After an uncharacteristically sluggish performance in 2022, tech stocks have staged a robust rebound in 2023. This revival may be attributed to the escalating dependence of corporations on advanced technological solutions and expeditious digital metamorphosis anticipated to fuel industry expansion.
Upon careful analysis, I believe tech stocks EchoStar Corporation (SATS) and Stratasys Ltd. (SSYS) could be solid buys now, given their robust growth trajectory and promising profitability. Conversely, waiting for a better entry point in Infosys Limited (INFY) might be prudent.
Amid swift digital transformation, technological innovations enhance convenience and accessibility within our living spaces. These advancements herald substantial opportunities for growth as previously expensive or seemingly unreachable services are now easily obtainable in sectors like healthcare, automotive, and real estate.
Entering 2024, the tech industry's prospects appear promising due to cooling inflation, predicted interest rate cuts, and heightened consumer spending dynamics. The industry is thriving and continues to be a high-performing market player this year, evident from Technology Select Sector SPDR Fund’s (XLK) impressive 54% year-to-date gain.
The industry owes its vehement expansion to the broad-based adoption of cutting-edge technologies, including AI, the Internet of Things (IoT), Augmented and Virtual Reality (AR&VR), 5G, and machine learning by businesses and individuals worldwide.
As per Gartner, Inc.’s (IT), global IT spending is set to touch the $5.10 trillion mark by 2024, indicating an 8% annual rise. The ubiquitous need for digital transformation across numerous industries propels this colossal surge in IT expenditure.
As businesses consistently aim to maximize their investments in technology, the forthcoming years will likely witness substantial growth in the IT sector. The global IT services market is expected to reach $4910.4 billion by 2027, growing at a CAGR of 8%.
The global 3D printing industry is expected to reach $105.99 billion by 2028, growing at a 24.9% CAGR. This exponential growth is anticipated to be propelled by escalating digitalization and the incorporation of cutting-edge technologies like Industry 4.0, intelligent factories, robotics, and machine learning, boosting demand for online 3D printing for simulation purposes.
Also, the IT outsourcing market is estimated to grow at a CAGR of 9.3% to $1.42 trillion by 2031.
With these favorable trends in mind, let's delve into the fundamentals of the three tech stock picks.
Infosys Limited (INFY)
Headquartered in Bengaluru, India, INFY provides consulting, technology, outsourcing, and next-generation digital services in North America, Europe, India, and internationally.
On November 22, INFY announced a strategic long-term collaboration with TK Elevator (TKE), one of the world's leading urban mobility companies. As a part of the engagement, INFY will consolidate, harmonize, and modernize TK Elevator's digital landscape.
The engagement aims to continually innovate and transform the company's application and IT environment, leveraging an AI-first strategy powered by Infosys Topaz, an AI-first set of services, solutions and platforms using generative AI technologies.
INFY’s trailing-12-month cash from operations of $2.98 billion is significantly higher than the industry average of $$73.59 million. Its trailing-12-month ROCE and ROTA of 30.89% and 19.84% are significantly higher than the industry averages of 1.11% and 0.26%, respectively.
For the fiscal second quarter ended September 30, 2023, INFY’s revenues amounted to $4.72 billion, up 3.6% year-over-year. Its gross profit rose 4.5% over the prior-year quarter to $1.45 billion. Its net profit came at $751 million, representing a marginal increase. However, its EPS came in at $0.18.
As of September 30, 2023, total current assets stood at $9.28 billion, compared to $8.63 billion as of March 31, 2023.
Analysts expect INFY’s revenue to increase 3.1% year-over-year to 18.53 billion for the year ending March 2024. Its EPS is expected to grow marginally year-over-year to $0.72 for the same period. It surpassed revenue estimates in three of four trailing quarters, which is impressive.
Shares of INFY have gained 10.3% over the past nine months to close the last trading session at $18.67. Over the past six months, it gained 19.5%.
INFY’s POWR Ratings reflect its outlook. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
INFY also has an A grade for Quality and a B for Stability. It is ranked #6 out of 9 stocks in the Outsourcing – Tech Services industry.
