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5 Best UK Tech Stocks To Buy Right Now

Sam Boughedda trader
Updated 12 Dec 2022

UK tech stocks don't receive the same attention as their American cousins, but exciting developments are taking place. The stock picks below consider the growth prospects of firms that investors should be aware of.

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5 Best UK Tech Stocks To Buy Right Now

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Our analysis takes into account how each firm is coping with the new economic environment and looks under the hood using fundamental analysis. Skyrocketing demand for solutions in areas like automation, cybersecurity, and fintech, means there are plenty of opportunities for investors to make returns.

Read on to uncover our analysis of the following key points:

What are UK Tech Stocks?

The criteria defining tech stocks have widened over time. It reflects how more firms have embraced technology and how software-based products have become more widely adopted across society.

The sector's core remains those firms producing or servicing items ranging from semiconductors to innovative software. The companies can have ground-breaking proprietary technology that can make life-changing sums of money for shareholders.

The key price driver to look out for is scalability. Tech firms such as Microsoft, which made many investors rich, were able to increase their revenue stream at a far faster rate than their cost base. Once Microsoft had developed its products, each additional licence sold incurred minimal extra expense.

Classic stock valuation models consider scalability and use predicted future revenues to calculate what the share price should be today. As some tech firms could potentially be generating exponentially greater revenues in just one or two years, they often have high price-to-earnings (P/E) ratios.

Those investors who are prepared to sit tight to see how a firm progresses can buy UK-listed tech stocks, including UK-based companies and foreign firms listed on the London Stock Exchange.

The Best UK Tech Stocks to Buy Now

Buying tech stocks has been made much easier by – technology. Online brokers have revolutionised the industry and made tech stock investing cost-effective and user-friendly. The more challenging part of the process is stock selection.

To help with that, AskTraders has compiled a list of the best UK-listed tech stocks by researching their potential for revenue growth. Some scrutiny is needed because if the exciting projects in the pipeline don't materialise, the share price can be expected to crash.

All the tech stocks below look set to deliver on their potential, so there is a compelling reason to consider investing in them now.

Sage Group PLC (LON:SGE)

Sage Group was founded in 1981, so it is far from being the small start-up the tech sector is often known for. It shouldn't be overlooked, though, as the company's well-established accountancy software products make it ideal for anyone considering buying just one UK tech stock.

Its client base is multinational and comprises small- to medium-sized firms that pay regular subscriptions. Given the challenges associated with changing systems, many existing Sage clients can be expected to suck up price rises rather than switch to an alternative. That's crucial in an inflationary environment and points to the firm having a reliable income stream.

Sage Group PLC (SAGE) Daily Price Chart 2019 2022
Sage Group PLC (SAGE) – Daily Price Chart – 2019 – 2022 | Source: IG

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The SGE share price has traded in a sideways channel for several years. Given that it's more of a dividend stock than a growth stock, a breakout to the upside appears unlikely. But applying patience and picking the stock up closer to the 525p price support level would allow investors to improve on the dividend yield, which, even before any share price softening, is an impressive 2.27%.

Kainos Group PLC (LON:KNOS)

Belfast-based Kainos provides IT consulting and software services to businesses, governments, and healthcare providers. The company has over 250 commercial clients, including household names like Netflix, HP, Booking.com, and Diageo. Its customers in the public sector include the UK Home Office, the Ministry of Justice, and the NHS.

Compared to other UK tech stocks, Kainos has relatively low beta. There is enough volatility to keep investors interested, but once it gains momentum, as it did between 2019 and 2022, it plots a relatively steady course.

Kainos Group PLC (KNOS) – Daily Price Chart – 2019 – 2022
Kainos Group PLC (KNOS) – Daily Price Chart – 2019 – 2022 | Source: IG

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Those looking to buy Kainos right now might want to wait for the stock price to return and test the new supporting trendline, which is currently in the region of 1500p.

Softcat (LON:SCT)

FTSE 250 firm Softcat is a Marlow-based IT infrastructure provider founded in 1993. The company provides bespoke end-to-end technology solutions for businesses going through a digital transformation.

