The investment banking giant Morgan Stanley has singled out three globally underappreciated tech stocks that it believes hold substantial growth potential.

What Happened: Morgan Stanley has identified CompuGroup Medical (OTC:CMPUY), a healthcare software provider, Exclusive Networks (OTC:EXNWF), a cybersecurity firm, and W.A.G. Payment Solutions as overlooked stocks with attractive valuations. The bank has assigned an overweight rating to all three, reported CNBC.

"As this theme of 'broadening out' becomes more important, we think investors will increasingly look to quality small caps at attractive valuations as sources of alpha," said Morgan Stanley.

"CGM benefits from the typical attributes of the software business model e.g. high customer stickiness given the high switching costs, highly recurring revenue (~70%) providing high visibility, the ability to put through annual price increases, healthy margins which should be boosted by operating leverage and price increases, and healthy [free cash flow] generation," the analysts wrote.

The bank views CompuGroup, which holds leading market positions in several countries, including Germany, France, and Austria, as the most undervalued stock in its software coverage. Morgan Stanley has set a price target of 37 euros for CompuGroup, suggesting a 23% upside.

W.A.G. Payment Solutions, a prominent integrated payment provider, was also tagged as an undervalued stock with a price target of 135 pence, indicating a 98.5% upside.

Exclusive Networks, one of the largest and fastest-growing specialist distributors of cybersecurity products globally, was assigned a price target of 26.5 euros, a 15.7% upside from its current price.

"We continue to view Exclusive as an attractive way for European investors to play the theme of cybersecurity in a diversified manner," the bank said.

Why It Matters: The stock market has been on a bull run, with some analysts predicting that it's only halfway through its potential, according to a report from Ned Davis Research (NDR) in February. However, other analysts have warned of a potential market correction, as stocks are running out of reasons to move higher, as per a report by Piper Sandler in the same month.

In March, Bank of America predicted that the stock market's long-term bull rally could continue, with the S&P 500 potentially surging by 34% by the end of 2026. However, another leading research firm warned that global stock markets might be on the brink of a correction.

Morgan Stanley's identification of these overlooked tech stocks in this volatile market scenario could provide investors with potential growth opportunities.

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