Click here for the additional POWR Ratings for Growth, Value, Momentum, and Sentiment for INFY.
EchoStar Corporation (SATS)
SATS offers global networking solutions. Its Hughes segment provides broadband tech, hardware, and satellite solutions to government and enterprise clients, whereas its EchoStar Satellite Services arm offers owned/leased satellites on a full-time/occasional basis to U.S. government, ISPs, news, content, and private sector customers.
In November, SATS’ Hughes Network Systems announced that its JUPITER™ 3 ultra-high-density satellite has successfully deployed its solar arrays and antennas, and the spacecraft has passed readiness testing by the manufacturer, Maxar Space Systems.
Hughes is testing the satellite communications with ground equipment, which is the final step before initiating broadband services for customers such as airlines, corporations, governments, and consumers of its popular HughesNet service. The JUPITER 3 satellite will bring over 500 Gbps of additional broadband capacity across North and South America.
SATS’ trailing-12-month net income margin of 5.14% is 59.9% higher than the industry average of 3.21%. Its trailing-12-month CAPEX / Sales of 15.69% is 284.1% higher than the 4.09% industry average.
For the fiscal third quarter that ended September 30, 2023, SATS’ revenue from EchoStar Satellite Services increased 29.4% year-over-year to $6.45 million. Its total revenue came at $413.07 million. Its total adjusted EBITDA stood at $125.81 million.
In addition, as of September 30, 2023, the company’s current assets stood at $2.47 billion, compared to $2.13 billion as of December 31, 2022. Moreover, for the nine months that ended September 30, 2023, its cash and cash equivalents, including restricted amounts, stood at $1.10 billion, up 20.8% year-over-year.
Analysts expect SATS’ revenue and EPS for the fiscal year ending December 2023 to reach $1.76 billion and $0.58, respectively. It surpassed EPS estimates in three of four trailing quarters.
Shares of SATS have gained 27.6% over the past month to close the last trading session at $13.31. Over the past five days, it has gained 11%.
SATS’ POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
SATS also has a B grade for Value and Quality. It is ranked #9 out of 42 stocks in the Technology – Electronics industry.
To see SATS’ additional POWR Ratings for Growth, Momentum, Stability, and Sentiment, click here.
Stratasys Ltd. (SSYS)
SSYS provides polymer-based 3D printing solutions, offering a range of 3D printing systems, materials, software, and services for various industries, including automotive, aerospace, and healthcare.
Recently, SSYS has shared that the University Hospital Birmingham in England is delivering improved outcomes for head and neck cancer patients, with the hospital reporting reduced surgery times of up to three hours using tailored, 3D-printed cutting guides.
The success is credited to adopting a Stratasys J5 MediJet 3D printer, thus allowing the hospital to create precise, patient-specific cutting guides before surgeries. SSYS’ GrabCAD Print Software, working alongside this printer, has also proven to deliver additional benefits. Its ability to automatically build support material contributes to the overall end-to-end timesaving facilitated by the 3D printing workflow.
SSYS’ net sales for the fiscal third quarter that ended September 30, 2023, came at $162.13 million, while its non-GAAP gross profit came in at $78.27 million. Its non-GAAP operating income stood at $4.09 million.
The company’s non-GAAP net income and non-GAAP income per share came at $2.45 million and $0.04, respectively. As of September 30, 2023, its total current liabilities stood at $200.43 million, compared to $210.65 million as of December 31, 2022.
Analysts expect SSYS’ revenue and EPS for the fiscal fourth quarter ending December 2023 to come at $154.20 million and $0.02, respectively. It surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
The stock gained 8.5% over the past year to close the last trading session at $12.63. Over the past month, it gained 17.3%.
SSYS’ POWR Ratings reflect solid prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Growth and Momentum. It is ranked first out of 7 stocks within the Technology - 3D Printing industry.
Beyond what we have highlighted above, one can see SSYS’ Value, Stability, Sentiment, and Quality ratings, here.
What To Do Next?
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INFY shares . Year-to-date, INFY has gained 6.00%, versus a 24.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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