Technology exerts a pervasive influence, shaping both personal web interactions and business engagements through third-party providers and applications. Its omnipresence in our daily routines has underscored a trajectory of unceasing growth, promising an expansive future on the technological horizon.
Considering this outlook, it could be wise to scoop up shares of fundamentally sound tech stocks Bel Fuse Inc. (BELFB), Outbrain Inc. (OB) and Key Tronic Corporation (KTCC), as they could position themselves for rapid success in the dynamic market landscape. Let us understand this in detail.
The year's pivotal breakthrough has been the widespread adoption of generative AI, transforming sectors through improved collaboration and personalized digital experiences. Although generative AI hasn't yet significantly impacted IT spending, broader AI investments are fueling overall growth in IT expenditures.
Gartner (IT) anticipates that by 2026, generative AI will extensively transform 70% of the design and development processes for new web and mobile applications. Simultaneously, its latest forecast predicts an 8% growth in worldwide IT spending, reaching $5.1 trillion in 2024 compared to the previous year.
Furthermore, organizations implementing generative AI services are turning to the public cloud due to the extensive infrastructure needs. In tandem, global end-user spending on public cloud services is expected to surge by 20.4%, reaching $678.8 billion in 2024, a notable increase from $563.6 billion in 2023.
Moreover, the surging wave of technological innovations such as the Internet of Things (IoT), 5G networks, blockchain, spatial computing, homomorphic encryption, metaverse, 3D printing, additive manufacturing, and robotics and automation stands ready to propel industry expansion, significantly broadening its horizons.
The information technology market is expected to grow at a CAGR of 7.9% to reach $12 trillion in 2027, as projected by Report Linker.
In light of these encouraging trends, let us dive into the fundamentals of these three tech stocks.
Bel Fuse Inc. (BELFB)
BELFB designs, manufactures, markets, and sells cutting-edge products for networking, telecommunications, computing, industrial, data transmission, military, aerospace, transportation, and e-mobility sectors. Its segments include Connectivity Solutions; Power Solutions and Protection; and Magnetic Solutions.
On November 15, BELFB's company, Cinch Connectivity Solutions, a global leader in providing reliable connectivity solutions, unveiled the expansion of its pioneering Johnson Female to Female Bullet Adapters that facilitate connections between SMP to SMPM standards, catering to high-speed, high-performance sectors.
These adapters, designed for diverse environments such as laboratory radio frequency testing, satellite communication equipment, GPS and phased array antennas, radar systems, and automated test equipment, could position BELFB to capitalize on emerging opportunities and reinforce its market presence.
On November 8, BELF expanded its portfolio with single-port, 10G, NBase-T, 60W, and 100W Power over Ethernet (PoE) MagJack® integrated connector modules (ICMs). These advanced modules cater to diverse applications such as industrial controllers, video cameras, and Wi-Fi access points.
By addressing the evolving needs of customers seeking increased speeds coupled with 60W or 100W power, BELF is strategically positioned to capture a larger market share. This move is also expected to enhance revenue streams, foster customer loyalty, and contribute significantly to the company's growth.
For the third quarter that ended September 30, 2023, BELFB's gross profit grew 7.6% year-over-year to $55.47 million. Its adjusted EBITDA increased 9.5% from the year-ago value to $29.88 million.
In addition, the company's non-GAAP net earnings and non-GAAP class B EPS rose 16.1% and 13.5% from the previous year's quarter to $21.24 million and $1.68, respectively.
The consensus EPS estimate of $1.41 for the fiscal fourth quarter ending December 2023 reflects a 4.4% year-over-year improvement. Moreover, the consensus EPS estimate of $6.54 for the current fiscal year ending December 2023 exhibits a 41.9% rise from the prior year. Furthermore, the company surpassed the consensus EPS estimates in all four trailing quarters.
Shares of BELFB have gained 36.4% over the past month and 69% year-to-date to close the last trading session at $55.35.
BELFB's sound fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
BELFB has an A grade for Value and Sentiment and a B for Quality. It has ranked #4 out of 40 stocks within the B-rated Technology - Electronics industry.
