As the widespread adoption of digital technologies has been a boon for many industries, the tech sector is thriving, with rapid digitization and the emergence of cutting-edge technologies, the demand for specialized hardware solutions is soaring.
Given the robustness, I believe fundamentally sound tech stocks, Apple Inc. (AAPL), Dell Technologies Inc. (DELL), and Quantum Corporation (QMCO), should be a part of every investor’s watchlist.
Before delving into a detailed comparison of the fundamentals of the featured stocks, let’s first see what’s happening in the technology hardware industry.
The computer hardware segment is a fast and ever-evolving market with several globally recognized players. Furthermore, the global hardware market is projected to reach $164.21 billion by 2027, growing at a CAGR of 7.9%.
On the flip side, there is increasing competition coupled with colossal spending by the firms on research and development for introducing new and innovative products in the market.
Disruptions in the supply chain, negative impacts on the workforce, and ever-increasing demands brought about by the transition to a new way of life have resulted in businesses in the entire electronics value chain evaluating and modifying their operations.
The proliferation of digital technologies has created many opportunities for industries to streamline processes and improve offerings. In order to stay competitive, hardware companies must keep up with innovative technologies to attract consumers.
As Artificial intelligence (AI) continues to proliferate across numerous sectors, the demand for associated hardware is expected to grow. The global artificial intelligence in hardware market size is projected to surpass $89.22 billion by 2030, growing at a CAGR of 27%.
Furthermore, the global IT hardware market is expected to grow at a CAGR of 6.1% between 2022 and 2027. The anticipated robust demand for specialized and high-quality hardware can be attributed to the intensifying reliance on digital devices.
Given this backdrop, it could be wise to keep an eye on fundamentally robust stocks like AAPL, DELL, and QMCO that are well-positioned to offer significant returns. Let’s take a detailed view of these stocks.
Apple Inc. (AAPL)
Tech giant AAPL designs, manufactures, markets smartphones, personal computers, tablets, wearables, and accessories and sells various related services. Its product offerings include iPhone, Mac, AirPods Max, iPad, Apple TV, Apple Watch, HomePod, and accessories.
On June 21, AAPL launched the visionOS software development kit to enable its developer community to bring more smoothness to its app user experience. This new feature would allow users to interact with digital content in their physical space using natural and intuitive inputs.
This innovation should enable users to utilize the kit’s powerful and unique capabilities to improve their productivity, design, and gaming experience.
On June 5, the company unveiled Apple Vision Pro, a revolutionary spatial computer that actively integrates digital content with the physical world, propelling innovation to unprecedented levels.
Experts assert that the device has the potential to surpass other virtual reality headsets in terms of market penetration, despite its significantly high price tag. This can be attributed to AAPL’s exceptional design, unwavering brand loyalty, and cutting-edge technology.
Moreover, in the same month, the company made further strides in expanding its product lineup. It also unveiled a bigger MacBook Air laptop alongside high-end desktops tailored for 3D designers and programmers. The company also revealed major updates to iPhone, iPad, and Apple Watch operating systems.
AAPL pays an annual dividend of $0.96, which translates to a dividend yield of 0.50%. Its four-year average yield is 0.73%. The company’s dividend payouts have grown at CAGRs of 5.9% and 7.3% over the past three and five years, respectively. Also, it has a record of nine years of consecutive dividend growth.
In the second quarter (ended April 1, 2023), AAPL reported a net sale and an operating income of $94.84 billion and $28.32 billion, respectively. During the same period, the company’s net income amounted to $24.16 billion, while its EPS remained flat year-over-year at $1.52.
In addition, its total liabilities stood at $270 billion, declining 10.6% compared to $302.08 billion as of September 24, 2022.
Street expects AAPL’s revenue to increase marginally year-over-year in the fiscal fourth quarter (ending September 2023) to $90.33 billion. Its EPS for the current quarter is expected to rise 5.6% year-over-year to $1.36. Moreover, it surpassed the EPS estimates in three of the trailing four quarters.
The stock’s trailing-12-month net income margin of 24.49% is substantially higher than the 2.01% industry average. Likewise, its trailing-12-month ROCE, ROTC, and ROTA of 145.61%, 39.09%, and 28.40% compare to the industry averages of 0.63%, 1.78%, and 0.06%, respectively.
AAPL’s shares have gained 36.5% over the past six months and 49% year-to-date to close the last trading session at $193.62.
AAPL’s POWR Ratings reflect this favorable outlook. It has an A grade for Quality. Among the 43 stocks in the Technology - Hardware industry, it is ranked #21. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
To see additional POWR Ratings for Growth, Value, Momentum, Stability, and Sentiment for AAPL, click here.
Dell Technologies Inc. (DELL)
DELL designs, develops, manufactures, markets, sells, and supports several comprehensive and integrated solutions, products, and services in the Americas, Europe, the Middle East, Asia, and internationally. The company operates through two segments, Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG).
