The tech industry is booming due to widespread automation, significant investments in digital transformation, and the integration of advanced technologies like generative AI, which helps boost operational efficiency and improve productivity.
Considering these factors, investors could consider buying fundamentally strong tech stocks TD SYNNEX Corporation (SNX), AvePoint, Inc. (AVPT), and Proto Labs, Inc. (PRLB).
Before delving deeper into their fundamentals, let’s discuss why the tech industry is growing.
Globally, enterprises are enhancing their digital capabilities via investments in digital transformation, fueling positive momentum for tech companies. This year's anticipated rate cuts by the Federal Reserve and the excitement around generative AI’s application have driven the tech-heavy Nasdaq Composite’s 35.8% returns over the past year.
Businesses are investing in digitization to gain agility, scalability, and a competitive edge over their peers. They are also focusing on improving customer satisfaction and enhancing operational efficiency through the integration of advanced tech solutions.
According to Gartner, global IT spending is expected to amount to $5 trillion in 2024, marking a 6.8% increase from 2023. In addition, the spending on IT services this year is projected to grow 8.7% over the prior year to $1.50 trillion. Tech services are in high demand due to the migration to the cloud, expanding demand for cybersecurity solutions, etc.
Moreover, businesses are integrating 3D printing into their operations as it provides several advantages, such as reduced costs, customized manufacturing, lower wastage, and on-demand production.
3D printing technology is widely used in the automotive, aerospace, and healthcare sectors. The global market for 3D printing is set to grow at a CAGR of 24.3% to reach $83.90 billion by 2029.
Furthermore, investors’ interest in tech stocks is evident from the Technology Select Sector SPDR Fund’s (XLK) 43.8% returns over the past year.
Considering these conducive trends, let’s analyze the fundamentals of the three technology stocks mentioned above.
TD SYNNEX Corporation (SNX)
SNX is a distributor and solutions aggregator for the information technology (IT) ecosystem. The company provides personal computing devices, mobile phones, printers, supplies, endpoint technology software, and a range of data center technologies, including hybrid cloud, security, storage, networking, servers, and computing components.
On March 7, 2024, SNX launched TD SYNNEX Cloud Labs, a virtual environment that accelerates vendor go-to-market efforts by providing flexible, scalable, and cost-efficient cloud-based PoC demos. This innovation eliminates expensive labs, streamlines support, reduces sales cycles, and simplifies complex PoC setups, optimizing cost-effectiveness with a pay-per-use approach.
On February 29, 2024, SNX announced an expanded collaboration with NVIDIA, enhancing its AI offerings in North America by providing NVIDIA platforms such as Omniverse, virtual GPU software, AI Enterprise, and RTX GPUs for AI applications across various industries, aligning with the SNX’s Destination AI Program.
SNX’s Executive Vice President of Sales and Vendor Management, Gary Palenbaum, said, “Our commitment to providing the very best AI tools to address the needs of our customers consistently supports our expanded collaborations with industry leaders like NVIDIA to bring the full range of their solutions to our valued customers.”
In terms of the trailing-12-month Return on Common Equity, SNX’s 7.68% is 142.7% higher than the 3.16% industry average. Likewise, its 6.42% trailing-12-month Return on Total Capital is 172.1% higher than the industry average of 2.36%. Its 1.95x trailing-12-month asset turnover ratio is 221.1% higher than the industry average of 0.61x.
For the fourth quarter that ended November 30, 2023, SNX’s revenues came in at $14.41 billion. Its non-GAAP gross profit came in at $1.02 billion. Likewise, its non-GAAP net earnings came in at $285.60 million. Also, its non-GAAP EPS came in at $3.13. In addition, as of November 30, 2023, its total liabilities stood at $21.23 billion, compared to $21.71 billion as of November 30, 2022.
Street expects SNX’s EPS for the quarter ending May 31, 2024, to increase 14.7% year-over-year to $2.79, and its revenue for the same quarter is expected to increase 1.6% year-over-year to $14.28 billion. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 14.1% to close the last trading session at $102.70.
