The stock market faced a hard time due to several geopolitical crises, high inflation, rising interest rates, and the pandemic's ongoing repercussions. Finding affordable tech stocks you can buy with confidence, might seem like looking for a needle in a haystack in these turbulent economic times.
Therefore, investors could consider buying fundamentally sound cheap tech stocks Nokia Oyj (NOK), Dropbox, Inc. (DBX), and Celestica Inc. (CLS) to garner steady returns.
The stock market’s sell-off last year, caused by increasing interest rates, record-high inflation, and shaky economic circumstances, wiped out tech stocks. Several fundamentally sound IT businesses are currently trading at discounted valuations as the stock market is in a downward trend this year and is further exacerbated by concerns over bank insolvencies.
Over the past two weeks, the stock market has seen some wild swings, marked by fears of a possible banking sector contagion. However, amid this, the Nasdaq Composite index is up 13.3% year-to-date and back above both its 50-day and 200-day moving averages.
Moreover, although tech companies entered this year prepared for a recession, according to a Gartner Inc. (IT) survey, 72% of high-tech leaders in the United States, Canada, and Western Europe have plans to grow revenue in 2023 despite economic uncertainty.
The overall demand for tech products and services is still strong. The global information technology market is expected to reach about $12 trillion in 2027, growing at a CAGR of 7.9%. The demand for cloud computing services is expected to drive the demand for IT services during the forecast period.
Given this backdrop, it could be wise to scoop up the shares of fundamentally strong tech stocks NOK, DBX, and CLS, which are trading at attractive valuations.
Nokia Oyj (NOK)
Headquartered in Espoo, Finland, NOK provides mobile, fixed, and cloud network solutions worldwide. The company operates through four segments Mobile Networks; Network Infrastructure; Cloud and Network Services; and Nokia Technologies.
On March 21, A successful experiment of an Open RAN compatible near real-time RAN Intelligent Controller (RIC) with a native E2 interface was disclosed by NOK in partnership with AT&T Inc. (T).
The company aims to advance innovation through this partnership to speed up the procedure and guarantee a premium user experience. NOK seeks to expand its business into targeted, high-growth, and high-margin vertical markets to address growth opportunities beyond its traditional primary markets.
On March 13, NOK announced a partnership with Netplus Broadband, an ISP in India, to supply its Multi-Access Gateway Broadband Network Gateway (BNG) application for access management, hosted on the FP5-based 7750 SR and the 7250 IXR, which offers a scalable and high-capacity infrastructure to enable Netplus' rapid broadband access growth across India.
This reflects the growing demand for the company’s services and solutions over its peers. Both companies are expected to benefit significantly by expanding their footprint and offerings in India.
On March 7, Hrvatski Telekom chose NOK's Converged Charging software solution to modernize online charging and better use network monetization potential that can open up new income streams for the Croatian operator. The deal expands NOK’s partnership with Hrvatski Telekom, which already uses a variety of other Nokia products.
In terms of forward non-GAAP P/E, NOK is trading at 9.99x, 51.7% lower than the industry average of 20.69x. Its forward EV/Sales multiple of 0.83 is 69.1% lower than the industry average of 2.70x. In addition, the stock’s forward EV/EBITDA and EV/EBIT ratios of 5.92 and 6.69 compare with industry averages of 13.39 and 16.35, respectively.
NOK’s net sales increased 16.1% year-over-year to €7.45 billion ($8.01 billion) in the fourth quarter that ended December 31, 2022. Its operating profit grew 19.2% from the year-ago value to €882 million ($947.92 million), while its EPS came in at €0.56, representing an increase of 366.7% year-over-year.
Its net profit for the period increased 363.5% year-over-year to €3.15 billion ($3.39 billion) in the same quarter.
Street expects NOK’s revenue to increase 9.5% year-over-year to $6.15 billion for the fiscal first quarter (ending March 31, 2023). Its EPS is expected to increase by 10.9% year-over-year to $0.08. Moreover, the company surpassed the EPS estimates in three of the trailing four quarters.
The stock has gained 3.3% over the past six months to close the last trading session at $4.65.
NOK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Among the 50 stocks in the B-rated Technology - Communication/Networking industry, it is ranked #4. NOK is also rated an A in Value and a B in Growth, Momentum, and Sentiment. To see additional POWR Ratings for Stability and Quality for NOK, click here.