On July 19, DELL announced its acquisition of Moogsoft, an AI-driven intelligent monitoring solution provider that supports DevOps and ITOps. This acquisition is expected to enhance the company’s AIOps capabilities within its product portfolio and as a critical component of its “multi-cloud by design” strategy.
On June 16, DELL announced a quarterly dividend of $0.37 per common share, payable to the shareholders on August 4. The company’s annual dividend translates to a 2.72% yield at the current price level, higher than the four-year average dividend yield of 0.69%.
On May 23, NVIDIA Corporation (NVDA) and DELL launched Project Helix, a collaborative effort that enables enterprises to build and deploy trustworthy generative AI applications using technical expertise and pre-built tools. By facilitating the growth and scaling of businesses, Project Helix is expected to generate strong demand among enterprises.
On the same day, the company introduced Project Fort Zero to provide an end-to-end Zero Trust security solution for global organizations. With this launch, DELL expands its portfolio of security solutions and services to help organizations protect against threats, withstand and recover from attacks and outages.
This new initiative builds on the company’s adoption of Zero Trust, leading to delivering a validated, advanced maturity Zero Trust solution by next year.
For the fiscal first quarter that ended on May 5, 2023, DELL’s total revenue came in at $20.92 billion, while its total operating expenses declined by 6.7% from the year-ago value to $3.95 billion. Its non-GAAP net income and non-GAAP earnings per share amounted to $963 million and $1.31, respectively.
For the same quarter, its cash, cash equivalents, and restricted cash stood at $7.93 billion, up 8.9% year-over-year.
Analysts expect DELL’s EPS and revenue to be $1.14 and $20.85 billion, respectively, for the second quarter (ending July 2023). EPS and revenue are projected to register a year-over-year growth of 10.9% and 4.5%, reaching $6.17 and $90.89 billion in the fiscal year 2025.
Additionally, the company surpassed the revenue estimates in three of the four trailing quarters, while it topped its EPS estimates in all four trailing quarters, which is promising.
DELL’s trailing-12-month ROTA of 2.32% is significantly higher than the 1.78% industry average. Also, its trailing-12-month EBIT margin and CAPEX/Sales of 5.45% and 3.10% are 23.9% and 32% higher than the industry averages of 4.39% and 2.35%, respectively.
The stock has gained 44.1% over the past nine months to close the last trading session at $54.37.
DELL’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to Buy in our proprietary rating system. It also has a B grade for Value and Sentiment. Within the same industry, it is ranked #10.
Click here to see the other ratings of DELL for Growth, Momentum, Stability, and Quality.
Quantum Corporation (QMCO)
QMCO delivers end-to-end solutions to analyze, enrich, store, manage, protect, and preserve unstructured data across its entire lifecycle. Its portfolio of products includes primary storage software and systems, secondary storage software and systems, as well as devices and media.
On June 28, QMCO announced the integration of its comprehensive enterprise backup storage portfolio with the new Veeam Data Platform, which promises to deliver more advanced data security, recovery, and hybrid cloud capabilities.
With this development, the company expects to deliver a multi-tiered, scalable approach aimed at data protection to ensure that businesses resume their normal operations in the shortest amount of time with minimal cost.
Further, this could help QMCO expand its customer base, increase revenue, and establish itself as a reliable and secure provider of data protection and backup solutions.
During the fourth quarter (ended on March 31, 2023), QMCO’s total revenue increased 10.6% year-over-year to $105.34 million, while its total operating expenses declined marginally from the year-ago value to $41.31 million.
Its non-GAAP gross profit increased 2.2% year-over-year to $37.41 million. The company’s adjusted EBITDA improved by 145.2% from the prior-year quarter to $1.04 million. Also, its net cash provided by financing activities stood at $41.17 million, up 104.2% year-over-year.
QMCO’s revenue for the second quarter (ending September 2023) is expected to increase marginally year-over-year to $99.53 million. It is expected to register a 2.9% year-over-year growth, reaching $424.63 million in the fiscal year 2024. In addition, it topped the consensus revenue estimates in each of the trailing four quarters.
The stock’s trailing 12-month CAPEX/Sales of 3.05% is 29.6% higher than the industry average of 2.35%. Additionally, its trailing-12-month asset turnover ratio of 1.99x compares to the industry average of 0.61x.
Over the past three months, the stock has gained 10.2% to close the last trading session at $1.08.
It’s no surprise that QMCO has an overall rating of B, which translates to Buy in our proprietary rating system. It has a B grade for Value, Sentiment, and Quality. Out of 43 stocks in the same industry, it is ranked #11.
In addition to the POWR Ratings we’ve stated above, we also have QMCO’s ratings for Growth, Momentum, and Stability. Get all QMCO’s ratings here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
AAPL shares were trading at $194.26 per share on Wednesday afternoon, up $0.64 (+0.33%). Year-to-date, AAPL has gained 49.95%, versus a 19.64% 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.
3 Major Tech Stocks That Should Be Part of Every Investor's Watchlist StockNews.com
