Technology stocks offer investors the promise of growth in ways few other sectors can. After all, technology is synonymous with innovation, which spawns new products, services, and features.
Over the past 12 months, the Morningstar US Technology Index rose 30.16%, while the Morningstar US Market Index gained 23.92%. The tech stocks that Morningstar covers look 5% overvalued as a group, but there are still opportunities in the sector.
1-Year Performance of Tech Stocks
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10 Best Tech Stocks to Invest in Now
The stocks of these technology companies with Morningstar Economic Moat Ratings of wide or narrow are the most undervalued according to our fair value estimates as of Feb. 19, 2025.
- Sensata Technologies ST
- Nice NICE
- Sabre Corporation SABR
- Endava DAVA
- Taiwan Semiconductor Manufacturing Company 2330
- ON Semiconductor ON
- Adobe ADBE
- Fidelity National Information Services FIS
- Manhattan Associates MANH
- NXP Semiconductors NXPI
Here’s a little more about each of the best tech stocks to buy, including commentary from the Morningstar analysts who cover each company. All data is as of Feb. 19, 2025.
Sensata Technologies
- Morningstar Price/Fair Value: 0.59
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Narrow
- Industry: Scientific & Technical Instruments
Technical instruments company Sensata Technologies is the cheapest stock on our list of the best tech stocks to buy. The firm is a global supplier of sensors for transportation and industrial applications. Sensata stock is trading 41% below our fair value estimate of $51 per share.
“We view Sensata Technologies as a differentiated supplier of sensors and electrical protection, predominantly for transportation markets. The firm has oriented itself to benefit from secular trends toward electrification, efficiency, and connectivity. Despite the cyclical nature of the automotive and heavy vehicle markets, electric vehicles and stricter emissions regulations provide Sensata the opportunity to sell into new sockets, which has allowed the firm to outpace underlying vehicle production growth by about 4% historically. We think such outperformance is achievable over the next 10 years, given our expectations for a fleet mix shift toward EVs and Sensata’s growing addressable content in higher-voltage vehicles.
“In our view, Sensata’s ability to grow its dollar content in vehicles demonstrates intangible assets in sensor design, as it works closely with OEMs and Tier 1 suppliers to build its products into new sockets. We also think the mission-critical nature of the systems into which Sensata sells gives rise to switching costs at customers, leading to an average relationship length of roughly three decades with its top 10 customers. As a result of switching costs and intangible assets, we believe Sensata benefits from a narrow economic moat and we expect it to earn excess returns on invested capital for the next 10 years.
“Over the next decade, we expect Sensata to focus on organic growth in electric vehicles and increasingly electrified industrial applications. The firm has historically been an active acquirer but is focusing on organic investment, reduced leverage, and increased shareholder returns in the medium term, of which we approve. After a misguided strategic foray into the telematics market, Sensata changed CEOs and divested its failed Insights business. We like the firm’s focus on electrification, which we feel is the most attractive growth opportunity available. Still, we believe new management has to prove an ability to extract consistent organic growth to investors. The firm’s ability to grow content in electric vehicles and outperform underlying global automotive production are the primary drivers of our investment thesis.”
William Kerwin, Morningstar senior analyst
Read more about Sensata Technologies here.
NICE
- Morningstar Price/Fair Value: 0.62
- Morningstar Uncertainty Rating: Medium
- Morningstar Economic Moat Rating: Narrow
- Industry: Software - Application
Nice is an enterprise software company that serves the customer engagement and financial crime and compliance markets. Trading 38% below our fair value estimate, NICE has a narrow moat rating. We think shares of this stock are worth $290 per share.
“Nice provides cloud and on-premises software solutions that primarily serve the customer engagement market as well as the financial crime and compliance, or FC&C, market. The majority of revenue is generated in the US, but international expansion has become a bigger priority.
“The customer engagement segment contributes around 80% of company revenue, which includes Nice’s nascent public safety business. CXone, Nice’s flagship customer engagement product, is a cloud-native contact center as a service, or CCaaS, platform that delivers a seamless solution combining contact center software and workforce engagement management. CXone is an industry-leading product that will become increasingly critical for enabling omnichannel interactions amid a move to digital-first customer engagement. With only 15% to 20% of contact center agents in the cloud, including minimal from the enterprise market, the residual opportunity is significant. Consequently, we expect strong midterm growth as customers transition to the cloud.
