Despite potential macroeconomic challenges, the tech industry's long-term prospects are promising due to digitization, increased reliance on technology, and rapid advancements in artificial intelligence and automation.
Amid this backdrop, it could be wise to keep an eye on tech stocks Garmin Ltd. (GRMN), Dolby Laboratories, Inc. (DLB) and Xerox Holdings Corporation (XRX).
Before delving deeper into their fundamentals, let’s discuss what’s happening in the tech industry.
Digital transformation is a game changer in the technology industry because it changes how businesses operate and interact with customers. It enables businesses to improve processes, increase productivity, and provide consumers with individualized experiences.
Also, digital transformation creates new chances for innovation, allowing businesses to remain competitive in an ever-changing technology setting. The digital transformation market is predicted to increase at a 25.1% CAGR to $7.03 trillion by 2032.
The U.S. tech market accounts for 35% of the world market and is expected to grow 5.4% in 2023. This expansion can be ascribed to the United States' ongoing technological innovation and breakthroughs. Also, rising consumer and business demand for technology products and services is propelling growth.
Moreover, investors’ interest in tech stocks is evident from the iShares Expanded Tech Sector ETF’s (IGM) 19.2% returns over the past six months and 37.5% over the past nine months.
Let’s take a look at the fundamentals of stocks.
Garmin Ltd. (GRMN)
Headquartered in Schaffhausen, Switzerland, GRMN designs, develops, manufactures, markets, and distributes a range of wireless devices in the Americas, the Asia Pacific, Australian Continent, Europe, the Middle East, and Africa. Its Fitness segment offers running and multi-sport watches; cycling products; activity tracking and smartwatch devices; fitness and cycling accessories.
GRMN’s trailing-12-month CAPEX/Sales of 4.04% is 33.1% higher than the industry average of 3.04%. However, its trailing-12-month asset turnover ratio of 0.65x is 34.8% lower than the industry average of 0.99x.
In the third quarter (ended September 30, 2023), GRMN’s net sales increased marginally year-over-year to $1.28 billion. During the same quarter, the company’s net income amounted to $257.24 billion, while its EPS came in at $1.34, up 22% and 22.9% year-over-year, respectively.
However, its operating expenses declined 6.3% year-over-year to $458.20 billion.
Analysts expect GRMN’s revenue to increase 6.2% year-over-year to $5.16 billion for the year ending December 2023. Its EPS is expected to grow 2.7% year-over-year to $5.27 for the same year. Shares of GRMN has gained 41.3% over the past month to close the last trading session at $128.91.
GRMN’s POWR Ratings reflect this uncertain outlook. The stock has an overall rating of C, equating to a Neutral Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
GRMN also has a C grade for Growth, Stability, Value and Sentiment. It is ranked #20 out of 36 stocks in the Technology - Hardware industry. Click here for the additional POWR Ratings for Momentum and Quality for GRMN.
Dolby Laboratories, Inc. (DLB)
DLB designs and manufactures advanced audio and imaging hardware and software for the entertainment, cinema, broadcast, and television industries. Its products enhance image and sound quality during content creation, distribution, and playback, providing a superior audiovisual experience for audiences.
DLB’s trailing-12-month EBIT margin of 20.22% is 310.7% higher than the 4.92% industry average. However, its trailing-12-month asset turnover ratio of 0.46x is 25.8% lower than the industry average of 0.62x.
DLB’s revenue increased 4.4% year-over-year to $290.56 million in the fourth quarter that ended September 30, 2023. Its gross income increased 5.8% from the year-ago value to $255.01 million. Also, the company’s non-GAAP net income and EPS increased 21.2% and 20.4% year-over-year to $63.94 million and $0.65, respectively.
However, its total operating income declined 20.8% year-over-year to $258.50 million.
The consensus revenue came in at $1.30 billion for the fiscal year ending September 2024 represents a marginally decrease year-over-year. Its EPS is expected to grow 3.9% year-over-year to $3.70 for the same year. It surpassed EPS estimates in three of four trailing quarters. Shares of DLB has gained 24.8% over the past year to close the last trading session at $86.40.
DLB’s mixed outlook is reflected in its POWR Ratings. The stock has an overall rating of C, translating to a Neutral in our proprietary rating system.
DLB has a C grade for Value, Stability, Sentiment and Momentum. It ranks #12 out of 40 stocks in the Technology - Electronics industry. Click here to access additional DLB ratings (Growth and Quality).
Xerox Holdings Corporation (XRX)
XRX designs, develops, and sells document management systems and solutions in the Americas, Europe, the Middle East, Africa, India, and internationally. It offers workplace solutions, including color and multifunction printers, digital services that leverage workflow automation, personalization and communication software, content management solutions, and digitization services.
XRX’s trailing-12-month ROCE of 5.50% is 387.6% higher than the industry average of 1.13%. However, its trailing-12-month EBITDA margin of 8.81% is 4.8% lower than the 9.25% industry average.
XRX’s revenues for the third quarter ended September 30, 2023, came in at $1.65 billion. Additionally, its adjusted net income stood at $77 million, compared to a net income of $44 million in the year ago quarter. Its adjusted EPS came in at $0.46, compared to a loss per share of $0.27 in the year ago quarter.
Also, its total current assets came in at $3.35 billion for the period that ended September 30, 2023, compared to $4.11 billion for the period that ended December 31, 2022.
Street expects XRX’s revenue to decrease 2.2% year-over-year to $6.95 billion for the year ending December 2023. Its EPS is expected to grow 70.8% year-over-year to $1.91 for the same year. Shares of XRX has gained 36% over the past month to close the last trading session at $18.81.
XRX has an overall C rating, equating to a Neutral in our POWR Ratings system. It has a C grade for Sentiment. It is ranked #30 out of 76 stocks in the Technology - Services industry.
Beyond what is stated above, we’ve also rated XRX for Growth, Value, Stability, Quality and Momentum. Get all XRX ratings here.
What To Do Next?
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GRMN shares were trading at $128.72 per share on Wednesday morning, down $0.19 (-0.15%). Year-to-date, GRMN has gained 43.32%, versus a 26.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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