The technology industry remains upbeat about its long-term prospects despite the challenges faced by companies in this space due to rising interest rates. While the potential recession next year might curb the growth of most technology companies, continued breakthroughs and rising demand should help them regain strength quickly.
Ken Englund, EY Americas Technology, Media, and Telecommunications Leader, said, “Tech companies are very agile, and that's a benefit for them during these times. Even with the potential of an economic downturn, tech leaders are looking at ways to anticipate and mitigate recessionary pressures by using it as a time to reset and shift their strategies toward digital transformation, emerging technologies, and talent retention.”
With cloud computing becoming the go-to option for supporting everything-as-a-service (XaaS) and fostering innovation, the technology industry is well-positioned to grow. The global information technology market is expected to grow at a CAGR of 8.8% to $13.09 billion by 2026.
Furthermore, growing corporate and government investments should boost the tech industry’s prospects. According to the forecast by Gartner, Inc. (IT), worldwide IT spending is expected to reach $4.60 trillion in 2023, an increase of 5.1% from 2022.
Investors’ interest in tech stocks is evident from the Technology Select Sector SPDR ETF’s (XLK) 6.6% gains over the past month. Given the industry’s long-term growth prospects, adding quality tech stocks Microsoft (MSFT), Dell Technologies (DELL), and Juniper Networks (JNPR) to your portfolio could be wise.
Microsoft Corporation (MSFT)
The tech juggernaut MSFT creates, licenses, and provides support for software, services, products, and solutions across the globe. It operates in three segments: Productivity and Business Processes; Intelligent Cloud; and More Personal Computing.
On November 16, MSFT and Lockheed Martin announced their strategic alliance to help power the next generation of technology for the Department of Defense (DOD) with classified Cloud Innovations, Artificial Intelligence/Machine Learning (AI/ML), Modeling, and Simulation Capabilities; 5G.MIL® Programs; and Digital Transformation.
Through this alliance, MSFT aims to demonstrate how the defense industrial base can use advanced 5G connectivity, critical data processing and analysis, and immersive experiences at the edge to support decision-making.
On November 14, MSFT launched the Microsoft Supply Chain Platform. This modular platform combines the best of Microsoft AI, collaboration, low-code, security, and SaaS apps to help organizations maximize their investment in supply chain data estate.
The Microsoft Supply Chain Platform and Supply Chain Center will assist businesses in getting the most out of their current investments so they can learn more and act quickly.
For the fiscal 2023 first quarter ended September 30, 2022, MSFT’s total revenue increased 10.6% year-over-year to $50.12 billion, while its gross margin was $34.67 billion, up 9.5% year-over-year. Its operating income grew 6.3% from the prior-year period to $21.52 billion. MSFT’s income before income taxes came in at $21.57 billion, a 5.1% increase from the year-ago value.
On November 29, MSFT announced that its board of directors declared a quarterly dividend of $0.68 per share. The dividend is payable on March 9, 2023, to shareholders of record on February 16, 2023.
MSFT has raised its dividends for 18 consecutive years. It pays a $2.72 per share dividend annually, which translates to a 1.07% yield on the current price. Its four-year average dividend yield is 1.05%. MSFT’s dividend payments have grown at a CAGR of 10.4% over the past three years.
The consensus EPS estimate of $9.53 for the current fiscal year (ending June 2023) indicates a 3.5% year-over-year improvement. Likewise, the consensus revenue estimate for the same year of $212.95 billion reflects a rise of 7.4% from the prior year. Furthermore, the company’s EPS and revenue for the next year are expected to increase 17.1% and 13.5% year-over-year to $11.16 and $241.66 billion, respectively.
The stock has gained 9.9% over the past month to close the last trading session at $255.14.
MSFT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates 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 a B grade for Stability, Quality, and Sentiment. Within the Software - Business industry, it is ranked #9 of 53 stocks.
Beyond what we stated above, we also have MSFT’s ratings for Growth, Value, and Momentum. Get all MSFT ratings here.
Dell Technologies Inc. (DELL)
DELL is a multinational company that offers information technology solutions. It operates through two segments, Infrastructure Solutions Group (ISG); and Client Solutions Group (CSG). DELL also provides information security solutions to defend its clients from cyber assaults, as well as cloud software and infrastructure.
Yesterday, DELL and OneMind Technologies, a wholly owned subsidiary of Affluence Corporation, entered into a strategic partnership. Under the terms of the agreement, DELL will incorporate OneMind’s Hypervisor into its Digital City Software product.
