Tech stocks have been under pressure amid rising inflation and the Federal Reserve’s interest rate increases. Investors’ pessimism has led to a price plunge by several fundamentally sound tech stocks this year. However, given the tech industry’s bright long-term prospects, fundamentally sound tech stocks could be bound soon for significant gains.
With organizations rapidly implementing digital transformations, the industry’s revenue is expected to grow at a 7.1% CAGR to reach $1.57 trillion by 2027. As per a report from Bain & Company, tech companies have contributed 52% of the total equity market value growth since 2015. Furthermore, trends such as creating supply chains for the future, the adoption of SaaS and everything-as-a-service and implementing hybrid workforces should bolster the market’s growth over the long run.
Against this backdrop, we think tech stocks STMicroelectronics N.V. (STM), ACI Worldwide, Inc. (ACIW), Axcelis Technologies, Inc. (ACLS), Sapiens International Corporation N.V. (SPNS), and NICE Ltd. (NICE) are poised to bounce back in price, given their fundamental strength.
STMicroelectronics N.V. (STM)
Geneva, Switzerland-based STM designs, develops, manufactures, and sells semiconductor products. The company operates through the Automotive and Discrete Group; Analog, MEMS, and Sensors Group; and Microcontrollers and Digital ICs Group segments.
On May 18, 2022, STM and SP Group, a leading utility group in the Asia Pacific and Singapore’s national grid operator, announced an agreement to install a district cooling system at ST AMK TechnoPark that will eliminate 120,000 tons of carbon from the environment. This is expected to bring the company closer to its goal of becoming carbon neutral globally by 2027.
Also, STM and MACOM Technology Solutions Holdings Inc. (MTSI), a leading supplier of semiconductor products for the Telecommunications, Industrial and Defense, and Datacenter industries, announced the successful production of radio-frequency Gallium-Nitride-on Silicon (RF GaN-on-Si) prototypes that will offer high potential for 5G and 6G infrastructure. STM’s collaboration with MTSI should prove beneficial for the company because it will enable it to offer attractive cost and supply-chain advantages for high-volume applications.
STM’s net revenues increased 17.6% year-over-year to $3.55 billion in its fiscal first quarter, ended March 31, 2022. Its gross profit grew 40.8% from its year-ago value to $1.66 billion. The company’s net income has increased 105.1% year-over-year to $747 million over the period. Also, its EPS came in at $0.79, up 102.6% from the prior-year quarter.
The $0.79 consensus EPS estimate for the current quarter represents a 72.2% improvement year-over-year. The $3.73 billion consensus revenue estimate for the same quarter represents a 24.8% increase from the same period last year. Also, it has an impressive earnings surprise history; it topped the Street’s EPS estimates in three of the trailing four quarters.
Over the past three months, the stock has gained 11.3% in price to close yesterday’s trading session at $39.69. However, the stock has slumped 20.8% over the past six months.
STM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which translates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
STM has a B grade in Growth, Momentum, Sentiment, Quality, and Value. It is ranked #4 of 95 stocks in the B-rated Semiconductor & Wireless Chip industry.
Beyond what is stated above, we have also rated STM for Stability. Get all the STM ratings here.
Click here to checkout our Semiconductor Industry Report for 2022
ACI Worldwide, Inc. (ACIW)
ACIW in Naples, Fla., develops, markets, installs, and supports a range of software products and solutions for facilitating digital payments to banks, merchants, and billers worldwide.
On June 7, ACIW agreed to sell its corporate online banking solutions to One Equity Partners, a middle-market private equity firm. The divestment aligns with ACIW’s three-pillar strategy, allowing it to enhance its corporate online banking solutions, expand the core software portfolio, and better serve its customers.
ACIW’s total revenues have increased 13.3% year-over-year to $323.08 million in the fiscal quarter, ended March 31, 2022. Its operating income grew 649.8% from its year-ago value to $27.67 million, while its net income improved 896.4% year-over-year to $15.49 million. Its EPS increased 750% from its year-ago value to $0.13.
Analysts expect ACIW’s revenue for the current quarter to come in at $330.09 billion, indicating a 9.4% increase year-over-year. Also, the company’s EPS is expected to grow 11.6% year-over-year to $0.26 in the same period.
ACIW has gained 5.4% over the past month to close the last trading session at $28.38. It has slumped 10% in price over the past three months.
It is no surprise that ACIW has an overall B rating, which equates to Buy in our POWR Ratings system.
ACIW has an A grade in Growth and a B in Value and Sentiment. Among the 107 stocks in Financial Services (Enterprise) industry, ACIW is ranked #7.
In addition to the POWR Rating grades I have just highlighted, one can see the ACIW’s Momentum, Stability, and Quality ratings here.
