The tech sector continues to thrive thanks to constant innovations and developments. Emerging technologies like artificial intelligence (AI), machine learning (ML), cloud computing, and the Internet of Things (IoT) are expected to drive the industry’s growth in the long term.
The industry's landscape is changing due to the increasing acceptance of these cutting-edge technologies, which guarantees a favorable environment for businesses in this sector. Therefore, investors could consider investing in quality tech stocks HP Inc. (HPQ), Box, Inc. (BOX), and LiveRamp Holdings, Inc. (RAMP) to take advantage of the industry’s tailwinds.
Before diving deeper into the fundamentals of these stocks, let’s discuss what’s shaping the industry’s prospects.
Increased investments in digital transformation initiatives and the adoption of advanced technologies have put the tech industry under the spotlight. Gartner predicts global IT spending to hit $5.10 trillion in 2024, rising 8% year-over-year. Higher investments in cloud computing, the development of generative AI, and digital transformation initiatives will drive the growth.
As the tech industry evolves, there is a growing demand for advanced tech hardware to support the rise in remote work and cybersecurity services. With the advancements in software, the need for advanced hardware becomes imperative. There is a robust demand for advanced hardware that meets complex processing and data storage requirements.
The IT hardware market is expected to grow at a CAGR of 7.9% to reach $177.11 billion. Moreover, as businesses embrace digital transformation, the demand for IT services to implement and optimize digital products and services, cloud services, etc., is expected to rise. The global IT services market is projected to reach revenues of $1.36 trillion this year and grow at a CAGR of 6.8% to reach $1.77 trillion by 2028.
Investors’ interest in tech stocks is evident from the Technology Select Sector SPDR ETF’s (XLK) 50.5% returns over the past year.
In light of such favorable trends, let’s delve deeper into the fundamentals of the featured tech stocks.
HP Inc. (HPQ)
HP provides personal computing and other digital access devices, imaging and printing products, and related technologies, solutions, and services globally. The company operates through three segments: Personal Systems, Printing, and Corporate Investments. It serves individual consumers, small- and medium-sized businesses, and large enterprises.
On November 7, HPQ announced that it had partnered with Indo-MIM Private Limited to advance metal additive manufacturing and expand its application in various industries. INDO-MIM has invested in three HP Metal Jet S100 printers as part of the collaboration to advance additive manufacturing globally.
Savi Baveja, President of Personalization & 3D Printing and Chief Incubation Officer, HPQ said, “We are proud to partner with INDO-MIM to create new possibilities for their customers leveraging our S100 solution and metals additive manufacturing capabilities. We are thrilled to work with INDO-MIM to drive new metals applications, expand material possibilities and increase precision and productivity.”
“We share a common purpose to accelerate innovation, grow adoption and scale breakthrough applications,” he added.
Two out of the three printers will be based in Bangalore, India, focusing on material and application development to cater to customers in the Middle East, India, and the rest of the Asia-Pacific region, and the third unit based in Texas will support North American clients and expand their production capabilities.
In terms of forward non-GAAP P/E, HPQ’s 8.68x is 63% lower than the 23.46x industry average. Its 0.68x forward EV/Sales is 76.5% lower than the 2.89x industry average. Likewise, its 8.04x forward EV/EBIT is 60% lower than the 20.09x industry average.
For the fiscal fourth quarter ended October 31, 2023, HPQ’s total net revenue amounted to $13.82 billion. The company’s non-GAAP net earnings increased 8.4% year-over-year to $902 million. Its non-GAAP earnings from operations increased 11.3% over the prior year quarter to $1.25 billion. Its non-GAAP net earnings per share came in at $0.90, registering an increase of 9.8% year-over-year.
HPQ’ revenue for the quarter ending April 30, 2024, is expected to increase 2% year-over-year to $13.17 billion. Its EPS for the quarter ending January 31, 2024, is expected to increase 8.4% year-over-year to $0.81. It surpassed the consensus EPS estimates in three of the trailing four quarters, which is impressive. Over the past three months, the stock has gained 14.4% to close the last trading session at $29.90.
