Despite facing significant headwinds over the last year, the tech is well-poised for long-term growth owing to the increasing investments in tech and the ongoing digital transformation across various industries.
To that end, investors could look to buy fundamentally strong technology hardware stocks TDK Corporation (TTDKY), Iteris, Inc. (ITI), and Quantum Corporation (QMCO), given their high growth potential.
Before diving deeper into the fundamentals of these stocks, let’s discuss why the tech hardware industry is well-positioned for growth.
The technology sector witnesses constant innovation and evolution of products and infrastructure due to the redundancy of old technology and trends.
2022 was a challenging year for most sectors, and the technology industry was no different. Worldwide PC shipments declined 16.2% last year to reach 286.20 million units. The decline was attributed to the possibility of a global recession, high inflation, and higher interest rates.
This trend continued in the first quarter as PC shipments declined 30% year-over-year to 55.20 million units. However, the industry will likely recover thanks to the rising demand for consumer electronics like smartphones, laptops, smartwatches, gaming consoles, etc.
The Covid-19 pandemic has accelerated the adoption of remote and hybrid work, propelling the demand for a wide range of hardware products.
Moreover, the growth of cloud computing, data-driven services, etc., has boosted the demand for data centers. These data centers use highly efficient and powerful hardware components to process and store data. Also, the proliferation of the Internet of Things (IoT) is also boosting the demand for hardware components.
The global hardware market is expected to grow at a CAGR of 7.9% to $164.21 billion by 2027. In addition, the global IoT market is expected to grow at a CAGR of 16.7% to $650.50 billion by 2026.
Considering these factors, it could be wise to buy these featured stocks. Let’s take a closer look at their fundamentals.
TDK Corporation (TTDKY)
Headquartered in Tokyo, Japan, TTDKY engages in the manufacture and sale of electronic components worldwide. The company operates through four segments: Passive Components MSFT Sensor Application Products; Magnetic Application Products, Energy Application Products, and Other segments.
TTDKY’s revenue grew at a CAGR of 17% over the past three years. Its EBIT grew 19.9% over the past three years. In addition, its EPS grew at a CAGR of 25.5% during the same time frame.
TTDKY’s net sales increased 14.7% year-over-year to ¥2.18 trillion ($15.79 billion) for the fiscal year that ended March 31, 2023. The company’s operating profit increased 1.2% year-over-year to ¥168.83 billion ($1.22 billion). Its net cash provided by operating activities increased 46.8% year-over-year to ¥262.77 billion ($1.90 billion).
In addition, its net EPS came in at ¥300.64. Also, its gross profit increased 3.7% year-over-year to ¥584.52 billion ($4.23 billion).
TTDKY’s EPS and revenue for fiscal 2024 are expected to increase 15% and 324.4% year-over-year to $3.03 and $15.73 billion, respectively. The stock has gained 15% year-to-date to close the last trading session at $37.43.
TTDKY’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. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Technology - Hardware industry, it is ranked #12 out of 43 stocks. The stock has a B grade for Value and Stability. Click here to see the additional ratings of TTDKY for Growth, Momentum, Sentiment, and Quality.
Iteris, Inc. (ITI)
ITI provides intelligent transportation systems technology solutions worldwide. The company offers smart mobility infrastructure solutions, including traveler information systems, transportation performance measurement software, traffic analytics software, transportation operations software, transportation-related data sets, and advanced sensing devices, among other services.
On March 15, 2023, HERE Technologies and ITI announced a multi-year agreement to integrate a broader suite of location-based services and user capabilities from HERE Technologies into Iteris’ ClearMobility® Platform.
This integration is expected to help public agencies address the critical priorities of the National Roadway Safety Strategy and support federal, state, and local officials who are ensuring roadways are both safer and less congested. The agreement could, in turn, boost ITI’s public appeal.
ITI’s revenue grew at a CAGR of 12.2% over the past three years and at a CAGR of 7.3% over the past five years. In addition, its total assets grew at a CAGR of 3.1% during the same time frame.
ITI’s total revenues for the quarter ended December 31, 2022, increased 27.1% year-over-year to $40.69 million. The company’s gross profit increased 6.5% year-over-year to $11.82 billion.
Analysts expect ITI’s revenue for the quarter ended March 31, 2023, to increase 18.2% year-over-year to $40.47 million. Over the past year, the stock has gained 81.7% to close the last trading session at $4.47.
ITI’s POWR Ratings reflect its solid prospects. It has an overall rating of B, equating to a Buy in our proprietary rating system. The stock is ranked #14 in the same industry. It has a B grade for Growth.
To see the additional POWR Ratings of ITI for Value, Momentum, Stability, Sentiment, and Quality, click here.
Quantum Corporation (QMCO)
QMCO provides products for storing and managing digital video and unstructured data in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. Some of the company’s products include CatDV, StorNext software systems, and Scalar tape systems.
On March 1, 2023, QMCO announced a partnership with WaitTime, the industry leader in crowd intelligence analytics, to deliver a certified solution that provides real-time crowd intelligence using video surveillance data captured and stored by Quantum's Unified Surveillance Platform (USP).
This certified solution is easy to deploy and gives organizations increased visibility within the operations of their venue while providing additional value to end users.
QMCO’s total assets grew at a CAGR of 12% over the past three years.
QMCO’s adjusted net income for the third quarter that ended December 31, 2022, came in at $1.56 million, compared to an adjusted net loss of $4.55 million in the prior-year quarter. Its total revenue increased 16.6% year-over-year to $111.20 million.
The company’s adjusted EBITDA increased significantly year-over-year to $6.13 million. Its adjusted net EPS came in at $0.02, compared to an adjusted loss per share of $0.08 in the year-ago quarter.
Analysts expect QMCO’s revenue for the quarter ended March 31, 2023, to increase 7.2% year-over-year to $102.04 million. The stock has fallen 6.4% year-to-date to close the last trading session at $1.02.
QMCO’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #13 in the Technology - Hardware industry. It has an A grade for Sentiment and a B for Growth and Stability. Click here to see the other ratings of QMCO for Value, Momentum, and Quality.
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TTDKY shares were trading at $37.43 per share on Friday morning, down $0.00 (0.00%). Year-to-date, TTDKY has gained 15.03%, versus a 10.01% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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