The technology industry is growing significantly due to the rising automation and digital technologies across various industries. Given the favorable industry trends, quality tech stocks Lenovo Group Limited (LNVGY), Insight Enterprises, Inc. (NSIT), and Crexendo, Inc. (CXDO) could be smart investments for 2024.
Globally, the increased IT spending, coupled with the widespread adoption of software-as-a-service and cloud-based solutions, is boosting the industry. Also, IT cloud services are expected to witness growth due to the massive cloud deployments across the end-user industries. Global IT Services market is expected to grow at a CAGR of 8.4% until 2028.
Additionally, Gartner predicts global IT spending to hit $5.10 trillion in 2024, an 8% increase. This growth is expected to be fueled by higher investments in cloud computing, growth of generative AI, and digital transformation of businesses.
Furthermore, the increasing need to store data amid the growing usage of data analytics, AI, blockchain, IoT, cloud computing, and all Internet-based services is driving demand for advanced hardware. The IT hardware market is projected to grow at a CAGR of 7.9% to reach $177.11 billion by 2028.
With these favorable trends in mind, let's delve into the fundamentals of the three best technology stock picks mentioned above.
Lenovo Group Limited (LNVGY)
Headquartered in Quarry Bay, Hong Kong, LNVGY is an investment holding company, that develops, manufactures, and markets technology products and services. It operates through Intelligent Devices Group, Infrastructure Solutions Group, and Solutions and Services Group segments.
On December 14, 2023, LNVGY announced it had expanded its hybrid cloud platform for AI with new ThinkAgile hyperconverged solutions and ThinkSystem servers that advance cloud deployment, hybrid connectivity and AI capabilities, powered by the next generation of Intel Xeon Scalable Processors. The new AI ready platform delivers improved performance and the latest accelerators as a critical next step for delivering a dynamic hybrid AI approach across public, private, and foundational models to enable AI for All.
On December 4, 2023, LNVGY announced its new Chromebox Micro media player during the Digital Signage Experience (DSE). The Lenovo Chromebox Micro is a new breed of Chromebox, an ultra-thin and affordable media player offering high performance, proven data security, and easier remote control and device management with ChromeOS.
LNVGY’s trailing-12-month ROCE of 21.19% is significantly higher than the industry average of 1.13%, while its trailing-12-month ROTC of 10.45%% is 287.7% higher than the industry average of 2.70%.
LNVGY’s group revenue for the second quarter that ended September 30, 2023, came in at $14.41 billion. Likewise, the company’s net income attributable to equity holders and earnings per share came in at $249 million and $1.99, respectively. Its gross profit margin rose 0.7 percentage points year-over-year to 17.5%.
Analysts expect LNVGY’s revenue for fiscal year ending March 31, 2025, to increase 10.4% year-over-year to $62.09 billion. Its EPS is expected to increase 53.9% year-over-year to $2.36 for the same year.
The stock has gained 36.6% over the past three months to close the last trading session at $27.97.
LNVGY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade in Value and Momentum. It is ranked #18 out of 36 stocks in the B-rated Technology - Hardware industry.
Click here to see the other ratings of LNVGY (Sentiment, Stability, Growth, and Quality).
Insight Enterprises, Inc. (NSIT)
NSIT provides information technology (IT) hardware, software services and solutions in the United States and internationally. The company's solution portfolio includes cloud enablement, data and AI, digital strategy, intelligent applications and edge, and IoT solutions, as well as digital transformation services.
On December 1, 2023, NSIT announced that it had completed the acquisition of SADA, a leading cloud business and technology consultancy and six-time Google Cloud Partner of the Year. The acquisition advances Insight’s strategy and further strengthens its unique position as a leading Solutions Integrator offering market-leading multicloud solutions at scale.
NSIT’s trailing-12-month ROCE of 16.52% is significantly higher than the industry average of 1.13%, while its trailing-12-month ROTC of 9.69% is 259.3% higher than the industry average of 2.70%.
NSIT’s total net sales for the fiscal third quarter ended September 30, 2023, came in at $2.27 billion. Gross profit rose 2% year-over-year to $408.87 million. Its earnings per common share increased 11% year-over-year to $4.15. its adjusted EBITDA increased 14.5% year-over-year to $128.76 million.
Analysts expect NSIT’s EPS for the fourth quarter ended December 31, 2023, to increase 20.8% year-over-year to $3.06. Its revenue is expected to be $2.40 billion for the same quarter.
Shares of NSIT increased 77.7% over the past year to close the last trading session at $177.19.
NSIT’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Stability, Momentum, and Quality. Within the B-rated Technology - Services industry, it is ranked #22 out of 75 stocks.
Beyond what is stated above, we’ve also rated NSIT for Growth, Value, and Sentiment. Get all NSIT ratings here.
Crexendo, Inc. (CXDO)
CXDO provides cloud communication platform and services, video collaboration, and managed IT services for businesses in the United States, Canada, and internationally. It operates through two segments, Cloud Telecommunications and Software Solutions.
CXDO’s trailing-12-month gross profit margin and levered FCF margin of 60.3% and 12.15% are 40.83% and 41.1% higher than the respective industry averages of 48.88% and 8.62%.
CXDO’s total revenue increased 52.3% year-over-year to $13.87 million for the fiscal third quarter that ended September 30, 2023. Its net income came in at $1.70 million, compared to a loss of $696 thousand in the previous-year quarter. Its EPS came in at $0.07, compared to negative $0.03 in the previous-year quarter.
Street expects CXDO’s revenue for the fiscal fourth quarter ended December 2023 to increase 20.6% year-over-year to $13.80 million. The company’s EPS is expected to be $0.04 for the same quarter. Moreover, it has surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
Over the past six months, the stock has surged 174% to close the last trading session at $4.85.
It’s no surprise that CXDO has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has an A grade for Sentiment and a B in Quality and Growth. Within the Technology - Services industry, it is ranked #19 out of 75 stocks.
In addition to the POWR Ratings stated above, one can access CXDO's ratings for Momentum, Value, and Stability here.
What To Do Next?
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LNVGY shares were trading at $27.99 per share on Tuesday afternoon, up $0.02 (+0.07%). Year-to-date, LNVGY has gained 0.07%, versus a -0.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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