When it comes to tech stocks, most investors think bigger is better. They believe the FANGs or dot-com survivors such as Microsoft (NASDAQ:MSFT) and Cisco(NASDAQ:CSCO) are the way to go in the sector. And there is some truth to that feeling. After all, these giants still produce billions in revenues, cash flows and profits. Heck, some of these giant tech stocks even pay hefty dividends these days.

However, bigger may not be better. This is especially true when it comes to tech stocks.

The truth is, the big boys aren’t the always the ones dominating their respective technology subsectors. In fact, there are many small- and mid-cap tech stocks that are the leaders. Moreover, they offer a bigger opportunity to find above-average growth in both revenues and profits. And they are able to grow their share prices much faster than the bigger tech stocks as well. After all, doubling a $1 billion market cap is much easier than a $1 trillion one.

For investors, the reality is, going small in the technology sector could be really smart and pay-off over the long haul. And these three small-cap tech stocks are the ones to buy.

Domo Inc (DOMO)

Source: Shutterstock

Market-Cap: $989 million

There’s no secret that cloud computing is huge these days as Software as a Service (SaaS) platforms have become the rage with businesses. The problem is, there’s just so many of these firms. How do you analyze data from your Salesforce (NASDAQ:CRM) applications and Amazon (NASDAQ:AMZN) AWS services at the same time.

The answer is small-cap tech stock Domo (NASDAQ:DOMO).

Recently IPO’d unicorn tech-stock DOMO provides analytic data solutions for the cloud. The best part is that it isn’t trying to compete with the big tech names, but ties them together to provide customers the ability to get to the big picture. This strategy seems to be working, DOMO has more than 1,500 customers. And those customers are spending some big bucks for the firm’s tech. Last quarter, billings at Domo rose 35% year-over-year and total revenues grew by 31%.

Analysts expect that DOMO will continue to see continued success as more firms look to query their data across various platforms. And as the linkage between these platforms, the firm should be able to score additional customers and increase its offerings to existing ones. And yet, the firm still has only a $1 billion market cap. That leaves it plenty of room for capital appreciation.

Box (BOX)

Market-Cap: $2.82 billion

The collaborative workplace is here. Managing documents, products and other content across various locations and workers is now the norm for many businesses. Cloud computing specialist Box(NASDAQ:BOX) is facilitating that trend.

BOX offers a variety of apps and programs designed to help businesses facilitate collaboration and storage of everything from emails to jpg files. The idea is that work can flow between customers and employees of the firm — all on a secure network/platform. Enterprise seems to be keen on the idea — with BOX courting major customers like General Electric (NYSE:GE) and AstraZeneca (NYSE:AZN). As a result, BOX has experienced some torrid growth over its history. Since 2016, the firm has experienced a 23% compound annual growth rate in its revenues. Moreover, the firm has posted positive cash flows for the last five quarters.

And the gains can keep coming. BOX is currently working to score more contracts with the Federal Government to help with record safe-keeping and digitizing the government’s workload.

Now could be the best time to strike on BOX shares. Poor guidance outlook — thanks to the length of time it takes to score those government contracts — has pushed down shares. But with a huge customer base as well as overall long-term growth, BOX seems poised to win and be one of the best tech stocks around.

Etsy Inc (ETSY)

Source: Meaghan O’Malley via Flickr (Modified)

Market-cap: $7.58 billion

Brand recognition is key when it comes to internet properties. And when it comes to hand-made, art and one-of-one objects, Etsy(NASDAQ:ETSY) is the leader. This even Amazon hasn’t been able to compete in this arena.

And it turns out, that brand is worth a lot.

ETSY has now seen its eighth consecutive quarter revenue growth. And while that revenue growth did slip a bit last quarter, this shouldn’t worry investors. Partly because Etsy’s profits and margins have actually increased. The reason is that ETSY doesn’t store inventory, it just serves as middle-man to facilitate transactions between craftspeople and buyers. And its moat and brand-name make it the go-to website to do that.

Additionally, ETSY has been adding additional services to its menu of options. This includes promotion for sellers, facilitating transactions/personalized website design via its Pattern initiatives and more. As ETSY leans more on these products, revenues should once again resume and continue their pace of growth.

In the end, ETSY has positioned itself to be one of the top online merchants and tech stocks. With a market cap of only $7.5 billion, there’s plenty of potential down the road — even buyout potential.

Disclosure: At the time of writing, Aaron Levitt was long AMZN.

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