“Nice earns about 20% of revenue from its FC&C business, which represents cloud-based risk management, fraud prevention, anti-money laundering, and compliance solutions. We expect that the increasing cost of compliance, the digitalization of financial services firms, the disruption of digital assets, and the explosion of data will accelerate the cloudification of the financial-services industry. Nice now has cloud-based solutions to serve organizations of all sizes, including X-Sight for the enterprise market and Xceed for the small and medium-sized market.
“For its 2022-26 strategic cycle, Nice is targeting double-digit total revenue growth, more than 80% of total revenue from cloud products, and a non-GAAP operating margin above 30%.”
Rob Hales, Morningstar senior analyst
Sabre Corporation
- Morningstar Price/Fair Value: 0.70
- Morningstar Uncertainty Rating: Very High
- Morningstar Economic Moat Rating: Narrow
- Industry: Software - Infrastructure
Sabre holds the number-two air booking volume share in the global distribution system industry. Trading 30% below our fair value estimate, Sabre Corporation has a moat rating of narrow. We think shares of this stock are worth $4.87 per share.
“Despite near-term reduced consumer saving rates and long-term corporate travel demand uncertainty, we expect Sabre to maintain its position in global distribution systems over the next 10 years. This view is driven by a gradual recovery in corporate travel and Sabre’s leading network of airline content and travel agency customers as well as its solid position in technology solutions for these carriers and agents. Sabre’s 30%-plus GDS air transaction share is the second largest of the three companies (behind narrow-moat Amadeus and ahead of privately held Travelport) that together control about 100% of market volume. Sabre is also a leader in providing technology solutions to travel suppliers.
“Sabre’s GDS enjoys a network advantage, which is the source of its narrow moat rating. As more supplier content (predominantly airline content) is added, more travel agents use the platform, and as more travel agents use the platform, suppliers offer more content. This network advantage is solidified by technology that integrates GDS content with back-office operations of agents and IT solutions of suppliers, leading to more accurate information that is also easier to book. The company’s network prowess should be supported by next-generation platforms, like SabreMosaic, which is an open-source, cloud-based, artificial intelligence solution that makes it easier for airlines to customize its offering and upsell content.
“Replicating Sabre’s GDS platform would entail aggregating and connecting content from several hundred airlines to a platform that is also connected to travel agents, which requires significant costs and time. Although we see GDS aggregation, processing, and back-office advantages as substantial, technology architectures like those of Etraveli enable end users to access not only GDS content but supply from competing platforms, which could take some volume from companies like Sabre. Also, GDS faces some risk of larger carriers making direct connections with larger agencies, although we expect these relationships to be the exception rather than the rule and for Sabre to still be the aggregating platform in either case.”
Dan Wasiolek, Morningstar senior analyst
Read more about Sabre Corporation here.
Endava
- Morningstar Price/Fair Value: 0.73
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Narrow
- Industry: Software - Infrastructure
Endava is a next-generation IT services company that primarily assists clients with their digital transformation efforts by creating customized software for them. Endava is an affordable tech stock, trading at a 27% discount to our fair value estimate of $42 per share. The software infrastructure firm earns a narrow economic moat rating.
“Endava, based in the UK, is an IT services company focused on providing digital transformation and engineering services. It generates revenue mainly by charging clients on a time and materials basis for services such as consulting/advice, customized software development and integration, and quality assurance and testing. Endava is highly exposed to the financial services sector, with nearly half of its revenue generated from the sector. Within financial services, Endava is known for its expertise in payments and private equity.
“Like many of its peers, Endava’s core strategy is to land and expand, which means securing big clients and growing revenue in those relationships by increasingly providing these clients more services. Endava’s 10 largest clients account for around a third of group revenue with the largest, Mastercard, contributing around 10%. Mastercard has been a client for over 20 years.
“Endava concentrates on the financial services and technology, media, and telecom industries. The company aims to diversify its industry exposure by securing new clients from new verticals. In particular, Endava is targeting clients in retail and healthcare given its current expertise is most transferrable to these areas.
“Similarly, the company is geographically concentrated with around 33% of revenue generated in the UK and around 26% generated in continental Europe. To diversify, Endava is primarily growing its business in North America.
“Endava’s delivery model is based on agile project management from employees in nearshore locations, which it plans to expand. To best serve its clients' unique digital transformation goals, the flexibility from the iterative nature of agile project management is effective. Furthermore, the nonstandardized nature of these projects requires constant dialogue and interaction between Endava and its clients, which means having delivery teams with similar time zones to its clients (nearshoring) is best to deliver the project successfully in a timely manner.
