The technology sector is flourishing with rapid transformation and digitization across end-use industries. Also, the broad application of emerging technologies is opening new growth avenues for the industry players.
Given the industry’s robust outlook, investors could consider buying fundamentally sound tech stocks Viavi Solutions Inc. (VIAV), AvePoint, Inc. (AVPT), and Mastech Digital, Inc. (MHH) under $10 for solid returns.
According to the recent forecast by Gartner, with rapid digital transformation worldwide, global tech spending will grow significantly this year and beyond. Worldwide IT spending is expected to reach $5.06 trillion in 2024, an increase of 8% from the previous year.
Statista predicts the IT services market revenue to grow at a CAGR of 5.8% to reach a volume of $1.88 trillion by 2029. In global comparison, the US will generate the most revenue in 2024 of around $522 billion.
Additionally, the communication equipment market is growing significantly with growing digital connectivity and rising demand for advanced telecommunication devices.
The communication equipment market is estimated to reach $245.52 billion in 2024 and is expected to grow at a CAGR of 6%, reaching $348.70 billion by 2030. The market is driven by demand for high-performance equipment, expansion in internet services, prevalence of smart devices, and increasing data-driven services.
With these favorable trends in mind, let’s delve into the fundamentals of the three above-mentioned tech stocks.
Viavi Solutions Inc. (VIAV)
VIAV provides network test, monitoring, and assurance solutions for communications service providers, hyperscalers, network equipment manufacturers, OEMs, government, and avionics customers. It operates in three segments: Network Enablement (NE); Service Enablement (SE); and Optical Security and Performance Products (OSP).
On May 7, VIAV announced the availability of SecurePNT™ 6200 with SecureTimeSM services, a resilient timing clock solution. SecurePNT and SecureTime with Fugro AtomiChron® timing service allow intelligent zero-trust multisource assurance combining signals from GEO, LEO, MEO, and GNSS constellations.
The Fugro AtomiChron® timing source allows VIAV’s SecureTime eGNSSSM GEO service to deliver true authenticated and encrypted resilience and higher accuracy and augments resilience, assurance, precision, and availability on a global scale.
In the third quarter that ended March 30, 2024, VIAV reported net revenue of $246 million, of which its revenue from the Optical Security and Performance Products segment increased 8.1% year-over-year to $76.20 million. Its non-GAAP net income and non-GAAP EPS came in at $13.20 million and $0.06 for the quarter, respectively.
In addition, the company’s cash and cash equivalents and total assets totaled $454.20 million and $1.74 billion as of March 30, 2024.
Street expects VIAV’s revenue to increase 1.9% year-over-year to $252.70 million for the fourth quarter (ending September 2024). The company’s EPS for the same quarter is expected to grow 1.6% year-over-year to $0.09.
VIAV’s stock plunged 4.2% over the past six months to close the last trading session at $7.47.
VIAV’s bright outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Growth, Value, and Quality. VIAV is ranked #8 among the 47 stocks in the Technology - Communication/Networking industry.
Click here to access additional of VIAV ratings for Sentiment, Stability and Momentum.
AvePoint, Inc. (AVPT)
AVPT provides a cloud-native data management software platform in North America, Europe, the Middle East, Africa, and Asia Pacific. The company also offers software-as-a-service solutions and productivity applications. To address critical challenges and the management of data, it provides modularity and cloud services architecture.
On April 9, AVPT launched its new analytics capabilities in its tyGraph solution specific to Copilot for Microsoft 365, allowing organizations to measure and optimize their Copilot for Microsoft 365 usage and impact. AvePoint tyGraph, with its new capabilities, helps organizations explore the full potential of their AI investments and enhance employee experience.
On February 21, AVPT announced the addition of three new products to its FedRAMP authorization as a Software as a Service (SaaS) company. The products are AvePoint tyGraph, MaivenPoint Examena, and MaivenPoint Curricula. These products are part of the AVPT’s Confidence Platform’s Modernization Suite.
It reflects AVPT’s commitment to supporting organizations like the government in their adoption of new technology like AI. These products enable organizations to remove barriers to workplace innovation by unifying data, optimizing business processes, and improving the employee experience.
For the first quarter ended March 31, 2024, AVPT’s total revenue increased 25.1% year-over-year to $74.53 million. Its non-GAAP gross profit grew 29.6% from the year-ago value to $55.20 million. The company’s non-GAAP operating income came in at $6.61 million, against a non-GAAP operating loss of $329 thousand during the prior year’s quarter.
AVPT raised its full-year 2024 outlook. For the second quarter 2024, the company expects total revenues of $73.80 million to $75.80 million, or year-over-year growth of 15% at the midpoint, and non-GAAP operating income of $3.60 million to $4.60 million.
For the full year, AVPT expects total revenues in the range of $314.30 million to $320.30 million, and it expects non-GAAP operating income to be between $30 million and $32 million.
Analysts expect AVPT’s revenue for the third quarter (ending September 2024) to increase 13.1% year-over-year to $82.26 million, while its EPS is expected to grow 30.5% year-over-year to $0.04, respectively. Further, the company has surpassed the consensus revenue estimates in all of the trailing four quarters.
AVPT’s shares have surged 9.3% over the past six months and 81.6% over the past year to close the last trading session at $8.10.
AVPT’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Quality and Growth. Within the Technology - Services industry, AVPT is ranked #11 out of 78 stocks.
In addition to the POWR Ratings I’ve just highlighted, you can see AVPT’s ratings for Sentiment, Stability, Value, and Momentum here.
Mastech Digital, Inc. (MHH)
MHH offers digital transformation IT services to large, medium-sized, and small companies. It operates in Data and Analytics Services; and IT Staffing Services segments. The company provides data management and analytics services, including project-based consulting services.
In terms of forward non-GAAP P/E, MHH is trading at 13.08x, 31% lower than the industry average of 18.95x. Likewise, the stock’s forward EV/Sales multiple of 0.43 is 76.4% lower than the industry average of 1.80. Similarly, its forward Price/Sales of 0.50x is 66.5% lower than the industry average of 1.49x.
MHH’s trailing-12-month levered FCF margin of 9.04% is 35.7% higher than the industry average of 6.66%. Likewise, the stock’s trailing-12-month Asset Turnover Ratio of 1.79x is 128.7% higher than the industry average of 0.78x.
For the first quarter that ended March 31, 2024, MHH reported revenues of $46.82 million, and its gross profit was $12.13 million for the same period. The company’s non-GAAP net income and non-GAAP EPS came in at $763 thousand and $0.06, respectively.
In addition, the company’s total assets stood at $1.06 billion as of March 31, 2024, versus $1.05 billion as of December 31, 2023.
Analysts expect MHH’s revenue and EPS for the third quarter (ending September 2024) to grow 3% and 72.7% year-over-year to $49.20 million and $0.19, respectively.
Shares of MHH have surged marginally over the past three months to close the last trading session at $8.57.
MHH’s POWR Ratings reflect its promising prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has a B grade for Value. MHH is ranked #21 among 77 stocks in the Technology - Services industry.
To access additional MHH ratings for Sentiment, Growth, Quality, Stability, and Momentum, click here.
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VIAV shares were unchanged in premarket trading Friday. Year-to-date, VIAV has declined -25.82%, versus a 10.05% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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