SNX’s POWR Ratings reflect robust prospects. It 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.
It is ranked #10 out of 81 stocks in the Technology - Services industry. It has a B grade for Value, Momentum, and Sentiment. Click here to see SNX’s Growth, Stability, and Quality ratings.
AvePoint, Inc. (AVPT)
AVPT provides a cloud-native data management software platform in North America, Europe, the Middle East, Africa, and the Asia Pacific. It offers software-as-a-service solutions and productivity applications. The company also provides modularity and a cloud services architecture to tackle critical challenges in data management for organizations that utilize third-party cloud vendors.
On February 21, 2024, AVPT announced the addition of three new products to its FedRAMP (moderate) authorization, expanding its SaaS solutions for federal agencies, along with achieving HITRUST CSF v11.0.1 certification for its AvePoint Confidence Platform, reinforcing security standards for global healthcare providers and enhancing its SOC 2 Type II certifications.
In terms of the trailing-12-month gross profit margin, AVPT’s 71.50% is 45.5% higher than the 49.16% industry average. Its 14.50% trailing-12-month levered FCF margin is 60.8% higher than the 9.02% industry average. Likewise, its 0.63x trailing-12-month asset turnover ratio is 4.5% higher than the industry average of 0.61x.
AVPT’s total revenue for the fiscal fourth quarter ended December 31, 2023, increased 17.3% year-over-year to $74.62 million. Its non-GAAP gross profit rose 22.2% over the prior-year quarter to $56.11 million. The company’s non-GAAP operating income stood at $10.30 million, up 630.6% over the year-ago quarter.
For the same quarter, its net income attributable to AVPT and EPS stood at $4.27 million and $0.02, respectively, compared to a net loss and loss per share of $12.72 million and $0.07 in the year-ago quarter.
For the quarter ending March 31, 2024, AVPT’s revenue is expected to increase 21.4% year-over-year to $72.33 million. Its EPS for the quarter ending September 30, 2024, is expected to increase 30.5% year-over-year to $0.04. Over the past year, the stock has gained 87.1% to close the last trading session at $7.56.
AVPT’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Growth and Quality. Within the Technology - Services industry, it is ranked #11. To access the additional ratings of AVPT for Value, Momentum, Stability, and Sentiment, click here.
Proto Labs, Inc. (PRLB)
PRLB is an e-commerce digital manufacturer of custom prototypes and on-demand production parts worldwide. The company offers injection molding, computer numerical control machining, three-dimensional (3D) printing, and sheet metal fabrication products.
In terms of the trailing-12-month Capex / Sales, PRLB’s 5.58% is 87.1% higher than the 2.98% industry average. Likewise, its 9.34% trailing-12-month levered FCF margin is 43.3% higher than the 6.52% industry average. Additionally, its 44.06% trailing-12-month gross profit margin is 45.1% higher than the 30.36% industry average.
For the fourth quarter ended December 31, 2023, PRLB’s total revenue rose 8.2% year-over-year to $125.05 million. Its non-GAAP gross profit increased 14.5% over the prior-year quarter to $56.61 million.
The company’s adjusted EBITDA came in at $22.30 million, up 53.8% year-over-year. Additionally, its non-GAAP net income and net income per share grew 70.1% and 76.9% year-over-year to $11.83 million and $0.46, respectively.
Analysts expect PRLB’s EPS for the quarter ending March 31, 2024, to increase 4.2% year-over-year to $0.31. Its revenue for the quarter ending June 30, 2024, is expected to increase 4.9% year-over-year to $128.26 million. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past six months, the stock has gained 25.3% to close the last trading session at $33.52.
PRLB’s positive outlook is reflected in its POWR Ratings. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Growth and a B for Value, Momentum, and Quality. It is ranked first out of 5 stocks in the Technology - 3D Printing industry. To see PRLB’s Stability and Sentiment ratings, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
SNX shares were trading at $102.24 per share on Tuesday morning, down $0.46 (-0.45%). Year-to-date, SNX has declined -4.62%, versus a 7.66% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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