The tech industry thrives as enterprises increasingly rely on tech-based services for their day-to-day operations. Given the favorable industry trends, quality tech stocks Teledyne Technologies Incorporated (TDY), TD SYNNEX Corporation (SNX)and AstroNova, Inc. (ALOT) might be monitored for December opportunities.
The IT industry is experiencing constant development, and new trends are emerging year after year, making it one of the most significantly growing markets. Businesses use IT services for various purposes, from standard chores like handling employee records to complex corporate processes like supply chain and operations management.
The global IT services market is expected to grow at a CAGR of 9.7% until 2030.
Global spending on public cloud services is expected to increase by 20.4% in 2024, driven by a combination of cloud vendor price increases and increased utilization. Gartner predicts global IT spending will reach $5.1 trillion in 2024, reflecting an 8% year-over-year increase.
The IT hardware market is projected to grow at a CAGR of 7.9% to reach $177.11 billion by 2028. Technologies like artificial intelligence, machine learning, and the Internet of Things are expected to drive the demand for specialized hardware as enterprises require powerful servers, storage systems, and networking equipment to host and process vast amounts of data in real-time.
With these favorable trends in mind, let's delve into the fundamentals of the three best stock picks.
Teledyne Technologies Incorporated (TDY)
TDY provides enabling technologies for industrial growth markets in the United States, Canada, the United Kingdom, France, and internationally.
On November 21, 2023, TDY and global innovator of imaging solutions, announced Emerald Gen2, its new state-of-the-art CMOS image sensor family. Built on TDY e2v’s advanced imaging technologies, this new family delivers enhanced performance, making the new sensors ideal for a wide range of machine vision uses, outdoor surveillance, and traffic detection and monitoring cameras.
TDY’s trailing-12-month EBIT margin of 18.74% is 291.7% higher than the industry average of 4.78%, while its trailing-12-month levered FCF margin of 13.24% is 63.1% higher than the industry average of 8.12%.
TDY’s net sales for the fiscal third quarter ended October 1, 2023, rose 2.9% year-over-year to $1.40 billion. Net income attributable to TDY rose 11.4% year-over-year to $198.6 million. Its earnings per common share increased 11% year-over-year to $4.15.
Analysts expect TDY’s revenue for the fourth quarter ending December 31, 2023, to increase 2.8% year-over-year to $1.46 billion. Its EPS is expected to be $4.23 for the same quarter. Also, the company topped the consensus EPS estimates in each of the four trailing quarters, which is impressive.
The stock has gained 15.9% year-to-date to close the last trading session at $404.59.
TDY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade in Sentiment. It is ranked #11 out of 39 stocks in the B-rated Technology - Electronics industry.
Click here to see the other ratings of TDY (Growth, Stability, Value, Momentum, and Quality).
TD SYNNEX Corporation (SNX)
SNX operates as a distributor and solutions aggregator for the information technology (IT) ecosystem. The company offers personal computing devices and peripherals, mobile phones and accessories, printers, supplies, and endpoint technology software; and data center technologies, such as hybrid cloud, security, storage, networking, servers, technology software, and converged and hyper-converged infrastructure, as well as computing components.
On November 29, 2023, SNX revealed that it would expand its AI enablement and training capabilities further through their offering of a new solution that uses artificial intelligence to analyze and understand images and videos, the Intel Geti software platform. SNX will serve as an initial distributor of the platform in the U.S. and Europe.
On November 16, 2023, SNX announced high-impact partner-driven updates at its largest North American customer event of the year, CommunitySolv. Building on a successful launch of its Partner Directory earlier, SNX would roll out additional enhancements to the platform based on direct user feedback, exclusively available for CommunitySolv members.
SNX’s trailing-12-month ROCE of 8.12% is 631.7% higher than the industry average of 1.11%. Its 7.02% trailing-12-month CAPEX /Sales is 160.4% higher than the 2.70% industry average.
During the third quarter ended August 31, 2023, SNX’s revenue amounted to $13.96 billion. Its non-GAAP gross profit increased 3.4% year-over-year to $973.70 million. Also, its non-GAAP net income amounted to $259.80 and non-GAAP EPS increased 1.5% year-over-year to $2.78.
Street expects SNX’s revenue and EPS to be $14.48 billion and $2.67 respectively for the fourth quarter ending November 2023. The company has surpassed the EPS estimates in three of the trailing four quarters.
Shares of SNX increased 1.4% over the past month to close the last trading session at $97.14.
SNX’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Momentum and Value. Within the Technology - Services industry, it is ranked #24 out of 76 stocks.
Beyond what is stated above, we’ve also rated SNX for Quality, Sentiment, Growth, and Stability. Get all SNX ratings here.
AstroNova, Inc. (ALOT)
ALOT designs, develops, manufactures, and distributes specialty printers, and data acquisition and analysis systems in the United States, Europe, Asia, Canada, Central and South America, and internationally. The company operates in two segments, Product Identification (PI) and Test & Measurement (T&M).
ALOT’s trailing-12-month ROTC of 4.24% is 57.4% higher than the 2.70% industry average. However, its trailing-12-month gross profit margin of 33.45% is 31.3% lower than the 48.67% industry average.
ALOT’s revenue declined 4.7% year-over-year to $37.50 million in the third quarter that ended October 28, 2023. However, the company’s gross profit increased 18% year-over-year to $14.78 million and EPS rose 825% year-over-year to $0.37.
Over the past year the stock has gained 29% but declined 3.6% over the past six months to close the last trading session at $15.16.
ALOT has an overall C rating, equating to a Neutral in our POWR Ratings system. It has a C grade for Stability, Momentum and Quality. It is ranked #19 out of 38 stocks in the Technology – Hardware industry.
In addition to the POWR Ratings stated above, one can access ALOT's ratings for Value, Growth, and Sentiment here.
What To Do Next?
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TDY shares were trading at $405.55 per share on Thursday afternoon, up $0.96 (+0.24%). Year-to-date, TDY has gained 1.41%, versus a 21.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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