Growing popularity of innovative technologies like Artificial Intelligence (AI) and cloud computing are continuously surging the demand for IT services and solutions. This has led to higher interest of companies to devise new and efficient products and services and cater to the consumer demands.
Given the industry’s robust outlook, investors could invest in current analysts favorite tech stocks Pure Storage, Inc. (PSTG), Flex Ltd. (FLEX), and Informatica Inc. (INFA) that are currently trading under $55.
The tech sector is evolving rapidly with advancements and innovations transforming the operations of businesses and lifestyles of consumers. This has resulted in accelerated investment by companies towards their digital transformation efforts. Further, the tech sector is poised to thrive in the future amid the Fed’s recent 50 basis-point cut.
The global information technology (IT) market is projected to reach $26.92 trillion by 2032, growing at a CAGR of 11%, driven by expanding market demand, requirement for digital solutions and technologies, adoption of AI, IoT, and cloud computing, coupled with an upsurge in investment in innovative IT solutions and services.
The Biden-Harris Administration recently allocated approximately $504 million as implementation grants to 12 Tech Hubs to scale up the production of critical technologies and strengthen U.S. economic competitiveness and national security, strengthening tech sector growth.
Considering the encouraging market trends, let’s discuss the fundamentals of the three tech stocks: PSTG, FLEX, and INFA.
Pure Storage, Inc. (PSTG)
PSTG is engaged in data storage and management technologies, products, and services internationally. Its Purity software is shared across its products and provides enterprise-class data services. It also offers FlashArray integrated hardware systems, including FlashArray//X, FlashArray//C, FlashArray//XL, FlashArray//E, and FlashArray File Services.
On September 26, PSTG and Rubrik, Inc. (RBRK), the Zero Trust Data Security™ company, partnered to bring primary storage, data security, and long-term retention with Rubrik Security Cloud to arm global customers with a proven reference architecture to ensure uptime and a path forward in the face of growing cyber threats.
On September 24, PSTG announced innovations to the Pure Storage platform, like Real-time Enterprise File, dynamic file services that change, adapt, and reconfigure in real-time to cater to the growing demands of modern applications.
The company also introduced additional innovations, which include a virtual machine (VM) assessment and industry-first Universal Credits. These innovations strengthen PSTG Storage-as-a-Service (STaaS) leadership.
During the second quarter that ended August 4, 2024, PSTG’s total revenue increased 10.9% year-over-year to $763.77 million. Its non-GAAP gross profit grew 10.9% from the year-ago value to $555.67 million. The company’s non-GAAP net income of $149.54 million and $0.44 per share indicates increases of 34.6% and 29.4% from the prior year’s quarter, respectively.
Also, the company’s non-GAAP free cash flow stood at $166.56 million, up 258.1% year-over-year.
As per the company’s third-quarter guidance, PSTG expects revenue of $815 million and non-GAAP operating income of $140 million.
Also, for the fiscal full year 2025, the company continues to expect revenue of $3.10 billion, showing 10.5% revenue year-over-year growth. Its non-GAAP operating income is expected to be $532 million.
Analysts expect PSTG’s revenue and EPS for the fiscal year (ending January 2025) to increase 10.6% and 16.4% year-over-year to $3.13 billion and $1.63, respectively. Also, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Over the past month, PSTG’s stock has gained 11.1% and 46% over the past year to close the last trading session at $51.32. Wall Street analysts expect the stock to hit $63.63 in the near term, indicating a potential upside of 24%.
PSTG’s bright outlook is reflected in its POWR Ratings. 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, each weighted to an optimal degree.
The stock has an A grade for Quality. It also has a B grade for Growth and Sentiment. Within the A-rated Technology - Storage industry, PSTG has topped among the stocks.
Click here to access additional PSTG ratings (Value, Stability, and Momentum).
Flex Ltd. (FLEX)
FLEX provides manufacturing solutions to various brands in Asia, the Americas, and Europe. The company operates in two segments: Flex Agility Solutions (FAS) and Flex Reliability Solutions (FRS). It offers flexible supply and manufacturing systems, lifestyle solutions, and consumer devices.
In terms of forward Price/Sales, FLEX is trading at 0.52x, 81.9% lower than the industry average of 2.85x. Likewise, the stock’s forward non-GAAP P/E multiple of 13.93 is 41.8% lower than the industry average of 23.94. Also, its forward EV/EBITDA of 8.10x is 43.8% lower than the industry average of 14.42x.
On August 22, FLEX’s Anord Mardix opened its second facility named D2 in Dundalk, Ireland. The facility will serve as an assembly hub for switchgear products, ensuring a seamless and efficient production process of reliable and uninterrupted data center power from the grid.