“Endava is striving to return organic revenue growth to around 20% per year with a relatively stable adjusted-profit-before-tax margin of 20%.”
Rob Hales, Morningstar senior analyst
Taiwan Semiconductor Manufacturing Company
- Morningstar Price/Fair Value: 0.74
- Morningstar Uncertainty Rating: Medium
- Morningstar Economic Moat Rating: Wide
- Industry: Semiconductors
Taiwan Semiconductor Manufacturing is the world’s largest dedicated chip foundry, with over 60% market share. The firm earns a wide economic moat rating, and the shares of its stock look 26% undervalued relative to our $273 fair value estimate.
“Taiwan Semiconductor Manufacturing Co. is the world’s largest dedicated contract chip manufacturer, or foundry, with over 60% market share. It makes integrated circuits for customers based on their proprietary IC designs. TSMC has long benefited from semiconductor firms around the globe transitioning from integrated device manufacturers to fabless designers. Like all foundries, it assumes the costs and capital expenditures of running factories amid a highly cyclical market for its customers. Foundries tend to add excessive capacity during times of burgeoning demand, which can result in underutilization during downturns that hampers profitability.
“The rise of fabless semiconductor firms has been maintaining the growth of foundries, which has in turn encouraged increased competition. However, most of these newer competitors are confined to low-end manufacturing due to prohibitive costs and engineering know-how associated with leading-edge technology. To prolong the excess returns enabled by leading-edge process technology, or nodes, TSMC initially focuses on logic products, mostly used on central processing units and mobile chips, then focuses on more cost-conscious applications. This strategy has been successful, illustrated by the fact that the firm is one of the two foundries still possessing leading-edge nodes when dozens of peers lagged.
“We note two long-term growth factors for TSMC. First, the consolidation of semiconductor firms is expected to create demand for integrated systems made with the most advanced nodes. Second, organic growth of artificial intelligence, Internet of Things, and high-performance computing applications may last for decades. AI and HPC play a central role in quickly processing human and machine inputs to solve complex problems like autonomous driving and language processing, which accentuated the need for more energy-efficient chips. Cheaper semiconductors have made integrating sensors, controllers, and motors to improve home, office, and factory efficiency possible.”
Phelix Lee, Morningstar analyst
Read more about Taiwan Semiconductor Manufacturing Company here.
ON Semiconductor
- Morningstar Price/Fair Value: 0.77
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Narrow
- Industry: Semiconductors
Onsemi is a supplier of power semiconductors and sensors focused on the automotive and industrial markets. The firm earns a narrow economic moat rating, and the shares of its stock look 23% undervalued relative to our $72 fair value estimate.
“We believe Onsemi is a power chipmaker aligning itself to the differentiated parts of its portfolio in order to accelerate growth and margin expansion. We expect the firm to outpace the growth of its underlying markets over the next five years as it tailors its portfolio of chips and sensors to pursue secular trends toward electrification and connectivity that allow it to sell into new sockets. Onsemi is the top supplier of image sensors to automotive applications like advanced driver-assist systems, and its semiconductors enable power transfer and conversion in electric vehicles and renewable energy—all of which we expect to keep Onsemi’s sales growth above that of its underlying markets.
“We think that Onsemi will be vulnerable to cyclicality in the long term but that its portfolio realignment will lend itself to more durable returns through a cycle. The firm’s increased focus on sticky verticals, as well as its differentiated sensor and silicon carbide technologies, contribute to our narrow economic moat rating. Onsemi’s bread and butter historically was in more commoditylike chips, but we expect the firm to focus on higher-value applications in the auto and industrial end markets going forward and in turn earn more consistent returns on invested capital.
“We expect Onsemi to focus on expanding margins over the medium term. Management has invested heavily in pruning and improving its manufacturing efficiency, and we expect it to see the fruits of these efforts. We also think the firm will continue to focus its investments on the auto and industrial markets, which are higher-growth and higher-margin than its legacy consumer and smartphone markets. We expect more cutting-edge silicon carbide chips to make up a greater mix of sales over the next five years, too. We think management faces execution risk in hitting its lofty goal of 53% non-GAAP gross margin but expect a focus on higher-margin verticals and an improved manufacturing footprint to get it to the low 50s over the next five years from a previous midcycle margin below 38%.”
