Driven by robust demand for hardware solutions amid widespread digital transformation globally and growing implementation of cutting-edge technologies, the tech hardware’s outlook appears promising. Thus, it could be wise to invest in fundamentally sound tech intelligence stocks Apple Inc. (AAPL), Nidec Corporation (NJDCY), and Quantum Corporation (QMCO).
The COVID-19 pandemic forced various organizations and educational institutions to adopt remote work and distance learning models, resulting in a significant surge in demand for tech hardware devices such as desktops, laptops, webcams, and accessories as businesses and individuals required to equip themselves for remote and learning environments.
Given their widespread use for work, education, entertainment, and personal use, hardware devices like PCs, laptops and tablets have gained immense popularity in recent years. Moreover, manufacturers frequently introduce new models with improved features, including faster processors, longer battery life, enhanced displays, and more connectivity options.
The IT hardware market is projected to reach $177.11 billion by 2028, growing at a CAGR of 7.9% during the forecast period. The rapid growth of the IT industry is a primary driver for the market. IT is crucial in various sectors, including healthcare, education, finance, manufacturing, entertainment, and retail. As the industry expands, the demand for hardware rises simultaneously.
Furthermore, the rapid adoption of emerging digital technologies such as Artificial Intelligence (AI), Machine Learning (ML), big data, the Internet of Things (IoT), Augmented Reality and Virtual Reality (AR&VR), and 5G are boosting the demand for specialized hardware products and solutions.
For instance, specialized hardware enables AI programs to operate at faster speeds, and handle more complex applications. Most popular AI hardware components include graphics processing units (GPUs), field-programmable gate arrays (FPGAs), application-specific integrated circuits (ASICs), high-bandwidth memory, and on-chip Node Version Manager (NVM).
The global AI in hardware market is expected to surpass nearly $248.09 billion by 2030, growing at a CAGR of 24.5% from 2023 to 2030.
Considering these favorable trends, let’s analyze the fundamental aspects of the three Technology - Hardware stock picks, beginning with the third choice.
Stock #3: Apple Inc. (AAPL)
AAPL is a leading consumer electronics company that designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories globally. It offers iPhone, a line of smartphones; Mac, a line of personal computers; iPad, a line of multi-purpose tablets; and wearables, home, and accessories comprising AirPods, Apple Watch, and HomePod.
On October 16, AAPL announced the expansion of the Apple Store® online in Chile. Customers nationwide can now shop at Apple’s full lineup of products and services online with Apple Specialists available to provide exceptional service and help discover the best of Apple.
On September 12, AAPL debuted the iPhone® 15 Pro and iPhone 15 Pro Max, featuring a strong yet lightweight titanium design with new contoured edges, a new Action button, powerful camera upgrades, and A17 Pro for next-level performance and mobile gaming. Such innovative additions to the company’s product portfolio are expected to boost its sales and growth.
Also, the company unveiled the Apple Watch Ultra™ 2. Apple Watch Ultra 2 offers all the features users love about Ultra, coupled with the powerful new S9 SiP, a magical new double tap gesture, Apple’s brightest display ever, extended altitude range, on-device Siri®, Precision Finding for iPhone®, and advanced capabilities for water adventures.
Over the past three years, AAPL’s revenue has grown at a CAGR of 11.9%. The company’s net income and EPS have increased at CAGRs of 17.5% and 21.8% over the same period, respectively, while its EBITDA has grown at a CAGR of 16.4%.
AAPL’s net sales from the Services segment increased 8.2% year-over-year to $21.21 billion for the third quarter that ended July 1, 2023. Its gross margin rose 1.5% from the year-ago value to $36.41 billion. The company’s net income and earnings per share came in at $19.88 billion and $1.26, up 2.3% and 5% year-over-year, respectively.
As of July 1, 2023, AAPL’s cash and cash equivalents were $28.41 billion, compared to $23.65 billion as of September 24, 2022.
Analysts expect AAPL’s revenue and EPS for the fiscal year (ending September 2024) to grow 5.6% and 7.9% year-over-year to $404.56 billion and $6.55, respectively. Moreover, the company has topped the consensus EPS estimates in three of the trailing four quarters.
Shares of AAPL have gained 40.6% year-to-date and 22.3% over the past year to close the last trading session at $175.84.
AAPL’s POWR Ratings reflect bright prospects. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Growth. AAPL is ranked #23 out of 41 stocks in the B-rated Technology - Hardware industry.
In addition to the POWR Ratings I’ve just highlighted, you can see AAPL’s ratings for Value, Stability, Sentiment, Momentum, and Growth here.
Stock #2: Nidec Corporation (NJDCY)
Headquartered in Kyoto, Japan, NJDCY develops, manufactures, and sells motors, electronics and optical components, and other related products internationally. The company’s products are used for applications in robotics, IoT products, automotive components, logistics, home appliances, information technology, housing equipment, and industrial machinery.