On August 8, FLEX and Musashi Energy Solutions, a group company of Musashi Seimitsu Industry Co., Ltd., partnered to supply Flex-designed and manufactured Capacitor-based Energy Storage Systems (CESS) featuring Musashi's Hybrid SuperCapacitor (HSC) technology.
These systems are designed to integrate with server rack power systems to address challenges with utility power in AI data centers.
For the fiscal 2025 first quarter that ended June 28, 2024, FLEX reported net sales of $6.31 billion, and its gross profit was $471 million. The company’s non-GAAP operating income rose 4.4% year-over-year to $306 million.
Furthermore, adjusted net income attributable to FLEX was $211 million for the quarter. Its non-GAAP EPS attributable to FLEX of $0.51 indicates growth of 8.5% from the prior year’s quarter.
According to the company's second-quarter fiscal 2025 guidance, FLEX expects revenue between $6.2 billion and $6.8 billion. Its adjusted operating income is expected to be $310 million - $350 million, and adjusted EPS is anticipated to range from $0.52 to $0.60.
For the full fiscal year 2025, the company's revenue expectation is $25.40 billion - $26.40 billion. The company's adjusted EPS is expected to be $2.30 to $2.50.
Analysts expect FLEX’s revenue for the fourth quarter (ending March 2025) to increase 5.3% year-over-year to $6.50 billion, and its EPS for the same period is expected to grow 21.2% year-over-year to $0.69. Moreover, the company topped the consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has surged 17% over the past six months and 26.5% over the past year to close the last trading session at $33.65. Its 12-month price target of $38.60 reflects a 14.71% potential upside.
FLEX’s POWR Ratings reflect its bright prospects. The stock has an overall grade of B, translating to a Buy in our proprietary rating system.
FLEX has a B grade for Sentiment and Momentum. It is ranked #24 among the 76 stocks within the Technology - Services industry.
To see the other FLEX ratings for Stability, Growth, Quality, and Value, click here.
Informatica Inc. (INFA)
INFA develops an artificial intelligence-powered platform that connects, manages, and unifies data across multi-vendor, multi-cloud, and hybrid systems at enterprise scale internationally.
INFA’s forward non-GAAP P/E of 22.16x is 7.4% lower than the industry average of 23.94x. Likewise, the stock’s forward EV/EBIT multiple of 15.25 is 23.9% lower than the industry average of 20.03. Also, its forward Price/Book of 3.06x is 27.8% lower than the industry average of 4.24x.
On October 1, INFA announced that it has been chosen by leading New Zealand utility company Genesis Energy to provide sustainable and secure data-driven business practices. Genesis Energy will implement INFA’s Cloud Data Governance and Catalog, underpinned by Informatica’s AI-powered Intelligent Data Management Cloud™.
Also, on September 12, INFA announced that Ricoh Company, Ltd., a leading provider of document management solutions, has chosen INFA's Intelligent Data Management Cloud™ (IDMC) to accelerate its GLIDER data infrastructure project, which will support the overall business transformation of Ricoh becoming a digital services company.
During the second quarter that ended on June 30, 2024, INFA’s total revenues increased 6.5% year-over-year to $400.62 million. Its non-GAAP income from operations rose 31.2% from the year-ago value to $114.86 million. Also, the company’s non-GAAP net income came in at $71.23 million and $0.23 per share, indicating growth of 48% and 35.3% year-over-year, respectively.
In addition, INFA’s adjusted EBITDA rose 29.4% from the prior year’s quarter to $118.71 million.
The company provides its financial guidance for the third quarter of 2024. INFA expects total revenues to range from $412 million to $428 million, representing 2.8% year-over-year growth. Its non-GAAP operating income is expected to be between $139 million and $151 million, reflecting 13.2% year-over-year growth.
For the full-year 2024, the company's total revenue is set to be $1.66 billion - $1.68 billion. It has raised its non-GAAP operating income to a range of $538 million to $558 million, up 18.5% year-over-year.
Street expects INFA’s EPS for the third quarter (ended September 2024) to increase 11.8% year-over-year to $0.30. Its revenue is expected to grow 3.2% year-over-year to $421.41 million for the same quarter. Furthermore, the company surpassed the consensus EPS estimates in all of the trailing four quarters.
Shares of INFA have gained 0.8% over the past month and 16.4% over the past year to close the last trading session at $25.13. Wall Street analysts expect the stock to hit $30.63 in the near term, indicating a potential upside of 21.89%.
INFA’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
INFA has a B grade for Quality. It is ranked #7 among 18 stocks in the A-rated Software - SAAS industry.
In addition to the POWR Ratings we’ve stated above, we also have INFA’s ratings for Value, Momentum, Stability, Sentiment, and Growth. Get all INFA ratings here.
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.
PSTG shares were trading at $52.31 per share on Tuesday afternoon, up $0.99 (+1.93%). Year-to-date, PSTG has gained 46.69%, versus a 21.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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