William Kerwin, Morningstar senior analyst
Read more about ON Semiconductor here.
Adobe
- Morningstar Price/Fair Value: 0.77
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Wide
- Industry: Software - Application
Adobe provides content creation, document management, and digital marketing and advertising software and services to creative professionals and marketers. The firm earns a wide economic moat rating, and the shares of its stock look 23% undervalued relative to our $590 fair value estimate.
“Adobe has come to dominate in content creation software with its iconic Photoshop and Illustrator solutions, both now part of the broader Creative Cloud. The firm has added new products and features to the suite through organic development and bolt-on acquisitions to drive the most comprehensive portfolio of tools used in print, digital, and video content creation. The December 2021 launch of Adobe Express helps further broaden the company’s funnel, as it incorporates popular features of the full Creative Cloud but comes in lower cost and free versions. The 2023 introduction of Firefly marks an important artificial intelligence solution that should also attract new users. We think Adobe is properly focusing on bringing new users under its umbrella and believe that converting these users will become more important over time.
“CEO Shantanu Narayen provided Adobe with another growth leg in 2009 with the acquisition of Omniture, a leading web analytics solution that serves as the foundation of the digital experience segment that Adobe has used as a platform to layer in a variety of other marketing and advertising solutions. Adobe benefits from the natural cross-selling opportunity from Creative Cloud to the business and operational aspects of marketing and advertising. On the heels of the Magento, Marketo, and Workfront acquisitions, we expect Adobe to continue to focus its M&A efforts on the digital experience segment and other emerging areas.
“The Document Cloud is driven by one of Adobe’s first products, Acrobat, and the ubiquitous PDF file format created by the company; it is now racing to become a $4 billion business. The rise of smartphones and tablets, coupled with bring-your-own-device and a mobile workforce, has made a file format that is usable on any screen more relevant than ever.
“Adobe believes it is attacking an addressable market well in excess of $200 billion. The company is introducing and leveraging features across its various cloud offerings (like Sensei artificial intelligence) to drive a more cohesive experience, win new clients, upsell users to higher-price-point solutions, and cross-sell digital media offerings.”
Dan Romanoff, Morningstar senior analyst
Fidelity National Information Services
- Morningstar Price/Fair Value: 0.79
- Morningstar Uncertainty Rating: Medium
- Morningstar Economic Moat Rating: Narrow
- Industry: Information Technology Services
Fidelity National Information Services provides core processing and ancillary services to banks, but its business has expanded over time. The firm earns a narrow economic moat rating, and the shares of its stock look 21% undervalued relative to our $88 fair value estimate.
“Fidelity National Information Services' acquisition of Worldpay in 2019 was one of three similar transformational deals that took place in short order. But FIS has more recently decided to undo the Worldpay deal as it struggled with operational issues within the Worldpay business.
“Following a period of weak performance, management changed at FIS at the end of 2022. The new team, frustrated with the performance of the Worldpay business, originally decided that FIS would spin off Worldpay. We questioned whether the spinoff was the correct move. FIS’ peers, Fiserv and Global Payments, have not faced the issues that have plagued FIS. To us, this suggests FIS’ recent issues stem more from operational missteps (specifically underinvestment in the small and medium-sized business space) and that the strategy behind the combination was not necessarily flawed.
“Management later decided to sell a 55% stake in Worldpay to the private firm GTCR instead. The deal valued Worldpay at $17.5 billion, or 9.8 times 2023 EBITDA, including corporate and additional stand-alone costs, with potentially another $1 billion in the future based on GTCR’s returns. We believe Worldpay might be better off as a private company, given that we think the business needs significant investment to restore growth. To this end, we like that GTCR has committed an additional investment of up to $1.25 billion for acquisitions. On the other hand, we think FIS sold a majority stake at a somewhat depressed level. Additionally, the two companies remain intertwined and Worldpay has become a private company, which will potentially reduce transparency into its turnaround efforts. Overall, if Worldpay had to be divested, we would have preferred a clean break.
“On the positive side, following the sale, FIS returned to being primarily a bank tech provider. This business, while lower growth, is very predictable and stable, and we believe this segment has the strongest moat among FIS’ businesses. But investors will likely have very limited insight into the performance of Worldpay, which will still account for a meaningful portion of the overall value.”
Brett Horn, Morningstar senior analyst
Read more about Fidelity National Information Services here.