HPQ’s POWR Ratings reflect its solid prospects. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
HPQ has an A grade for Value and Momentum and a B for Growth. Within the B-rated Technology – Hardware industry, it is ranked #2 out of 35 stocks. In addition to the POWR Ratings stated above, one can access HPQ’s additional ratings for Stability, Sentiment, and Quality ratings here.
Box, Inc. (BOX)
BOX provides a cloud content management platform that enables organizations of various sizes to manage and share their content from anywhere on any device. The company's Software-as-a-Service platform enables users to perform various services both internally and with external parties. It also offers web, mobile, and desktop applications for cloud content management on a platform for custom applications.
On December 14, 2023, BOX announced new consulting services that help customers safely and securely implement an AI content strategy across their organizations. These offerings are available through Box Consulting, providing tailored workshops, implementation roadmaps, and managed deployments to assist organizations in safely implementing AI content strategies.
“The promise of AI combined with the value of an enterprise’s unique business content is potentially transformative, but the steps you can take to harness the full power of this new technology are not always clear,” said Jon Herstein, Chief Customer Officer at Box.
“These new offerings merge Box Consulting’s deep expertise in enterprise content with access to Box’s groundbreaking AI technology and the experts who built it. By executing a robust AI content strategy with Box Consulting, organizations can unlock the value of their unstructured data and realize the power of AI much more quickly,” he added.
In terms of forward non-GAAP PEG, BOX’s 0.87x is 57.2% lower than the 2.04 industry average. Its 13.56x forward EV/EBITDA is 9.9% lower than the 15.05x industry average.
BOX’s revenue for the fiscal third quarter that ended October 31, 2023, increased 4.6% year-over-year to $261.54 million. Its non-GAAP operating income increased 7.8% over the prior year quarter to $64.63 million.
The company’s non-GAAP net income attributable to common stockholders increased 14.1% year-over-year to $53.23 million. Also, its non-GAAP EPS came in at $0.36, representing an increase of 16.1% year-over-year.
Analysts expect BOX’s revenue and EPS for the quarter ending January 31, 2023, to increase 2.5% and 4.2% year-over-year to $262.81 million and $0.39, respectively. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past three months, the stock has gained 2.2% to close the last trading session at $24.89.
BOX’s solid prospects are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Quality and a B grade for Growth and Value. It is ranked #6 out of 75 stocks in the Technology – Services industry. Click here to see the additional BOX ratings for Momentum, Stability, and Sentiment.
LiveRamp Holdings, Inc. (RAMP)
RAMP operates a data collaboration platform globally. It operates the LiveRamp Data Collaboration platform that enables an organization to unify customer and prospect data to build a single view of the customer in a way that protects consumer privacy. Its platform supports various people-based marketing solutions, including data collaboration, activation, measurement and analytics, identity, and data marketplace.
In terms of forward EV/EBIT, RAMP’s 18.79x is 6.5% lower than the 20.09x industry average. Its 2.51x forward Price/Book is 38.1% lower than the 4.06x industry average.
For the fiscal second quarter, which ended September 30, 2023, RAMP’s revenues increased 8.7% year-over-year to $159.87 million. The company’s non-GAAP net earnings from continuing operations rose 96% year-over-year to $29.13 million. Its adjusted EBITDA increased 77.7% over the prior year's quarter to $32.38 million.
Also, its non-GAAP EPS from continuing operations came in at $0.43, representing an increase of 95.5% year-over-year.
Street expects RAMP’s revenue and EPS for the quarter ended December 31, 2023, to increase 4.3% and 25.3% year-over-year to $165.37 million and $0.35, respectively. It has an impressive surprise history, having beaten the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 58% to close the last trading session at $35.40.
It’s no surprise that RAMP has an overall rating of A, which translates to a Strong Buy in our POWR Ratings system.
It has a B grade for Growth, Value, Sentiment, and Quality. Within the same industry, it is ranked #2. Beyond what is stated above, we’ve also rated RAMP for Momentum and Stability. Get all the RAMP ratings here.
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HPQ shares were trading at $29.89 per share on Thursday afternoon, down $0.01 (-0.03%). Year-to-date, HPQ has declined -0.66%, versus a -1.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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