The tech industry experiences significant growth driven by rising investments in sustainability, the widespread use of smart devices and apps, the adoption of technologies like adaptive AI, and an unwavering focus on cybersecurity. So, robust tech stocks NetApp, Inc. (NTAP), Dropbox, Inc. (DBX), and Eltek Ltd. (ELTK) could be ideal additions to one’s portfolio.
The tech sector's rapid innovations and advanced products, catering to the increasing demand for digital solutions, contribute to its status as one of the fastest-growing sectors today. Besides, businesses' growing reliance on technology has created a lucrative market for IT service providers, boosted further by the pandemic. The rapid shift to remote work has also increased demand for IT solutions, leading to heightened needs for tools and infrastructure. Gartner forecasts worldwide IT spending to rise 8% year-over-year to $5.07 trillion this year.
Additionally, the industry is poised for substantial growth and economic contribution due to technological advancements and increased reliance on digital solutions. The surge in digitization trends is fueling demand for advanced hardware, driven by cloud services, AI, blockchain, IoT, and machine learning. The market for IT hardware is expected to grow at a CAGR of 7.9% to reach $191.03 billion by 2029.
Furthermore, the growing adoption of the Internet of Things (IoT) enhances safety and boosts demand for consumer electronics by improving product quality and performance. Tech giants' increased investments in emerging economies contribute to market expansion.
The consumer electronics market is projected to reach $ 5.82 billion by 2033, expanding at a CAGR of 5.8%.
Given the industry tailwinds, it's time to examine the fundamentals of the top three stocks in the tech industry.
NetApp, Inc. (NTAP)
NTAP provides cloud-led and data-centric services to manage and share data on-premises and private and public clouds worldwide. It operates in the Hybrid Cloud and Public Cloud segments. The company offers intelligent data management software, storage infrastructure solutions, cloud storage and data services, cloud operation services, and application-aware data management services.
NTAP’s trailing-12-month EBIT and EBITDA margins of 18.10% and 21.72% are 267.8% and 130.7% higher than the industry averages of 4.92% and 9.42%, respectively.
On November 29, 2023, NTAP announced that its next cash dividend of $0.50 per share would be paid on January 24, 2024. The company pays an annual dividend of $2, which yields 2.33% on the current market price, compared to a four-year average dividend yield of 3.02%.
NTAP’s net revenues came in at $1.56 billion in the fiscal second quarter ended October 27, 2023. Its services revenue rose 3.6% year-over-year to $856 million. Its non-GAAP income from operations increased 6.6% year-over-year to $419 million. The company’s non-GAAP net income increased 2.5% year-over-year to $334 million.
Also, its non-GAAP net income per share came in at $1.58, registering a 6.8% increase over the prior-year quarter.
NTAP’s EPS and revenue for the quarter ending January 31, 2024, are expected to increase 23.3% and 4.1% year-over-year to $1.69 and $1.59 billion, respectively. Moreover, the company has an excellent surprise history, surpassing the EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 32.1% to close the last trading session at $85.43.
NTAP’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 are calculated by considering 118 different factors, each weighted optimally.
It has an A grade for Quality and a B for Growth and Momentum. Within 36 stocks in the A-rated Technology – Hardware industry, it is ranked #11.
In addition to the POWR Rating stated above, one can find NTAP’s ratings for Value, Stability, and Sentiment here.
Dropbox, Inc. (DBX)
DBX provides a content collaboration platform worldwide. The company’s platform allows individuals, families, teams, and organizations to collaborate and sign up for free through its website or app, as well as upgrade to a paid subscription plan for premium features.
DBX’s trailing-12-month net income margin of 22.50% is 853.8% higher than the industry average of 2.36%. The stock’s trailing-12-month levered FCF margin of 30.52% is 252.9% higher than the industry average of 8.65%.
On November 17, DBX and NVIDIA Corporation (NVDA) announced a new partnership to enhance knowledge work and productivity for millions of DBX users using artificial intelligence (AI). The collaboration aims to integrate personalized generative AI into DBX, improving search accuracy, organization, and workflows. The goal is to enhance the user experience for DBX customers with cloud-based content.
During the fiscal third quarter ended September 30, 2023, DBX’s revenue increased 7.1% year-over-year to $633 million. Its gross profit improved 6.7% from the year-ago quarter to $513.40 million. The company’s net income and net income per share rose 37.1% and 43.5% from the prior-year quarter to $114.10 million and $0.33, respectively. Moreover, its income from operations came in at $130.70 million, up 46.4% year-over-year.
Street expects DBX’s EPS and revenue to rise 20.9% and 5.4% year-over-year to $0.48 and $631.03 million in the fiscal fourth quarter ended December 2023. It has surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
The stock has gained 40.7% over the past nine months to close the last trading session at $31.03. It soared 11.7% over the past three months.
DBX’s POWR Ratings reflect this robust outlook. The stock has an overall B rating, translating to a Buy in our proprietary rating system.
It has an A grade for Quality and a B for Value. In the 77-stock Technology – Services industry, it is ranked #9.
To see DBX ratings for Growth, Stability, Momentum, and Sentiment, click here.
Eltek Ltd. (ELTK)
Headquartered in Petach Tikva, Israel, ELTK manufactures, markets, and sells printed circuit boards (PCBs) in Israel, Europe, North America, India, the Netherlands, and internationally.
ELTK’s trailing-12-month net income margin of 12.99% is 450.9% higher than the 2.36% industry average. Its trailing-12-month EBIT margin of 13.89% is 178.3% higher than the 4.92% industry average.
On December 18, ELTK announced that it had received an order worth $4.50 million for advanced machines, software, and a service contract to expand production capabilities. Most deliveries are scheduled for the first quarter of 2024, in addition to the three production lines ordered in August 2023.
On December 13, ELTK paid a cash dividend in the amount of $0.22 per share and, in the aggregate, an amount of approximately $1.30 million. The annual dividend yields 1.32% on the prevailing price level.
In the third quarter ended September 30, 2023, ELTK’s revenue amounted to $11.86 million, up 14.9% year-over-year. Its gross profit and net income increased 52.1% and 113.8% year-over-year to $3.68 million and $2.15 million, respectively. The company’s EPS came in at $0.36, up 111.8% year-over-year. Moreover, its non-GAAP EBITDA grew 79.9% year-over-year to $2.61 million.
Analysts expect ELTK’s EPS to grow 110.9% year-over-year to $1.16 for the fiscal year 2023. Its revenue is likely to come in at $46.53 million for the same year.
The stock has gained 283.1% over the past year to close the last trading session at $16.71. It has returned 311.6% over the past nine months.
ELTK’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has an A grade for Quality and a B for Growth, Sentiment, and Momentum. It is ranked #4 out of 39 stocks in the B-rated Technology – Electronics industry.
Click here to see ELTK‘s additional ratings (Value and Stability).
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NTAP shares were trading at $86.07 per share on Thursday morning, up $0.64 (+0.75%). Year-to-date, NTAP has declined -1.80%, versus a -0.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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