Manhattan Associates
- Morningstar Price/Fair Value: 0.80
- Morningstar Uncertainty Rating: Medium
- Morningstar Economic Moat Rating: Wide
- Industry: Software - Application
Manhattan Associates provides software that helps users manage their supply chains, inventory, and omnichannel operations. Trading 20% below our fair value estimate, Manhattan Associates has an economic moat rating of wide. We think shares of this stock are worth $230 per share.
“Manhattan Associates is the clear leader in the warehouse management systems software niche, in our view. Supply chains are complex and any disruption to warehouse operations could have a significant ripple effect among all nodes in the chain, which is captured in sticky customer relationships. When normalized for covid, we view the company as capable of driving low-double-digit revenue growth annually over the next five years, with even better earnings growth. Manhattan Associates is building on its lead with cloud versions of its software solutions, which has also brought about margin expansion and accelerating growth, which we think will lead to improving returns.
“Manhattan Associates provides software that helps users manage their supply chains, inventory, and omnichannel operations. Customers are generally retailers, wholesalers, manufacturers, and logistics providers. We think these solutions are critical to customer operations, as they enable users to optimize inventory throughout the entire supply chain, to manage inventory and fulfill orders, and to manage retail storefront inventory, point of sale, ordering, and omnichannel operations. Because Manhattan provides all these discrete but related solutions on a single platform, we believe it is a very attractive solution to customers, as it presents a unified view. Manhattan differentiates itself by doing much of the implementation and update work.
“Manhattan Associates serves more than 1,000 blue-chip customers. These customers tend to have more complex supply chain, distribution center, warehouse, and retail footprints. We think the WMS market is approximately $3 billion, but layering in omnichannel creates a faster growing opportunity in the $10 billion area. The company enjoys renewal rates on maintenance contracts in the area of 95%, with cloud renewal retention near 100%. We see the Active Omnichannel SaaS solution as a critically important development that should propel the company for the next decade. In our opinion, Active Omni empowers traditional retailers to more effectively compete with Amazon.”
Dan Romanoff, Morningstar senior analyst
Read more about Manhattan Associates here.
NXP Semiconductors
- Morningstar Price/Fair Value: 0.82
- Morningstar Uncertainty Rating: Medium
- Morningstar Economic Moat Rating: Wide
- Industry: Semiconductors
Semiconductor company NXP Semiconductors rounds out our list of best tech stocks to buy. NXP Semiconductors is a leading supplier of high-performance mixed-signal products. The stock is 18% undervalued relative to our fair value estimate of $300 per share.
“NXP Semiconductors is one of the largest suppliers of semiconductors for the automotive market and a significant player in the analog and mixed-signal chip markets generally. We believe the company has a strong position in the automotive, industrial, mobile, and communications infrastructure markets through a combination of switching costs and intangible assets. Although the company sells into cyclical industries, the strength of these competitive advantages gives us confidence that it will generate excess returns over the cost of capital over the next decade and beyond.
“The merger of Freescale and the former NXP in 2015 led to a powerhouse in automotive semiconductors, which makes up more than half of the company’s total revenue. Like many of its chipmaking peers, NXP is well positioned to benefit from safer, greener, smarter cars in the years ahead. It is among the market leaders in automotive semis, especially in microcontroller units, or MCUs, which serve as the brains of a variety of electronic functions in a car. We’re optimistic about NXP’s development of products used in active safety systems, such as 77-gigahertz radar modules and battery management systems in upcoming electric vehicles, most notably from Volkswagen.
“Yet NXP’s prospects are also bright in its industrial and Internet of Things segment, thanks to its legacy strength in MCUs and embedded processors, along with its development of newer crossover MCUs that combine some of the benefits of each.
“In communications infrastructure, NXP should remain a key supplier of power amplifiers into 5G wireless infrastructure equipment. Finally, NXP’s mobile wallet solutions should remain the industry’s gold standard and the backbone of mobile payment technologies offered by Apple, Google, and others.”
Brian Colello, Morningstar strategist
How to Find More of the Best Technology Stocks to Invest in
Investors who would like to extend their search for the best tech stocks can do the following:
- Review Morningstar’s comprehensive list of technology stocks to investigate further.
- Use the Morningstar Investor screener to build a short list of technology stocks to research and watch.
- Read the latest news about notable technology stocks from Morningstar senior analyst Dan Romanoff.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