“Historically, Dell's business has grown through its ecosystem of partners. For the last four years, our team has been working to build an ecosystem and working closely with partners like OneMind to develop expertise in solving specific problems, bring proven solutions with modern architectures and ensure successful implementations,” said Ferry Chung, DELL’s Global VP of Digital Cities.
On November 17, DELL announced expanding its position as the market leader in data security hardware and software to assist clients in safeguarding their data in private clouds, in the public cloud, and at the edge. Its comprehensive strategy will help enterprises achieve Zero Trust architectures to increase cyber resiliency and reduce security complexity.
Furthermore, on November 14, DELL announced the extension of its high-performance computing (HPC) portfolio, which includes robust solutions that support enterprises' rapid innovation with confidence.
New DELL servers and solutions are expected to provide the companies access to technologies previously only available to the largest research institutes and government organizations, enabling them to take on HPC, simplify AI adoption, and advance their businesses.
For the fiscal 2023 third quarter ended October 28, 2022, DELL’s service revenue increased 6.2% year-over-year to $5.78 billion. Its non-GAAP operating income grew 21.7% year-over-year to $2.38 billion, while its non-GAAP net income came in at $1.70 billion, up 29.9% year-over-year. In addition, the company’s non-GAAP EPS grew 38.6% from the year-ago value to $2.30.
DELL pays a $0.99 per share dividend annually, which translates to a 2.21% yield on the current price. Its four-year average dividend yield is 0.23%.
Analysts expect DELL’s EPS estimate of $7.44 for the current fiscal year (ending January 2023), indicating a 16.7% year-over-year improvement. DELL has surpassed its consensus EPS estimates in three of the four trailing quarters. Shares of DELL have gained 16.6% over the past month to close the last trading session at $44.79.
DELL’s POWR Ratings reflect its strong outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
The stock has a B grade for Growth, Value, and Sentiment. Within the Technology - Hardware industry, it is ranked #8 of 42 stocks.
To see additional POWR Ratings for Quality, Stability, and Momentum for DELL, click here.
Juniper Networks, Inc. (JNPR)
JNPR specializes in AI networking, cloud computing, and connected security systems. It creates, develops, and sells goods and services for high-performance networks, enabling clients to build networks for their companies.
On November 29, JNPR announced that Indonesian digital infrastructure provider PT IndoInternetTbk (Indonet) had chosen Juniper Apstra to assist with automating, modernizing, and facilitating an experience-first development of its network infrastructure.
Apstra's regulated automated network deployment and monitoring have already increased Indonet's efficiency by an estimated 20%. Through this collaboration, JNPR will build a reliable infrastructure across Indonesia.
On November 15, JNPR announced that iconic retailer Canadian Tire Corporation Limited (CTC) selected Juniper’s full-stack AI-driven enterprise solution to modernize its IT infrastructure. The technology from Juniper will support CTC’s Better-Connected vision by enabling cutting-edge, tailored shopping experiences for every client, regardless of their preferred method.
For the fiscal 2022 third quarter ended September 30, 2022, JNPR’s net revenue increased 19% year-over-year to $1.41 billion, while its gross margin increased 13.8% from the year-ago value to $787.80 million. Its operating income grew 24.3% year-over-year to $149.3 million, and its net income came in at $121.50 million, up 36.6% year-over-year.
Furthermore, the company’s EPS grew 37% from the year-ago value to $0.37.
JNPR pays a $0.84 per share dividend annually, which translates to a 2.53% yield on the current price. JNPR’s dividend payments have grown at a CAGR of 16% over the past five years. Its four-year average dividend yield is 2.99%.
The consensus EPS estimate of $1.95 for the fiscal year (ending December 2022) indicates an 11.9% year-over-year increase. The consensus revenue estimate for the current year reflects a rise of 12.5% to $5.33 billion from the previous year. Furthermore, the company’s EPS and revenue for the next year are expected to increase 16.4% and 7.5% year-over-year to $2.27 and $5.73 billion, respectively.
The stock has gained 8.9% over the past month to close the last trading session at $33.24.
JNPR’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
The stock has a B grade for Growth and Quality. Within the Technology - Communication/Networking industry, it is ranked #4 of 48 stocks.
Click here to see additional ratings of JNPR for Stability, Momentum, Value, and Sentiment.
MSFT shares were trading at $255.28 per share on Thursday morning, up $0.14 (+0.05%). Year-to-date, MSFT has declined -23.38%, versus a -12.90% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
Microsoft, Dell, and 1 Other Tech Stock to Add to Your Portfolio This Week StockNews.com