Dropbox, Inc. (DBX)
DBX is a provider of a collaboration platform. Its platform lets users create, access, organize, share, collaborate, and secure content. DBX supports customers in the professional services, technology, media, education, industrial, consumer and retail, and financial services industries.
Last year in December, DBX acquired FormSwift, a cloud-based service that gives individuals and businesses a simple solution to create, complete, edit, and save critical business forms and agreements for approximately $95 million.
The combination of Dropbox, Dropbox Sign, DocSend, and FormSwift should help customers across industries manage end-to-end document workflows from closing deals to onboarding teams, giving them more control over their business results. This is expected to be operationally beneficial for the company.
In terms of forward non-GAAP P/E, DBX is trading at 12.53x, 39.4% lower than the industry average of 20.69x. In addition, the stock’s forward EV/EBITDA and EV/EBIT ratios of 9.57 and 11.48 compare with industry averages of 13.54 and 16.35, respectively.
DBX’s revenue increased 5.9% year-over-year to $598.80 million for the fourth quarter that ended on December 31, 2022. Its gross profit rose 7.4% year-over-year to $483 million, while its net income grew 163.5% from the year-ago value to $328.30 million. The company’s EPS came in at $0.93, representing an increase of 190.6% year-over-year.
Analysts expect DBX’s revenue to increase 7.2% year-over-year to $613.63 million for the fiscal second quarter (ending June 2023). Its EPS is expected to increase 9.5% year-over-year to $0.42. It has a promising earnings surprise history, surpassing the consensus EPS and revenue estimates in each of the four trailing quarters.
DBX’s shares have gained marginally over the past nine months to close the last trading day at $21.15.
DBX’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
It has an A grade for Quality and B for Value. It is ranked #10 out of 81 stocks in the Technology - Services industry. Click here to see the other ratings of DBX for Growth, Momentum, Stability, and Sentiment.
Celestica Inc. (CLS)
CLS is a provider of hardware platforms and supply chain solutions in North America, Europe, and Asia. The company’s operating segments are Advanced Technology Solutions; and Connectivity & Cloud Solutions. It serves aerospace and defense, health tech, industrial, original equipment manufacturers (OEMs), communications, and enterprise markets.
On March 14, CLS announced that Onex had disclosed its intentions to exchange all of its Multiple Voting Shares (MVS) in CLS for Subordinate Voting Shares (SVS) over the course of almost six months.
Rob Mionis, CLS’ President and CEO, said, “In 2022, Celestica posted its highest annual non-IFRS operating margin and highest non-IFRS adjusted EPS in the company’s history. Celestica is a much different company than it was just five years ago and we view this as the next logical phase in the company’s transformation.”
In terms of forward non-GAAP P/E, CLS is trading at 6.13x, 70.4% lower than the industry average of 20.69x. Its forward EV/Sales multiple of 0.25 is 90.7% lower than the industry average of 2.70x. In addition, the stock’s forward Price/Sales and Price/Cash Flows ratios of 0.20 and 4.08 compare with industry averages of 2.64 and 17.87, respectively.
For the fourth quarter that ended on December 31, 2022, CLS’ revenue rose 35.1% from the year-ago value to $2.04 billion. Its gross profit grew 31% from the year-ago value to $186.20 million. The company’s adjusted net earnings increased 23.9% year-over-year to $68.40 million. Its adjusted earnings per share stood at $0.56, up 27.3% year-over-year.
The consensus revenue estimate of $1.82 billion for the first quarter (ending March 31, 2023) represents a 16% increase year-over-year. The consensus EPS estimate of $0.45 for the current quarter indicates a 15.4% year-over-year growth. The company surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is excellent.
Over the past six months, the stock has gained 38.2% to close the last trading session at $12.41.
CLS’ solid prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It also has an A grade for Growth and Value and B for Momentum and Sentiment. Within the Technology - Services industry, it is ranked first.
Click here to see the additional ratings for CLS (Stability and Quality).
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NOK shares were trading at $4.65 per share on Wednesday afternoon, down $0.00 (0.00%). Year-to-date, NOK has gained 0.51%, versus a 4.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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