The global tech industry is poised for significant growth due to increasing remote work demands, expansion of e-commerce, technological adoption in emerging markets, progress in 5G and IoT, digital transformations across different sectors, and improvements in cybersecurity.
Amid this backdrop, investors could look to buy fundamentally strong tech stocks TDK Corporation (TTDKY), Kyndryl Holdings, Inc. (KD), and Stratasys Ltd. (SSYS).
Gartner predicts 2024 global IT spending at $5.06 trillion, an 8% increase from 2023. This highlights tech's vital role in operations, resilience, and productivity. Enterprises worldwide are boosting their digital capabilities through investments in digital transformation, driving demand for tech services.
Gartner expects spending on IT services to rise 9.7% year-over-year to $1.52 trillion this year. There has been a rising demand for advanced hardware to meet the ever-rising needs of processing and analyzing data and efficiently handling complex workloads. The IT hardware market is expected to grow at a 7.9% CAGR, reaching $191.03 billion by 2029.
Meanwhile, innovative 3D printing technology is extensively applied across the automotive, aerospace, and healthcare sectors, driven by the demand for customized products. 3D printing also offers several benefits, such as cost savings and reduced wastage.
As a result, the global 3D printing market is expected to grow at a CAGR of 24.3%, reaching $83.90 billion by 2029. Furthermore, investors’ interest in tech stocks is evident from the Technology Select Sector SPDR Fund’s (XLK) 35.1% returns over the past year.
Considering these conducive trends, let’s assess the fundamentals of the abovementioned technology stocks.
TDK Corporation (TTDKY)
Headquartered in Tokyo, Japan, TTDKY and its subsidiaries manufacture and sell electronic components internationally. The company operates through Passive Components, Sensor Application Products, Magnetic Application Products, Energy Application Products, and Other segments.
On April 23, 2024, TTDKY introduced the compact TDK-Lambda brand CUS800M and CUS1000M AC-DC power supply series, featuring up to 800W and 1000W, respectively, with a variable speed fan and various output options. These power supplies, suitable for medical, dental, test, broadcast, and industrial equipment, come with safety certifications, high efficiency, and a five-year warranty.
The CUS800M and CUS1000M series also offer remote on/off and remote sense functions, providing flexibility for different applications. With their compact size and high power density, these power supplies are ideal for space-constrained environments where reliable performance is crucial.
On January 9, 2024, TTDKY and Goodyear announced a partnership to enhance tire intelligence technologies. They aim to develop sensors and related technologies for vehicles and tires, improving vehicle performance and safety.
TTDKY’s levered FCF grew at a CAGR of 31.6% over the past three years. Also, its revenue grew at a CAGR of 12.5% over the past three years.
In terms of the trailing-12-month Return on Common Equity, TTDKY’s 7.88% is 146.6% higher than the 3.19% industry average. Likewise, its 4.68% trailing-12-month Return on Total Capital is 93% higher than the industry average of 2.43%. Its 0.64x trailing-12-month asset turnover ratio is 6.1% higher than the industry average of 0.60x.
For the fiscal year that ended March 31, 2024, TTDKY’s net sales came in at ¥2.10 trillion ($13.62 billion). Its operating profit increased 2.4% year-over-year to ¥172.89 billion ($1.12 billion). Likewise, its net profit attributable to owners of parent and EPS came in at ¥124.69 billion ($807.01 million) and ¥328.19, up 9.2% each over the prior-year quarter, respectively.
Street expects TTDKY’s EPS and revenue for the quarter ending September 30, 2024, to increase 38.3% and 3.3% year-over-year to $0.95 and $3.81 billion, respectively. It surpassed the revenue estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 35.1% to close the last trading session at $46.55.
TTDKY’s POWR Ratings reflect robust prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #9 out of 37 stocks in the B-rated Technology - Hardware industry. It has a B grade for Growth, Value, and Stability. Click here to see TTDKY’s Momentum, Sentiment, and Quality ratings.
Kyndryl Holdings, Inc. (KD)
KD operates as a technology services company and IT infrastructure services provider worldwide. The company offers cloud services, core enterprise and zCloud services, application, data, and artificial intelligence services, digital workplace services, security and resiliency services, network services, and edge services.
