The unprecedented dynamism within the world of technology is perpetually the sole prevailing force. Propelled by swift technological evolution and rising investments in pioneering innovation, the industry is poised for sustained growth.
Therefore, I am bullish on Uber Technologies, Inc. (UBER), Concentrix Corporation (CNXC), and Xerox Holdings Corporation (XRX), which possess robust growth prospects.
Before discussing what makes these stocks well-positioned for delivering solid returns, let’s see why the technology sector is primed for expansion.
Despite the vulnerability to macroeconomic fluctuations, the technology industry displays a commendable preparedness. Technology companies are uniquely equipped for resilience.
Numerous industries dynamically utilize advanced technology to captivate consumers, foster innovation, and enhance efficiency. In addition, a growing cluster of enterprises is commencing extensive digital transformation initiatives. This trend is anticipated to gain momentum as the acceptance of hybrid work models continues to rise.
The digital transformation market is anticipated to surpass $8.92 trillion by 2030, growing at a 21% CAGR. This growth trajectory is stimulated by shifting customer expectations, evolving business models, stiff competition, operational effectiveness, and sustainability commitments.
Prominent tech enterprises are substantially investing in artificial intelligence (AI), which should enhance the growth prospects of innovative software and pave the way for its extensive adoption across various industrial segments.
As per the latest CNBC Technology Executive Council’s bi-annual survey, 47% of leading tech officers across the economy, encompassing chief information security officers and chief technology officers, identified AI as their principal budgetary focus over the forthcoming year. Cloud computing was identified as the second-largest expenditure, constituting 21% of budgets.
The global IT services market is expected to reach $4910.4 billion by 2027, growing at a CAGR of 8%. The United States IT Services market is expected to reach $306.10 billion by 2028, growing at a CAGR of 7.10%.
Furthermore, investors’ interest in tech stocks is evident from the Technology Select Sector SPDR ETF (XLK) 21.9% returns over the past six months.
Given this backdrop, tech stocks UBER, CNXC, and XRX, with notable fundamental strengths and growth attributes, could be wise portfolio additions now.
Uber Technologies, Inc. (UBER)
UBER develops and operates proprietary technology applications in the United States, Canada, Latin America, Europe, the Middle East, Africa, and Asia, excluding China and Southeast Asia. It operates through three segments: Mobility, Delivery, and Freight.
On July 11, UBER and RideCo, a leader in on-demand transit technology, announced their newly formed partnership to offer transit agencies overflow (TNC) options. This unique technology integration enables agencies to achieve greater operational efficiency and higher productivity while enhancing rider equity.
UBER’s trailing-12-month gross profit margin of 32.06% is 6.5% higher than the industry average of 30.10%. Its trailing-12-month asset turnover ratio of 1.08x is 36.5% higher than the 0.79x industry average. Its trailing-12-month cash from operations of $1.98 billion is 799.4% higher than the industry average of $220.60 million.
UBER’s revenue grew at CAGRs of 43.3% and 32.1% over the past three and five years, respectively. In addition, its total assets grew at 6.5% and 15.8% CAGRs over the past three and five years, respectively.
During the fiscal second quarter that ended June 30, 2023, UBER’s revenue rose 14.3% year-over-year to $9.23 billion. Its income from operations amounted to $326 million, compared to a loss from operations of $713 million in the prior-year quarter.
Net income attributable to UBER and net income per share stood at $394 million and $0.18 compared to net loss and net loss per share of $2.60 billion and $1.33, respectively, in the year-ago quarter. Cash and cash equivalents and restricted cash stood at $8.46 billion, up 7.6% year-over-year.
The consensus revenue and EPS estimates stood at $9.56 billion and $0.11, respectively, for the fiscal third quarter ending September 2023. Moreover, it surpassed consensus revenue and EPS estimates in three of the trailing four quarters, which is impressive.
Over the past year, the stock has gained 60.6% to close the last trading session at $46.96. It gained 8.8% over the past month.
UBER’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
UBER has an A grade for Sentiment and Quality and a B for Growth. In the 79-stock Technology – Services industry, it is ranked #20.
Click here for the additional UBER POWR Ratings (Value, Momentum, and Stability).
Concentrix Corporation (CNXC)
CNXC is a leading provider of Customer Experience (CX) solutions and technology. It optimizes CX processes and provides innovative tech, automation, analytics, and business transformation. In addition, the company’s integrated solutions support customer lifecycle, including CX/UX strategy, design, and actionable insights.
