Buy 5 Mid-Cap Tech Stocks to Tap Lucrative Short-Term Upside Potential

U.S. stock markets have been witnessing an astonishing bull run since the beginning of 2023 barring some minor fluctuations. The three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have advanced 9.1%, 12.5% and 15.5%. Meanwhile, the mid-cap benchmark — the S&P 400 index — is also up 2.2% year to date.

Investment in mid-cap stocks is often recognized as a good portfolio diversification strategy. These stocks combine the attractive attributes of both small and large-cap stocks. Top-ranked, mid-cap stocks have a high potential to enhance their profitability, productivity and market share. These may also become large caps over time.

If economic growth slows down due to any unforeseen internal or external disturbance, mid-cap stocks will be less susceptible to losses than their large-cap counterparts owing to their lower international exposure. 

On the other hand, if the economy continues to thrive, these stocks will gain more than small caps due to established management teams, a broad distribution network, brand recognition and ready access to capital markets. 

Here, we recommend five mid-cap technology stocks with a favorable Zacks Rank that have attractive short-term price upside potential. These are: Lyft Inc. LYFT, GitLab Inc. GTLB, EPAM Systems Inc. EPAM, Onto Innovation Inc. ONTO and Semtech Corp. SMTC. Each of our picks currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The chart below shows the price performance of our five picks in the past three months.

Lyft Inc.

Lyft operates a peer-to-peer marketplace for on-demand ridesharing in the United States and Canada. Autonomous vehicle-related ambitions bode well. LYFT also benefits from an uptick in driver supply. The company is witnessing strong rider and driver growth, highlighting improvement in the ride-share market. 

LYFT aims to gain a stronghold in the highly promising robotaxi market through strategic partnerships. By adopting this approach, LYFT has avoided the massive R&D costs associated with developing autonomous systems independently. On the flip side, LYFT is mired in challenges like tariff tensions and, high debt load.

Lyft has an expected revenue and earnings growth rate of 14.6% and 25.9%, respectively, for next year. The Zacks Consensus Estimate for next year’s earnings has improved 5.6% over the last 30 days. 

The short-term average price target of brokerage firms for the stock represents an increase of 18.6% from the last closing price of $19.78. The brokerage target price is currently in the range of $10-$32. This indicates a maximum upside of 61.8% and a downside of 49.4%.

GitLab Inc.

GitLab offers a DevOps platform, which is a single application that leads to faster cycle time and allows visibility throughout and control over various stages of the DevOps lifecycle. GTLB’s expanding portfolio has been a major growth driver. Partnerships with leading AI providers and integrations with popular AI tools further enhanced GTLB’s position in the market.

GTLB is benefiting from strong enterprise demand for its AI-native DevSecOps platform, driven by the growing need for secure, efficient, and scalable software development solutions. GTLB’s focus on expanding its product offerings, such as GitLab Duo and Dedicated, is helping the company to drive customer engagement and platform adoption. 

GitLab has an expected revenue and earnings growth rate of 19.7% and 16.7%, respectively, for next year (ending January 2027). The Zacks Consensus Estimate for next year’s earnings has improved 2.1% over the last 60 days.

The short-term average price target of brokerage firms for the stock represents an increase of 38.8% from the last closing price of $41.49. The brokerage target price is currently in the range of $44-$72. This indicates a maximum upside of 73.5% and a downside of 6%.

EPAM Systems Inc. 

EPAM Systems is gaining from the ongoing digital transformation by enterprises and a continued focus on customer engagement and product development. EPAM’s sustained focus on strategic acquisitions and partnerships enhances its product portfolio and drives top-line growth. 

EPAM’s substantial investment in Gen AI capabilities is expected to boost growth as AI becomes increasingly integral to enterprise operations. A sustained focus on realigning the cost structure with the current demand environment is likely to benefit EPAM’s margins.

EPAM Systems has an expected revenue and earnings growth rate of 6.9% and 9.9%, respectively, for next year. The Zacks Consensus Estimate for next year’s earnings has improved 3% over the last 30 days.

The short-term average price target of brokerage firms for the stock represents an increase of 15.7% from the last closing price of $180.98. The brokerage target price is currently in the range of $160-$255. This indicates a maximum upside of 40.9% and a downside of 11.6%.

Onto Innovation Inc.

Onto Innovation has been benefiting from its diversified portfolio and growing foothold in AI-driven advanced packaging. Successful 3Di and Dragonfly qualifications, product uptake and offshore manufacturing ramp-up position it for solid sequential and long-term growth. 

ONTO expects about 18% fourth-quarter sales growth at the midpoint of $250-$265 million, driven by strong Dragonfly demand from 2.5D packaging customers and higher DRAM and logic spending. 

Momentum is building into 2026, with the Semilab acquisition and strong execution expected to boost ONTO’s competitiveness and margins. ONTO’s cash flow strength provides the flexibility to invest in R&D and pursue accretive acquisitions.

Onto Innovation has an expected revenue and earnings growth rate of 14.8% and 19.9%, respectively, for next year. The Zacks Consensus Estimate for next year’s earnings has improved 5.5% over the last seven days.

The short-term average price target of brokerage firms for the stock represents an increase of 23.4% from the last closing price of $127.18. The brokerage target price is currently in the range of $126-$180. This indicates a maximum upside of 41.5% and a downside of 0.9%.

Semtech Corp.

Semtech is benefiting from strong momentum across the industrial and datacenter markets served. Increasing demand for low-latency, high-efficiency connectivity solutions in AI-driven data centers is driving the adoption of SMTC’s Tri-Edge and CopperEdge product lines. 

The growing adoption of LoRa devices and the LoRaWAN standard is continuously aiding SMTC’s quarterly performance. Growing shipments in Asia and North America remain a positive factor. SMTC’s expanding Pro AV offerings remain tailwinds. Apart from this, SMTC is continuously expanding its customer base on the back of BlueRiver technology, which is another upside.

Semtech has an expected revenue and earnings growth rate of 10.1% and 24.5%, respectively, for next year (ending January 2027). The Zacks Consensus Estimate for next year’s earnings has improved 1% over the last 60 days.

The short-term average price target of brokerage firms for the stock represents an increase of 15.3% from the last closing price of $63.85. The brokerage target price is currently in the range of $53-$90. This indicates a maximum upside of 41% and a downside of 17%.

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This article originally published on Zacks Investment Research (zacks.com).

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