In addition to the POWR Ratings I've just highlighted, you can see BELFB's Growth, Momentum, and Stability ratings here.
Outbrain Inc. (OB)
OB operates a recommendation platform featuring Outbrain Engage-a product suite empowering media partners with data-driven recommendations to optimize user engagement. The platform includes a versatile dashboard enabling effective management and control over various aspects of the Outbrain Engage solution.
On September 26, OB and DoubleVerify Holdings, Inc. (DV), a leading digital media measurement, data, and analytics software platform, unveiled that OB's recently launched branding platform, Onyx, will integrate DV Marketplace Suite's advanced pre-bid tools, ensuring comprehensive brand suitability, fraud prevention, and viewability.
The collaboration underscores OB's dedication to providing advertisers with a trusted advertising experience on Onyx, guaranteeing campaigns run exclusively in brand-suitable environments. This commitment could enhance advertiser confidence and reinforce OB's leadership position in delivering quality advertising solutions.
That said, on June 14, OB introduced Onyx by Outbrain™, a pioneering branding platform tailored to amplify the business impact of awareness and consideration campaigns.
Operating solely within dedicated in-article environments across OB's premium publisher partners, Onyx aligns with OB's strategic vision of evolving into a comprehensive full-funnel marketing partner. This initiative aims to substantially expand OB's presence in the market, particularly with enterprise brands and agencies.
For the third quarter that ended September 30, 2023, OB's gross profit increased 10.7% year-over-year to $46.39 million. Its adjusted EBITDA grew 508.2% from the year-ago value to $10.25 million.
Furthermore, the company's adjusted net income and adjusted net income per share stood at $272 thousand and $0.01, compared to an adjusted net loss and adjusted net loss per share of $5.50 million and $0.10 in the prior year's period, respectively.
Analysts expect OB's revenue to increase 1.5% year-over-year to $235.25 million for the fiscal 2024 first quarter ending March 2024. Similarly, the company's revenue for the next fiscal year ending December 2024 is estimated at $994.13 million, indicating a 5.8% year-over-year improvement.
The stock has gained 4.7% year-to-date to close the last trading session at $3.79.
OB's robust prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
OB has an A grade for Value and Growth. It is ranked #16 within the 110-stock Technology - Services industry.
Click here to access the additional OB ratings (Momentum, Stability, Sentiment, and Quality).
Key Tronic Corporation (KTCC)
KTCC delivers comprehensive integrated services encompassing electronic and mechanical engineering, assembly, sourcing, procurement, logistics, and new product testing. Alongside its service portfolio, the company manufactures and sells keyboards and other input devices.
In its fiscal 2024 first-quarter release, KTCC reported sustained expansion of its customer base, securing new programs in security equipment, sporting goods, environmental solutions, and industrial control systems.
Anticipating increased demand in the second half of fiscal year 2024, particularly in Mexico, the company observes a positive trend of contract manufacturing returning to North America. Additionally, KTCC has noted a growing interest from potential customers exploring a shift from China-based manufacturing to its Vietnam facility.
KTCC's net sales increased 7.7% year-over-year to $147.76 million for the fiscal 2024 first quarter that ended September 30, 2023. Its gross profit grew 4.7% from the year-ago value to $10.86 million. As of September 30, 2023, the company's cash and cash equivalents amounted to $3.57 million, and total assets stood at $392.35 million.
For the second quarter of fiscal 2024, the company projects revenue between $135 million and $145 million, with expected earnings ranging from $0.05 to $0.10 per diluted share. KTCC gained 4.2% intraday, closing the last trading session at $3.96.
KTCC's solid outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
KTCC has an A grade for Growth and Momentum and a B for Value, Stability, and Sentiment. It is ranked #14 out of 110 stocks within the Technology - Services industry.
Click here to access additional KTCC ratings for Quality.
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.
BELFB shares were trading at $55.35 per share on Thursday morning, up $1.03 (+1.90%). Year-to-date, BELFB has gained 69.27%, versus a 20.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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