While macroeconomic challenges have harmed the IT sector, its long-term prospects remain optimistic. Therefore, it could be wise for investors to buy fundamentally sound tech stock Quantum Corporation (QMCO) now. However, I think it would be wise to wait for a better entry point in GoPro, Inc. (GPRO).
The global information technology market is predicted to reach $1.36 trillion by 2029, growing at a CAGR of 14.7%. The IT market is predicted to increase as a result of the advancement in technology and the growing need for digital transformation in various industries.
Moreover, technology hardware sector is growing due to increasing demand amid the adoption of emerging technologies, which require advanced hardware installations.
The global AI in hardware market is expected to reach $248.09 billion by 2030, growing at a CAGR of 24.5%, driven by improvements in cloud computing and big data, with major components such as networking storage and computers utilized in industries such as telecommunications, banking, and information technology.
Furthermore, investors’ interest in tech stocks is evident from the Technology Select Sector SPDR ETF’s (XLK) 20.6% returns over the past six months.
Let’s delve into the fundamentals of the featured stocks.
Stock to Buy:
Quantum Corporation (QMCO)
QMCO offers products for storing and managing digital video and unstructured data internationally. The company’s product portfolio includes Myriad All-Flash File and Object Storage Software, Unified Surveillance Platform Software, StorNext Hybrid Flash/Disk File Storage Software, CatDV Asset Management Software, DXi Backup Appliances, and Scalar Tape Storage.
QMCO’s trailing-12-month CAPEX / Sales of 2.91% is 20.1% higher than the industry average of 2.42%. Its trailing-12-month asset turnover ratio of 1.89x is 205.8% higher than the industry average of 0.62x.
QMCO reported total revenues of $91.79 million for the first quarter that ended June 30, 2023. Its non-GAAP gross profit grew 2.1% year-over-year to $35.18 million. The company’s adjusted EBITDA rose 122.8% from the year-ago value to $771 thousand. As of June 30, 2023, its cash and cash equivalents stood at $25.46 million.
The consensus revenue estimate of $370.05 million for the fiscal year ending March 2025 represents a 4.6% increase year-over-year. Its EPS is expected to come in at $0.09 for the same year. QMCO’s shares have lost marginally intraday to close the last trading session at $0.45.
QMCO’s POWR Ratings reflect this optimistic outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
QMCO also has a B grade for Value. It is ranked #12 out of 41 stocks in the B-rated Technology – Hardware industry. Click here for the additional POWR Ratings for Momentum, Growth, Stability, Sentiment and Quality for QMCO.
Stock to Hold:
GoPro, Inc. (GPRO)
GPRO develops and sells cameras, mountable and wearable accessories, and subscription services and software internationally.
GPRO’s trailing-12-month asset turnover ratio of 1.01x is marginally higher than the 1x industry average, while its trailing-12-month levered FCF margin of 0.51% is 90.4% lower than the industry average of 5.33%.
GPRO’s revenue for the second quarter ended June 30, 2023, declined 3.9% year-over-year to $241.02 million. Its non-GAAP net loss came in at $11.29 million, compared to a non-GAAP net income of $12.79 million in the year-ago quarter. Also, its non-GAAP loss per share came in at $0.07, compared to a non-GAAP EPS of $0.08 in the prior-year quarter.
However, as of June 30, 2023, the company’s total current liabilities stood at $259.72 million, compared to $275.93 million as of December 31, 2022. Also, its total liabilities amounted to $445.62 million, compared to $465.37 million for the same period.
Street expects GPRO’s revenue to decline 6.3% year-over-year to $1.02 billion for the year ending December 2023. Its EPS is expected to come in at negative $0.19. Shares of GPRO has gained 3.3% intraday to close the last trading session at $2.51.
GPRO’s mixed outlook is reflected in its POWR Ratings. The stock has an overall C rating, which translates to a Neutral in our proprietary system.
Within the same industry, it is ranked #28. To see additional GPRO’s ratings for Value, Growth, Momentum, Stability, Quality, and Sentiment, click here.
What To Do Next?
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QMCO shares were trading at $0.43 per share on Wednesday morning, down $0.01 (-2.63%). Year-to-date, QMCO has declined -60.55%, versus a 11.27% 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.
GoPro (GPRO) and Quantum (QMCO): Are These Tech Stocks Worth Buying Now? StockNews.com
