The U.S. tech stocks suffered a sharp selloff last month due to escalating concerns over historically high inflation, the Federal Reserve's tighter monetary policy, a weak corporate earnings season, and the possibility of an economic slowdown. However, strong demand for tech products and services is expected to drive growth in the industry. Increased adoption of advanced technologies, including cloud computing, quantum computing, artificial intelligence (AI), machine learning, virtual reality (VR), and blockchain technology, has been transforming the tech industry.
Furthermore, worldwide IT spending is expected to reach $4.4 trillion, an increase of 4% year-over-year, according to Gartner, Inc. (IT). The increased demand for application software, infrastructure software, and other managed services is projected to benefit the tech industry's growth and revenue. Given the promising growth prospects, we think it could be an ideal time to invest in quality tech stocks at discounted prices following the April market rout.
Against this backdrop, it could be profitable to invest in fundamentally sound tech stocks Viavi Solutions Inc. (VIAV) and Commvault Systems, Inc. (CVLT). These names are expected to gain momentum in the near term.
Viavi Solutions Inc. (VIAV)
VIAV in Milpitas, Calif., offers network testing and monitoring solutions, embedded systems and enterprise performance management solutions, and assurance solutions to communications service providers, network equipment manufacturers, enterprises, government, and avionics customers. The company operates through three segments: Network Enablement (NE); Service Enablement (SE); and Optical Security and Performance Products (OSP) segments.
Last month, VIAV launched the ALT-9000 universal radio altimeter (RADALT) test solution with more intricate waveforms to address safety and security issues in the aviation industry. The ALT-9000 adds fiber optic delay to traditional radio frequency (RF) testing, which allows it to test all types of RADALTS in the market. This new solution is expected to boost the company's market reach and revenues.
In March, VIAV unveiled FiberComplete PRO, a fiber test solution with a vast suite of capabilities. This test solution combines six test instruments through a single test port, including a light source, power meter, optic loss test set, ORL meter, fault finder, and OTDR. This launch is expected to boost VIAV's profitability.
In its fiscal 2022 third quarter, ended April 2, 2022, VIAV's net revenues grew 4% year-over-year to $315.50 million, while its gross profit improved 2.7% from the year-ago value to $186.90 million. The company's non-GAAP income from operations rose 10.3% year-over-year to $67.70 million. Its non-GAAP net income and non-GAAP earnings per share came in at $52 million and $0.22, respectively, registering an increase of 22.9% and 22.2% from the prior-year period.
The $1.28 billion consensus revenue estimate for its fiscal year 2022, ending Dec.2022 represents a 6.6% increase from the prior year. The company has surpassed the consensus revenue estimates in each of the trailing four quarters. The $0.93 consensus EPS estimate for the current year indicates a 12.2% year-over-year rise. Furthermore, it has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has declined 4.4% in price over the past six months and closed yesterday's trading session at $14.72.
VIAV's POWR Ratings reflect this promising outlook. It has an overall B grade, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
VIAV has a B grade for Stability, Growth, and Quality. Within the Technology - Communication/Networking industry, it is ranked #2 of 54 stocks. To see additional POWR Ratings (Value, Momentum, and Sentiment) for VIAV, click here.
Commvault Systems, Inc. (CVLT)
Oceanport, N.J.-based CVLT offers data protection and information management software applications and other related services in the U.S. and internationally. The company provides backup, recovery, data protection solutions, and data insight and storage solutions. In addition, it offers technology, business consulting, education, and remote managed services and sells appliances that integrate the software with hardware for business needs. It serves small- and medium-sized businesses, large enterprises, and government agencies.
In February, CVLT launched a Metallic portfolio of data management as a service (DMaaS) solutions in Japan. The full suite of DMaaS offerings is now available in more than 30 countries worldwide. This service offers seamless deployment and managed data protection, recovery, and compliance measures for a set of workloads, including Software-as-a-Service (SaaS) applications. This is expected to expand the company's global reach and boost revenues.
CVLT's total revenues increased 7.6% year-over-year to $205.95 million in its fiscal 2022 fourth quarter, ended March 31, 2022. Its gross margin improved 7.5% year-over-year to $173.90 million, while its income from operations grew 10.7% from its year-ago value to $11.45 million. The company's net income and net income per common share came in at $7.99 million and $0.17, respectively, registering an increase of 27.6% and 30.8% year-over-year.
Analysts expect CVLT's revenue for its fiscal 2023 second quarter, ending Sept. 30, 2022, to come in at $194.48 million, representing a 9.4% rise year-over-year. The Street expects the company's EPS for the next quarter to be $0.58, representing 21.7% growth year-over-year. The company has an impressive earnings history as it has surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of CVLT have decreased 8.1% in price over the past month and 11.6% over the past six months and closed yesterday's trading session at $59.34.
CVLT's strong fundamentals are reflected in its POWR Ratings. The stock has an overall A grade, which translates to Strong Buy in our proprietary rating system.
CVLT has a grade of A for Quality and a B for Growth, Value, and Sentiment. Within the Software - Application industry, it is ranked #1 of 156 stocks.
To see additional POWR Ratings (Momentum and Stability) for CVLT, click here.
Click here to check out our Software Industry Report for 2022
VIAV shares were trading at $14.31 per share on Friday afternoon, down $0.41 (-2.79%). Year-to-date, VIAV has declined -18.79%, versus a -13.89% rise in the benchmark S&P 500 or 2022index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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