Axcelis Technologies, Inc. (ACLS)
ACLS designs, manufactures, and services ion implantation and other processing equipment used to fabric semiconductor chips in the United States, Europe, and Asia. The company is headquartered in Beverly, Mass.
ACLS’ total revenue increased 53.3% from the prior-year quarter to $203.60 million in its fiscal quarter ended March 31, 2022. Its gross profit for the quarter came in at $89.77 million, reflecting a 59.1% increase year-over-year, while its income from operations stood at $48.92 million, up 140.4% year-over-year.
The Street expects ACLS’ EPS for its fiscal quarter ending June 30, 2022, to improve 86.4% year-over-year to $1.03. The $209.86 million consensus revenue estimate for the same period represents a 42.5% increase year-over-year. The company also surpassed the consensus EPS estimates in each of the trailing four quarters.
ACLS’ shares have slumped 7.4% in price over the past six months to close the last trading session at $63.64. It gained 53.2% over the year.
The company has an overall B rating, which translates to Buy in our proprietary ratings system.
ACLS is also rated B in Growth, Value, and Quality. Within the Semiconductor & Wireless Chip industry, it is ranked #14.
Click here to see additional POWR Ratings for Momentum, Sentiment, and Stability for ACLS.
Click here to checkout our Semiconductor Industry Report for 2022
Sapiens International Corporation N.V. (SPNS)
Headquartered in Holon, Israel, SPNS provides software solutions for the insurance and financial services industries in North America, the European Union, the United Kingdom, Israel, and internationally.
On May 24, SPNS announced that the Wyoming Department of Workforce Services (DWS) had modernized its Sapiens CoreSuite for Workers’ Compensation platform to take advantage of new capabilities for more rapid and efficient upgrades designed to optimize operational efficiencies, increase customer satisfaction, and boost profitability. This combined effort should help the company deliver industry-leading service to Wyoming’s employers and workers.
In the same month, the company announced that NYCM Insurance, a property and casualty insurance provider in operation for 120 years had implemented Sapiens ReinsurancePro to enhance its internal controls processes, automated calculations, and reporting. This partnership demonstrates SPNS’ strong positioning in its industry.
SPNS’ revenue increased 6.8% year-over-year to $117.7 million in its fiscal first quarter, ended March 31, 2022. Its non-GAAP gross profit improved 7.5% year-over-year to $52.9 million, while its non-GAAP operating income increased 9.3% from its year-ago value to $20.8 million. Its non-GAAP EPS increased 14.8% from its year-ago value to $0.31.
SPNS’ revenue for the current quarter is expected to be $123.25 million, indicating a 7.7% year-over-year growth. The company’s EPS is expected to increase 1.9% year-over-year to $0.30 for the same quarter. SPNS also beat the consensus EPS estimates in the trailing four quarters.
SPNS’ shares have gained 2.6% in price over the past month to close the last trading session at $24.52. The stock has slumped 32.9% over the past six months.
SPNS’ sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to Strong Buy in our POWR Ratings system.
The company also has an A grade in Sentiment and a B in Growth, Value, and Stability. The stock is ranked #3 in the Software - Business industry.
To get SPNS ratings for Momentum and Quality, click here.
Click here to check out our Software Industry Report for 2022
NICE Ltd. (NICE)
Based in Ra’anana, Israel, NICE provides cloud platforms for AI-driven digital business solutions worldwide.
On May 25, 2022, NICE announced that Aioi Nissay Dowa Insurance Co. Ltd, which is a part of MS&AD Insurance Group Holdings in Japan, had significantly increased its operational efficiency, cut costs, and reduced average handle times at its emergency call center after implementing NICE Advanced Process Automation (APA) solutions. This demonstrates NICE’s prowess in this space.
For its fiscal quarter ended March 31, 2022, NICE’s total revenue increased 15.9% year-over-year to $527.43 million. Its gross profit grew 17.3% from the year-ago value to $360.43 million. Its net income for the quarter stood at $57.94 million, reflecting an 11% increase year-over-year. And its EPS stood at $0.87, up 11.5% from the prior-year quarter.
The $1.79 consensus EPS estimate for the current quarter represents a 14.1% improvement year-over-year. The $523.82 million consensus revenue estimate for the same quarter represents a 14.2% increase from the same period last year. NICE topped the Street’s EPS estimates in each of the trailing four quarters.
NICE has gained 7.3% in price over the past month, but it has slumped 4.6% over the past three months to close the last trading session at $208.43.
NICE’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system.
NICE is rated B in Growth, Value, Stability, Sentiment, and Quality. It is ranked #4 of 156 stocks in the Software - Application industry.
To see additional POWR Ratings for Momentum for NICE, click here.
Click here to check out our Cloud Computing Industry Report for 2022
STM shares were trading at $39.23 per share on Wednesday afternoon, down $0.46 (-1.16%). Year-to-date, STM has declined -19.65%, versus a -13.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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