Since last year, inflationary pressures and the Federal Reserve’s aggressive interest rate hikes have led to a sell-off in the high-growth tech names. However, the tech industry is well-positioned for growth due to rising investments in digital transformation by enterprises and the rising demand for advanced tech solutions.
Therefore, it could be wise to buy fundamentally strong tech stocks Juniper Networks, Inc. (JNPR), Digi International Inc. (DGII), and Cambium Networks Corporation (CMBM). They are likely to capitalize on the industry tailwinds and look well-positioned for explosive growth.
The spending on new technology is expected to increase further as more companies use advanced technologies across their operations. According to the latest forecast by Gartner, worldwide IT spending is projected to reach $4.6 trillion in 2023, an increase of 5.5% year-over-year.
With new developments and trends emerging every year, the tech industry has become one of the fastest-growing industries. The global technology market is expected to expand at a CAGR of 25.7%, reaching $3.17 billion by 2027. Moreover, investors’ interest in tech stocks is evident from the Technology Select Sector SPDR ETF’s (XLK) 21.7% returns over the past six months.
Given these factors, it could be wise to buy the featured stocks.
Juniper Networks, Inc. (JNPR)
JNPR designs, develops, and sells network products and services worldwide. The company offers routing products, such as ACX series universal access routers; MX series Ethernet routers; PTX series packet transport routers; wide-area network SDN controllers; and session smart routers.
On March 8, 2023, JNPR announced that Shaare Zedek Medical Center has embarked on a total digital transformation of operations to provide superior experiences and exceptional care to its patients using Juniper’s data center solutions.
JNPR’s Vice President, Enterprise, EMEA, Gos Hein van de Wouw, believes that JNPR will provide high-performance technologies to Shaare Zedek Medical Center to ensure that it is fully prepared for continued digital acceleration. This is expected to generate solid revenue for JNPR.
In terms of the trailing-12-month EBIT margin, JNPR’s 10.67% is 128.9% higher than the 4.66% industry average. Its 9.10% trailing-12-month net income margin is 248.8% higher than the 2.61% industry average. Likewise, its 11.51% trailing-12-month Return on Common Equity is considerably higher than the industry average of 1.11%.
JNPR’s revenue grew at a CAGR of 7.4% over the past three years. Its EBIT grew at a CAGR of 6.6% over the past three years. Moreover, its EPS grew at a CAGR of 16.2% during the same time frame.
JNPR’s total net revenues increased 17.4% year-over-year to $1.37 billion for the first quarter that ended March 31, 2023. Its non-GAAP operating income increased 47.7% year-over-year to $203 million. Its non-GAAP net income increased 54.1% year-over-year to $156.60 million. Additionally, its non-GAAP EPS came in at $0.48, representing a 54.8% increase from the prior-year quarter.
JNPR’s EPS and revenue for the quarter ending June 30, 2023, are expected to increase 29.5% and 11.4% year-over-year to $0.54 and $1.41 billion, respectively. It has an excellent earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 2.8% to close the last trading session at $28.90.
JNPR’s strong 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 POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Technology - Communication/Networking industry, it is ranked #8 out of 51 stocks. JNPR has a B grade for Growth and Quality. To see the additional POWR Ratings of JNPR for Value, Momentum, Stability, and Sentiment, click here.
Digi International Inc. (DGII)
DGII provides business and mission-critical Internet of Things (IoT) products, services, and solutions in the United States and internationally. The company operates in two segments, IoT Products & Services and IoT Solutions
In terms of the trailing-12-month EBIT margin, DGII’s 11.51% is 147% higher than the 4.66% industry average. Its 6.29% trailing-12-month net income margin is 141.2% higher than the 2.61% industry average. Likewise, its 5.40% trailing-12-month Return on Common Equity is 387% higher than the industry average of 1.11%.
DGII’s revenue grew at a CAGR of 18% over the past three years. Its EBIT grew at a CAGR of 72.9% over the past three years. Moreover, its EPS grew at a CAGR of 52.7% during the same time frame.
DGII’s revenue for the second quarter ended March 31, 2023, increased 17.3% year-over-year to $111.14 million. Its adjusted net income increased 25.9% year-over-year to $18.22 million. Its adjusted EBITDA increased 22.2% year-over-year to $23.86 million, while its adjusted net EPS came in at $0.50, representing a 22% increase from the prior-year quarter.
DGII’s EPS and revenue for the quarter ending June 30, 2023, are expected to increase 5.6% and 5.8% year-over-year to $0.48 and $109.53 million, respectively. It has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 62% to close the last trading session at $31.25.
DGII’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #11 in the same industry. It has an A grade for Growth. We have also given DGII grades for Value, Momentum, Stability, Sentiment, and Quality. Get all DGII ratings here.
Cambium Networks Corporation (CMBM)
CMBM designs, develops, and manufactures wireless broadband and Wi-Fi networking infrastructure solutions. The company offers point-to-point fixed wireless backhaul and point-to-multipoint fixed wireless solutions and enterprise solutions.
In terms of the trailing-12-month EBIT margin, CMBM’s 6.76% is 45.1% higher than the 4.66% industry average. Its 6.80% trailing-12-month net income margin is 160.9% higher than the 2.61% industry average. Likewise, its 15.69% trailing-12-month Return on Common Equity is significantly higher than the industry average of 1.11%.
CMBM’s revenue grew at a CAGR of 3.6% over the past three years. Its EBITDA grew at a CAGR of 2% over the past three years. Moreover, its total assets grew at a CAGR of 16% during the same time frame.
CMBM’s revenues for the first quarter ended March 31, 2023, increased 25.1% year-over-year to $77.40 million. The adjusted EBITDA increased 435.7% year-over-year to $10.38 million. Its non-GAAP net income increased significantly year-over-year to $6.81 million. Moreover, its non-GAAP EPS came in at $0.24, representing a considerable increase over the prior-year quarter.
CMBM’s EPS and revenue for the quarter ending June 30, 2023, are expected to increase 46.3% and 16.6% year-over-year to $0.26 and $80.77 million, respectively. Over the past year, the stock has gained 4.3% to close the last trading session at $14.21.
CMBM’s POWR Ratings reflect its solid prospects. It has an overall rating of B, which equates to a Buy. It is ranked #6 in the Technology - Communication/Networking industry.
It has an A grade for Growth and a B for Sentiment. Click here to see the other ratings of CMBM for Value, Momentum, Stability, and Quality.
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JNPR shares were trading at $28.95 per share on Tuesday morning, up $0.05 (+0.17%). Year-to-date, JNPR has declined -8.77%, versus a 7.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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