Softcat is a ‘picks and shovels' style firm. Its core revenues come from cloud computing, data centres, network and cybersecurity services. That resulted in it being severely hit when investors experienced a loss of appetite for tech stocks in 2022. The share price fell in value by more than 50% in less than 12 months.

Softcat PLC (SCT) – Daily Price Chart – 2019 – 2022
Softcat PLC (SCT) – Daily Price Chart – 2019 – 2022 | Source: IG

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Trading a pullback strategy offers a route to buy Softcat during the current dip. There is significant price support in the region of 900p, a price level that held during previous moments of share price weakness in 2019 and 2020.

Darktrace PLC (LON:DARK)

Darktrace PLC is a tech firm which develops high-quality AI-based security software. Founded in 2013, the firm has offices in Cambridge (UK) and San Francisco (US) and a global client base, including prestigious firms such as Airbus, Siemens and Allianz.

It provides end-to-end IT security, with the software packages it sells being broken down by function and termed, prevent, detect, respond, and heal. That rounded approach allows Darktrace to offer everything a client might want regarding cybersecurity. As with Sage, that means it's able to increase charges to clients who are reluctant to go through the challenges of finding an alternative provider.

Darktrace PLC (DARK) – Daily Price Chart – 2019 – 2022
Darktrace PLC (DARK) – Daily Price Chart – 2019 – 2022 | Source: IG

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The price chart for Darktrace shows how DARK shares experience price spikes during periods of geopolitical uncertainty. If you think there is an increased risk of military conflict in the world and that a new battlefield will be established online, then buying Darktrace is also a hedge against other stocks tanking should that happen.

Wise PLC (LON:WISE)

Tech stocks can be leading indicators of a mood shift among investors, and the rally in WISE stock, which started in June 2022, pre-empted the wider market bounce in October.

That early start to a mini-rally is good news for investors in Wise, formerly known as TransferWise. The fundamentals also look good. The firm has over 10 million customers using its app to hold and convert over 50 currencies with no hidden fees.

Wise PLC (WISE) – Daily Price Chart – 2021 – 2022
Wise PLC (WISE) – Daily Price Chart – 2021 – 2022 | Source: IG

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The firm was launched in 2011 and first listed on the LSE in 2021, but more importantly for investors, it has been profitable since 2017. It has a relatively high P/E ratio and currently posts a reading of 208.40 on that metric. That does reflect that many are already backing it to be the next big thing in the payments industry.

Why Invest in UK Tech Stocks Now

Technological innovation is continuing to grow at a rapid pace. While tech listings in other regions, such as the US, have increased substantially over the years, the UK has lagged, with companies reluctant to list in London due to regulations.

However, after a recent review of UK practices, reforms were recommended, encouraging more tech stocks to list on the London Stock Exchange. That could produce a long overdue buzz about the UK tech investment sector.

With the LSE improving its offering, there is even more potential to find a tech stock which makes the incredible returns associated with market legends such as Apple, Microsoft, and Tesla.

What to Know Before Investing in Tech Stocks

Of course, like all investments, there are risks, but the tech sector tends to experience excessive peaks and troughs. The Dot.com bubble of the late 1990s and the tech sell-off of 2022 are prime examples of the price volatility investors might face.

The rollercoaster ride offered by tech stocks comes down to their future revenues being hard to predict. There is an understandable degree of uncertainty when estimating how popular a new product might be. Even established products face the risk of being challenged by insurgent competitors.

Macro factors also have to be considered. The shift by the world economy into a more inflationary environment erodes the value of any future earnings; that hit share prices throughout 2022. High inflation can also mean high-interest rates, and many tech companies have high debt levels, which look likely to become increasingly expensive to service.

Final Thoughts

Tech stocks are at the riskier end of the investment spectrum, but the potential they offer means they can be justified in any portfolio. One way of managing the inherent risks is to make sure you have a tried and tested strategy.

It is also crucial to select the broker which is the best fit for your needs. This list of trusted brokers includes firms regulated by Tier-1 financial authorities that provide the tools and services you need to tilt the odds in your favour.

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Sam is a trader and lead stock market writer at AskTraders. After starting his career in the forex market, Sam now focuses on stocks, specifically consumer staples.