On July 19, CNXC announced that it priced a public offering of $800 million aggregate principal amount of 6.65% senior notes due 2026, $800 million aggregate principal amount of 6.60% senior notes due 2028, and $550 million aggregate principal amount of 6.85% senior notes due 2033.
CNXC’s trailing-12-month levered FCF margin of 8.10% is 52.1% higher than the industry average of 5.33%. Its trailing-12-month gross profit margin of 35.87% is 19.2% higher than the industry average of 30.10%.
CNXC’s revenue and EBITDA grew at CAGRs of 11.8% and 18.1%, respectively, over the past three years. In addition, its net income grew at a CAGR of 47.9% over the past three years.
During the fiscal second quarter that ended May 31, 2023, CNXC’s total revenue increased 3% year-over-year to $1.61 billion, while its non-GAAP operating income increased 3.7% year-over-year to $220.61 million. The company’s adjusted EBITDA rose 3.6% from the year-ago quarter to $258.83 million. Its non-GAAP net income and earnings per common share stood at $140.59 million and $2.69, respectively.
The consensus revenue and EPS estimates of $1.70 billion and $3.38 for the fiscal fourth quarter ending November 2023 represent 3.5% and 12.2% year-over-year increases, respectively.
CNXC’s shares have gained 1.9% over the past month to close the last trading session at $82.28.
CNXC’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
CNXC has a B grade for Growth and Value. Within the same industry, it is ranked #24.
Click here for CNXC’s additional Momentum, Stability, Sentiment, and Quality grades.
Xerox Holdings Corporation (XRX)
XRX is a workplace technology company that designs, develops, and sells document management systems and solutions in the Americas, Europe, the Middle East, Africa, India, and internationally.
On July 20, 2023, XRX’s board of directors declared a quarterly dividend of $0.25 per share on its common stock, payable to the shareholders on October 31. XRX pays a $1 per share dividend annually, translating to a 6.38% yield on the current share price. Its four-year average dividend yield is 5.43%.
Also, the board declared a quarterly dividend of $20 per share on the outstanding Xerox Holdings Series, a convertible perpetual preferred stock, payable to the shareholders on October 2.
On May 15, XRX launched a new advertising campaign, “We Make Work, Work.” The company’s most significant brand and demand generation initiative in recent history, the new campaign demonstrates XRX’s deep understanding of its clients’ pain points and the workflow solutions they require to succeed in today’s dynamic hybrid workplace.
XRX’s trailing-12-month EBIT margin of 6.12% is 36.6% higher than the 4.48% industry average. Its trailing-12-month cash from operations of $351 million is 507.3% higher than the industry average of $57.80 million.
XRX’s revenue grew at a CAGR of 3% over the past year. In addition, its tangible book value grew at a 56.4% CAGR over the past 10 years.
On May 25, XRX announced a quarterly dividend of $0.25, payable on July 31, 2023. It pays $1 annually as dividends which translates to a yield of 6.91% at the current price. Its 4-year average dividend yield is 5.32%. Its dividend payouts have grown at 4.2% CAGR over the past three years.
XRX’s total revenues increased marginally year-over-year to $1.75 billion in the fiscal second quarter that ended June 30, 2023, while its gross profit stood at $597 million, up 7.2% from the prior-year quarter. Its adjusted operating income for the quarter came in at $107 million, up 205.7% year-over-year. XRX’s adjusted net income and adjusted earnings per share increased 200% and 238.5% year-over-year to $72 million and $0.44, respectively.
XRX’s revenue is expected to be $1.72 billion for the fiscal third quarter ending September 2023. The company’s EPS for the same quarter is expected to increase 104.2% year-over-year to $0.39. Moreover, it surpassed consensus EPS estimates in three of the trailing four quarters.
The stock has gained 8% year-to-date to close the last trading session at $15.77. Over the past month, it gained 5.9%.
XRX’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
XRX also has a B grade for Growth, Value, and Quality. It is ranked #14 within the same industry.
Beyond what we have highlighted above, one can see XRX’s POWR Ratings for Momentum, Stability, and Sentiment here.
What To Do Next?
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UBER shares fell $0.63 (-1.34%) in premarket trading Thursday. Year-to-date, UBER has gained 89.89%, versus a 18.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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