind-numbing fortune. Instead, they are eager to support businesses that improve people’s lives. Etsy is in a great position to ride this tailwind.

Like Amazon, Etsy is a massive global marketplace. However, its mission statement is to “keep commerce human.” Instead of crushing them, Etsy amplifies small business owners. It has millions of sellers and 71% of these sellers say they run their store as a business. 95% of them run it from their home.

Amazon also allows for third-party selling. But, it has been sued for anticompetitive practices. In some cases, Amazon has even been known to recreate its over version of popular products and drive the original seller out of business. Etsy, on the other hand, promotes the third-party seller.

Etsy provides an outlet for unique, homemade goods. Instead of buying another “Amazon Brand Item #1453”, shoppers can get a unique product. At the same time, they are supporting a small business owner. According to Etsy, 87% of shoppers say that the website has goods they can’t find elsewhere.

Just like Roku, Etsy, one of the new tech stocks to buy, was a big pandemic stock. Now, its stock is down big but its business still looks solid. This brings us to our next reason to buy Etsy.

It’s Potentially Undervalued

It’s true that Etsy was a major COVID-19 winner. Since 2019, its user base nearly doubled and the stock soared 500%. Due to this, a lot of analysts think that growth momentum is pulled forward. This means that Etsy generated higher-than-average sales during COVID-19. Now, in 2022 analysts expect these sales to fall off. I disagree.

Yes, Etsy was a COVID-19 winner. But, all the pandemic did was introduce more shoppers to Etsy. Just because the pandemic is over, it doesn’t mean that these shoppers will never return. In fact, about 30% of Etsy’s 90 million visitors in 2021 were repeat customers. These are all customers who now know about Etsy and will tell their friends about it. If anything, the pandemic increased Etsy’s brand awareness.

Etsy also may have been overvalued at the height of its runup (almost $300/share). But now? It has a P/E ratio of 44. For what it’s worth, this is lower than both Amazon and eBay.

There’s a good reason why analysts might be underestimating Etsy. 79% of Etsy sellers are women. Since Etsy is a semi-sophisticated digital platform, it’s safe to assume that these sellers skew younger.

It’s possible that analysts view Etsy as just another digital marketplace and could be underestimating just why shoppers love it so much.

I hope that you’ve found this article valuable for three new tech stocks to buy after the massive selloff. Please remember that I’m not a financial advisor and am just offering my own research and commentary. As usual, please base all investment decisions on your own due diligence.