On May 2, 2024, KD and Rubrik teamed up to boost cyber resilience for KD’s customers in various sectors. They introduced ‘Kyndryl Incident Recovery’ with Rubrik, a managed solution that cuts downtime and data loss risks and speeds up disaster recovery. This highlights the crucial role of data protection and cyber resilience in modern businesses.
On April 23, 2024, KD renewed and expanded its IT partnership with Honda Motor Europe Ltd., focusing on modernizing and managing mission-critical systems for Honda's logistics with the ‘Kyndryl Bridge.’ The aim was to increase agility, standardize processes, and future-proof IT systems.
This partnership will also enable Honda to leverage Kyndryl's expertise in cloud services, automation, and AI to drive innovation and efficiency in their operations.
In terms of the trailing-12-month levered FCF margin, KD’s 13.72% is 46% higher than the 9.40% industry average. Similarly, its 3.66% trailing-12-month Capex / Sales is 60% higher than the industry average of 2.29%. KD’s 1.44x trailing-12-month asset turnover ratio is 138.6% higher than the industry average of 0.60x.
For the fiscal fourth quarter that ended March 31, 2024, KD reported a revenue of $3.85 billion. Its total adjusted EBITDA grew 18.9% year-over-year to $566 million. KD’s adjusted pretax income stood at $30 million, compared to an adjusted pretax loss of $61 million in the year-ago quarter. For the same quarter, the company’s total cost and expenses declined 15.2% over the prior-year quarter to $3.85 billion.
Over the past nine months, KD’s stock has gained 66.8% to close the last trading session at $20.77.
KD’s strong fundamentals 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 a B grade for Growth and Sentiment. Within the Technology - Services industry, it is ranked #17 out of 78 stocks. To access the additional POWR Ratings of KD for Value, Momentum, Stability, and Quality, click here.
Stratasys Ltd. (SSYS)
SSYS provides connected polymer-based 3D printing solutions. It offers a range of 3D printing systems, which includes polyjet printers, Fused Deposition Modeling (FDM) printers, stereolithography printing systems, origin P3 printers, SAF printers, and various vertical markets.
On April 25, 2024, SSYS announced its new HighDef Printing capabilities and the H350 printer Version 1.5 launch, featuring improved performance and service capabilities.
These enhancements aim to provide finer detail, greater precision, and expanded applications for industries like aerospace, automotive, and healthcare. They offer reliable repeatability and intricate part design capabilities.
On April 16, 2024, SSYS announced an exclusive partnership with Select Additive Technologies, a major US machine tool reseller, to provide polymer additive manufacturing solutions to their extensive customer base, aiming to enhance efficiency, part performance, and manufacturing strategy with SSYS’ 3D polymer printers, software, and materials.
SSYS's revenue grew at a CAGR of 6.4% over the past three years. Likewise, its Tang Book Value and Total Assets grew at a CAGR of 3.5% and 4.6% during the same period.
In terms of the trailing-12-month gross profit margin, SSYS’s 44.53% is 44.3% higher than the 30.86% industry average.
SSYS’s revenues for the fourth quarter, which ended on December 31, 2023, amounted to $156.34 million. Its non-GAAP gross profit and non-GAAP operating income stood at $76.32 million and $2.02 million, respectively. Additionally, its non-GAAP net income amounted to $1.65 million, with a non-GAAP EPS of $0.02.
Analysts expect SSYS’s revenue for the quarter ending September 30, 2023, to increase marginally year-over-year to $162.53 million. Its EPS for the same quarter is expected to grow 45.8% year-over-year to $0.06. The company surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has declined 10.8% over the past month to close the last trading session at $9.64.
SSYS’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has a B grade for Growth and Momentum. Within the Technology - 3D Printing industry, it is ranked first out of 7 stocks. To see SSYS’s Value, Stability, Sentiment, and Quality ratings, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
TTDKY shares were trading at $45.19 per share on Wednesday morning, down $1.36 (-2.92%). Year-to-date, TTDKY has declined -4.50%, versus a 9.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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