The technology hardware industry is well-positioned for significant growth in the foreseeable years, driven by the increased demand for hardware products and solutions required to support the hybrid work culture coupled with the emergence and rapid adoption of advanced technologies.
Given the industry’s promising growth prospects, it could be wise to invest in top-rated tech hardware stocks Canon Inc. (CAJPY), Vtech Holdings Limited (VTKLY), and AstroNova, Inc. (ALOT) for solid gains. Let’s discuss this in detail.
The COVID-19 pandemic has had a profound impact on the technology hardware industry. The shift towards remote and hybrid work culture has boosted demand for a wide range of hardware products, such as laptops, computers, monitors, webcams, headphones, printers, and other remote work tools.
The global computer hardware market is expected to reach $909.80 billion by 2027, growing at a 6.6% CAGR, as per a report by the Business Research Company. The rising need for more energy-efficient and robust computing systems propels the market’s growth.
Furthermore, the industry is set to benefit from the explosive growth in the IoT world, with IoT devices to total 41 billion by 2027. The increasing adoption of IoT technology has fueled the need for specialized hardware components, including sensors, processors, and wireless connectivity modules.
The tech hardware industry is also reaping the rewards of AI’s widespread adoption. To meet the growing demand, industry players increasingly manufacture cutting-edge hardware, such as Graphics Processing Units (GPUs) and AI accelerators, required to enhance the AI algorithm’s capabilities.
Investors’ keen interest in tech hardware stocks is evident from the Dow Jones US Technology Hardware & Equipment Index’s 24.9% returns over the past six months.
Against this backdrop, fundamentally sound tech stocks CAJPY, VTKLY, and ALOT could be ideal additions to your portfolio, considering the robust growth potential of the industry. These stocks are rated A (Strong Buy) in our POWR Ratings system.
Let’s discuss these stocks in greater detail.
Canon Inc. (CAJPY)
With its headquarters in Tokyo, Japan, CAJPY manufactures and sells office multifunction devices (MFDs), laser and inkjet printers, cameras, medical equipment, and lithography equipment. Its segments include Printing Business Unit; Imaging Business Unit; Medical Business Unit; Industrial Business Unit, and Others.
On April 3, CAJPY announced that it is developing an ultra-high-sensitivity ILC equipped with a SPAD sensor. This camera would capture clear, color images, enabling precise monitoring of subjects even several kilometers away in low-light conditions.
The launch is expected to drive the company’s growth and profitability, given the growing demand for high-precision monitoring systems in critical infrastructure facilities such as national borders, airports, and power plants.
On March 23, CAJPY signed an asset purchase agreement with Kyoto Seisakusho Co., Ltd to obtain cell mass-production technology for clinical use. The acquisition would aid CAJPY in developing regenerative medicine technologies and expanding its medical business in the Bio-science field.
For the first quarter that ended March 31, 2023, CAJPY’s net sales increased 10.4% year-over-year to $7.25 billion, while its operating profit grew 10.9% from the prior year’s period to $630.41 million. Net income attributable to CAJPY rose 22.7% year-over-year to $420.97 million, and EPS came in at $0.41, up 26.3% year-over-year.
The consensus revenue estimate of $7.73 billion for the second quarter (ending June 2023) reflects a 5.8% year-over-year improvement. Likewise, the consensus EPS estimate of $0.51 for the current quarter indicates a 25% year-over-year rise. The stock has gained 9.9% over the past month to close the last trading session at $24.04.
CAJPY’s strong fundamentals are apparent in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
CAJPY has an A grade for Quality and a B for Value and Stability. It is ranked #3 in the 41-stock Technology - Hardware industry.
In addition to the POWR Ratings I’ve just highlighted, you can see CAJPY’s ratings for Growth, Sentiment, and Momentum here.
Vtech Holdings Limited (VTKLY)
Headquartered in Tai Po, Hong Kong, VTKLY designs, manufactures, and distributes electronic products, such as educational toys and phones. The company operates through four geographical segments: North America; Europe; Asia Pacific; and Others.
On February 27, Snom, a VTKLY subsidiary, launched the M500 Pro wireless family. This SIP-based Key System Unit is the industry's first cloud-accessible and provision-capable cordless phone system, offering the company a competitive advantage in the cordless phone system market.
The programmable fixed line keys allow business users to transfer calls, page their team, and have hands-free conversations with up to eight calls per base station. The new launch should enable the company to attract more customers and increase revenue.
Also, on February 17, Snom announced that its D7XX Series desk phones are now Zoom-certified. These phones are adaptable for remote, hybrid, or in-office workers. VTKLY's VoIP communication solutions would now be available to a broader audience through Zoom’s enterprise community. This would extend the company’s reach and boost its revenue streams.
For the six months that ended September 30, 2022, VTKLY’s revenue increased 4.5% year-over-year to $1.16 billion, and its gross profit grew 8% from the year-ago value to $329.40 million. In addition, Profit for the period and attributable to shareholders of the company rose 6.6% year-over-year to $82 million. The company’s EPS was $32.50, up 6.6% year-over-year.
Analysts expect VTKLY’s revenue to increase 3.3% year-over-year to $2.36 billion for the next fiscal year ending March 2024. Shares of VTKLY have gained 2.9% over the past six months to close the last trading session at $5.86.
VTKLY’s positive outlook is apparent in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
VTKLY has a B grade for Value, Stability, and Quality. It has ranked #4 out of 41 stocks within the same industry.
Click here to access additional VTKLY ratings for Sentiment, Momentum, and Growth.
AstroNova, Inc. (ALOT)
ALOT develops, manufactures, and markets a broad range of specialty printers and data acquisition systems, including hardware and software, that facilitate the use of cutting-edge technologies to collect, store, analyze, and show data in various formats. Its segments include Test and Measurement (T&M) and Product Identification (PI).
On March 23, Greg Woods, President and CEO of ALOT, said, “Looking ahead, we are well positioned in both of our segments, in Product Identification we are excited about the opportunities to continue to capitalize on the synergies provided by Astro Machine, and the rebound in the Aerospace and Defense sectors bodes well for our Test and Measurement segment, as we begin fiscal 2024.”
On October 24, 2022, ALOT launched the QL-E100, an entry-level addition to its QuickLabel product line-up. The QL-E100 is a compact, full-color tabletop label printer that is easy to use. Its innovative design opens up a new market for ALOT, enabling it to reach customers with smaller budgets or those new to in-house label printing.
During the fourth quarter that ended January 31, 2023, ALOT’s non-GAAP gross profit grew 39.1% year-over-year to $13.56 million. Its non-GAAP operating income stood at $2.10 million, compared to a loss of $227 thousand in the prior year’s period.
Additionally, the company’s non-GAAP net income and EPS came in at $1.36 million and $0.18, compared to a loss and loss per share of $759 thousand and $0.10 in the prior year’s quarter, respectively.
Shares of ALOT have gained 20.7% over the past six months to close the last trading session at $14.72.
ALOT’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
ALOT has an A grade for Growth and a B for Value, Stability, and Sentiment. It has topped the 41-stock Technology - Hardware industry.
Click here to access additional ALOT ratings for Quality and Momentum.
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CAJPY shares were trading at $24.10 per share on Tuesday afternoon, up $0.06 (+0.25%). Year-to-date, CAJPY has gained 11.16%, versus a 7.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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