While macroeconomic uncertainty could hinder near-term growth, the tech industry’s long-term prospects remain bright amid government spending and advancements.
We think tech stocks BlackBerry Limited (BB), Ribbon Communications Inc. (RBBN), and Aviat Networks, Inc. (AVNW) could be worth adding to your watchlists now.
According to the most recent Gartner, Inc. prediction, worldwide IT spending would hit $4.7 trillion in 2023, a 4.3% increase from 2022.
The digital transformation market is expected to increase at a CAGR of 24.1% to $ 3.14 trillion by 2030. The growing digitization trend, as well as the increasing requirement for effective resource utilization, are likely to fuel market expansion.
Moreover, the global IT services market is expected to grow at 9.5% CAGR to $9.85 trillion by 2031. Investors’ interest in tech stocks is evident from the Technology Select Sector SPDR ETF’s (XLK) 39% returns over the past nine months.
Take a detailed look at the stocks mentioned above:
BlackBerry Limited (BB)
Headquartered in Waterloo, Canada, BB provides intelligent security software and services to enterprises and governments worldwide. It offers intelligent security software and services to enterprises and governments worldwide. The company operates through three segments: Cybersecurity, IoT, Licensing, and Other.
BB’s trailing-12-month gross profit margin of 57.38% is 19% higher than the industry average of 48.20%.
During the fiscal first quarter ended May 31, 2023, BB’s net revenue increased 122% year-over-year to $373 million. Its gross margin came in at $194 million, up 203.1% year-over-year. Also, its operating expense declined 215.3% year-over-year, to $190 million.
The consensus revenue estimate of $859.63 million for the year ending February 2024 represents a 31% increase year-over-year. Its EPS is expected to come in at $0.02 for the same period. BB’s shares have gained 4.8% over the past six months to close the last trading session at $4.58.
BB’s POWR Ratings reflect its fundamentals. It has an overall C rating, translating to a Neutral. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
BB has a B grade for Growth. It is ranked #35 out of 51 stocks in the Technology - Communication/Networking industry. Click here for the additional POWR Ratings for Value, Sentiment, Momentum, Quality and Stability for BB.
Ribbon Communications Inc. (RBBN)
RBBN provides communications technology in the United States, Europe, the Middle East, Africa, the Asia Pacific, and internationally. It operates through two segments, Cloud and Edge; and IP Optical Networks.
RBBN’s forward EV/Sales multiple of 0.96 is 66.2% lower than the industry average of 2.84. Its forward Price/Sales multiple of 0.59 is 78% lower than the industry average of 2.70.
RBBN’s trailing-12-month asset turnover ratio of 0.70x is 13.6% higher than the industry average of 0.61x. Its trailing-12-month gross profit margin of 51.51% is 6.9% higher than the industry average of 48.20%.
For the fiscal second quarter that ended June 30, 2023, RBBN’s revenue increased 2.3% year-over-year to $210.62 million. Its non-GAAP EBITDA grew 9.5% from the year-ago value to $23 million. Furthermore, the company’s non-GAAP net income came $8 million, while non-GAAP EPS came in at $0.04.
RBBN’s revenue grew at CAGR of 7.9% over the past three years.
Analysts expect RBBN’s revenue to increase 4.4% year-over-year to $855.90 million for the year ending December 2023. Its EPS is expected to grow 140% year-over-year to $0.26 for the same period. The stock has gained 10% over the past nine months to close the last trading session at $2.86.
RBBN has an overall C rating, equating to a Neutral in our POWR Ratings system. It has a B grade for Growth. It is ranked #16 in the same industry.
Beyond what is stated above, we’ve also rated RBBN for Quality, Sentiment, Value, Momentum and Stability. Get all RBBN ratings here.
Aviat Networks, Inc. (AVNW)
AVNW is a supplier of microwave networking solutions and works to provide dependable products, services, and support to its customers. It offers outdoor, indoor, and split-mount radios; microwave routers and switches; microwave trunking; element management products; and software products.
AVNW’s forward EV/Sales of 0.97x is 65.7% lower than the industry average of 2.84x. Its forward Price/Sales of 1.01x is 62.5% lower than the industry average of 2.07x.
AVNW’s trailing-12-month ROTC of 8.46% is 305.2% higher than the industry average of 2.09%, while its trailing-12-month ROCE of 6.17x is significantly higher than the industry average of 0.09x.
In the fiscal third quarter ended March 31, 2023, AVNW’s total revenues increased 12% year-over-year to $83.48 million. Also, its non-GAAP operating income increased 10.6% year-over-year to $9.30 million. The company’s non-GAAP net income and EPS increased 11.9% year-over-year to $8.87 million and $0.75, respectively.
AVNW’s revenue grew at CAGR of 11.5% over the past three years. In addition, its total assets grew at 26.6% CAGR over the past three years.
Street expects AVNW’s revenue to increase 7.6% year-over-year to $370.43 million for the year ending June 2024. Its EPS is expected to grow at 11% year-over-year to $3.66 for the same period. Over the past three months the stock has gained 10.7% to close the last trading session at $30.05.
AVNW’s fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, which equates to a Neutral in our proprietary rating system.
It is ranked #15 in the same industry. It has a B grade for Growth, and Stability. To see additional AVNW ratings for Sentiment, Value, Momentum and Quality, click here.
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BB shares were trading at $4.67 per share on Thursday morning, up $0.09 (+1.97%). Year-to-date, BB has gained 43.25%, versus a 18.16% 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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