On October 5, NJDCY and Brazil’s Embraer (ERJ) received approval for a joint venture, Nidec Aerospace LLC. This transaction combines the complementary synergies and distinct areas of expertise of two world-class engineering conglomerates to develop Electric Propulsion Systems (EPS) for the aerospace sector.
This approval marks a significant milestone for the companies’ shared vision to advance and electrify how the world travels.
On August 2, NJDCY acquired Automatic Feed Company, Lasercoil Technologies LLC, and Automatic Leasing Company, privately owned U.S. companies (collectively the Target). The Target manufactures and sells peripheral equipment for medium and large presses and sheet metal cutting equipment for presses and has strong ties with major U.S. automakers and Tier 1 suppliers.
With the addition of the Target, NJDCY could offer a wide range of products and services to its customers, particularly in the press machine business, and extend the company’s market reach.
NJDCY’s revenue has grown at a CAGR of 14.5% over the past three years. Its EBITDA has improved at a CAGR of 7.1% over the same timeframe. Also, the company’s total assets have increased at a CAGR of 14.1%.
For the first quarter ended June 30, 2023, NJDCY’s net sales increased 4.8% year-over-year to ¥566.06 billion ($3.78 billion). Its operating profit grew 34.7% from the year-ago value to ¥60.15 billion ($401.60 million). The company’s profit before income taxes was ¥86.08 billion ($574.73 million), up 51% from the prior year’s quarter.
Additionally, the company’s profit attributable to owners of the parent rose 55% year-over-year to ¥64.04 billion ($427.58 million), and its EPS came in at ¥111.45, an increase of 55.9% year-over-year.
Street expects NJDCY’s revenue for the fiscal year (ending March 2024) to increase 939.2% year-over-year to $15.43 billion. The company’s EPS for the current year is expected to increase 290.2% year-over-year to $0.57. In addition, the company’s revenue has surpassed the consensus revenue estimates in three of the trailing four quarters.
Over the past three months, NJDCY’s stock has declined 8.8% to close the last trading session at $11.29.
NJDCY’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
The stock has an A grade for Stability. It is ranked #14 out of 41 stocks in the B-rated Technology - Hardware industry.
Beyond what we’ve stated above, we have also rated the stock for Growth, Value, Momentum, Quality, and Sentiment. Get all ratings of NJDCY here.
Stock #1: Quantum Corporation (QMCO)
QMCO offers products for storing and managing digital video and unstructured data internationally. The company’s product portfolio includes Myriad All-Flash File and Object Storage Software, Unified Surveillance Platform Software, StorNext Hybrid Flash/Disk File Storage Software, CatDV Asset Management Software, DXi Backup Appliances, and Scalar Tape Storage.
On October 11, QMCO announced new bundled offerings for organization-wide data protection based on Quantum DXi-Series Backup Appliances, the industry’s most efficient backup data management platform.
With DXi® Edge-Core-Cloud Bundles, customers could cost-effectively deploy a simple, comprehensive data protection fabric across their in-house infrastructure and cloud-resident resources to protect their data and business operations from harm. This new launch might drive the company’s profitability and growth.
On September 13, QMCO introduced new pre-configured bundles to make it easier to purchase and deploy Quantum ActiveScale™ Cold Storage, the industry’s unique S3-enabled object storage solution designed for active and cold data sets that lowers cold storage costs by up to 60%.
ActiveScale enables customers to build their own cloud storage resource to control costs and ensure fast, easy access to their data for compliance, analysis, and gathering insights to drive the business forward. The new offering should bode well for the company.
Over the past three years, QMCO’s revenue has increased at a CAGR of 3.2%. The company’s total assets have grown at a CAGR of 8.5% over the same period.
QMCO reported total revenues of $91.79 million for the first quarter that ended June 30, 2023. Its non-GAAP gross profit grew 2.1% year-over-year to $35.18 million. The company’s adjusted EBITDA rose 122.8% from the year-ago value to $771 thousand. As of June 30, 2023, its cash and cash equivalents stood at $25.46 million.
For the fiscal year ending March 2025, analysts expect QMCO’s revenue to increase 4.6% year-over-year to $370.05 million. The company’s EPS is expected to grow 20% per annum over the next five years.
The stock has plunged 3% over the past five days to close the last trading session at $0.60.
QMCO’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
QMCO has a B grade for Value. It is ranked #12 in the same industry.
Click here to see QMCO’s additional rating for Growth, Stability, Sentiment, Momentum, and Quality.
What To Do Next?
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AAPL shares fell $0.27 (-0.15%) in premarket trading Thursday. Year-to-date, AAPL has gained 35.91%, versus a 13.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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