The technology industry, driven by innovation and a constant desire for new digital solutions, has been making significant progress in areas of artificial intelligence, cloud computing, and security.
Given the industry’s growth prospects, investors could consider buying fundamentally sound tech stocks Cisco Systems, Inc. (CSCO), Dell Technologies Inc. (DELL) and TTM Technologies, Inc. (TTMI) for solid returns.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the tech industry.
According to the Consumer Technology Association®, retail revenues in the United States consumer technology industry will increase by 2.8% to $512 billion in 2024 (up $14 billion from 2023). This indicates an increase in consumer spending on technology products and services, according to the CTA's one-year industry forecast.
Richard Kowalski, Sr. Director of Business Intelligence at CTA, said, “Technology by nature is deflationary as innovation leads industries to find newer, more efficient ways to compete. Looking ahead to 2024, I expect developments in artificial intelligence will accelerate growth for consumer and enterprise technology companies as they become more efficient and find more ways to meet consumer needs.”
The global information technology market is expected to grow at a 14.7% CAGR and reach $1.36 trillion by 2029. This growth can be attributed to the increasing demand for digital transformation across various industries.
Moreover, investors’ interest in tech stocks is evident from the iShares Expanded Tech Sector ETF’s (IGM) 14.6% returns over the past six months and 32.6% over the past nine months.
Let us dive deeper into the fundamentals of the featured stocks:
Cisco Systems, Inc. (CSCO)
CSCO is engaged in designing, manufacturing, and selling Internet Protocol-based networking and other products related to the communications and information technology industry. The company offers wireless products, routed optical networking, 5G, silicon, optics solutions, etc.
CSCO’s trailing-12-month ROTA of 13.75% is significantly higher than the industry average of 0.48%. Its trailing-12-month ROCE of 31.78% is significantly higher than the industry average of 1.46%.
CSCO’s revenue increased 7.6% year-over-year to $14.67 billion during the fiscal 2024 first quarter that ended October 28, 2023. Its operating income grew 20.8% from the year-ago quarter to $4.28 billion. The company’s net income and EPS came in at $3.64 billion, and $0.89, up 36.3% and 36.9% year-over-year, respectively.
Analysts expect CSCO’s revenue to come in at $54.58 billion for the year ending July 2024. Its EPS is expected to come in at $3.88 for the same period. It surpassed EPS estimates in all four trailing quarters. The stock has gained 3.2% over the past month to close the last trading session at $49.91.
CSCO’s POWR Ratings reflect this promising outlook. 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.
CSCO also has an A grade for Quality and a B for Stability. It is ranked #6 out of 46 stocks in the Technology - Communication/Networking industry. Click here for the additional POWR Ratings for Growth, Value, Momentum and Sentiment for CSCO.
Dell Technologies Inc. (DELL)
DELL designs, develops, manufactures, markets, sells, and supports various 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).
DELL’s trailing-12-month ROTC of 12.33x is 340.3% higher than the industry average of 2.80x. Its trailing-12-month ROTA of 3.20% is 567.9% higher than the industry average of 0.48%.
DELL’s total net revenue for the fiscal third quarter ended November 3, 2023, came in at $22.25 billion, including product revenue of $16.23 billion and service revenue of $6.02 billion. Its non-GAAP operating expenses declined 5% year-over-year to $3.31 billion. The company’s non-GAAP net income stood at $1.39 billion and $1.88 per share.
The consensus revenue estimate of $92.70 billion for the year ending January 2025 represents a 4.5% increase year-over-year. Its EPS is expected to grow at 6.1% year-over-year to $7.06 for the same period. It surpassed EPS estimates in all four trailing quarters. Shares of DELL has gained 82.4% over the past year to close the last trading session at $77.11.
DELL’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
DELL has an A grade for Momentum and a B for Value, Growth and Sentiment. It ranks #7 out of 35 stocks in the B-rated Technology - Hardware industry. Click here to access additional DELL ratings (Stability and Quality).
TTM Technologies, Inc. (TTMI)
TTMI is a global manufacturer and seller of engineered systems, radio frequency components and, RF microwave/microelectronic assemblies, and printed circuit boards (PCB). It operates in the PCB and RF&S Components segments. The company offers a range of engineered systems, RF and microwave assemblies, HDI PCBs, flexible PCBs, custom assemblies, and system integration, IC substrates, and other components.
TTMI’s trailing-12-month EBIT margin of 5.29% is 7% higher than the industry average of 4.94%. Its trailing-12-month EBITDA margin of 12.20% is 29.5% higher than the industry average of 9.42%.
For the fiscal third quarter ended October 2, 2023, TTMI’s net sales amounted to $572.58 million. The company’s non-GAAP net income and EPS stood at $44.88 million and $0.43, respectively. Also, its adjusted EBITDA came in at $84.08 million.
As of October 2, 2023, TTMI’s total current liabilities came at $688.29 million, compared to $761.33 million as of January 2, 2023.
Street expects TTMI’s revenue to increase 5.8% year-over-year to $2.37 billion for the fiscal year ending December 2024. Its EPS is expected to grow 15.7% year-over-year to $1.49 for the same period. It surpassed EPS estimates in three of four trailing quarters. Shares of TTMI has gained 16.8% over the past nine months to close the last trading session at $14.78.
TTMI has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Sentiment and Growth. It is ranked #6 out of 41 stocks in the B-rated Technology - Electronics industry.
Beyond what is stated above, we’ve also rated TTMI for Value, Momentum, Stability and Quality. Get all TTMI ratings here.
What To Do Next?
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CSCO shares were trading at $49.84 per share on Wednesday afternoon, down $0.07 (-0.14%). Year-to-date, CSCO has declined -0.58%, versus a -0.11% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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