The technology industry is growing significantly due to the increased demand for innovative solutions, automation and the digital transformation across various industries. In light of this, I think it could be wise to capitalize on the industry’s tailwinds by investing in quality tech stocks, LiveRamp Holdings, Inc. (RAMP), Gilat Satellite Networks Ltd. (GILT), and AstroNova, Inc. (ALOT).
The IT Services market in United States has been experiencing a significant growth in recent years, driven by various factors such as technological advancements, increasing demand for cloud computing, and the need for digital transformation across industries. Customers in the United States are increasingly looking for IT services that can help them optimize their business processes, reduce costs, and improve their overall efficiency.
Revenue in the IT services market is expected to grow at a CAGR of 6.2% until 2028.
In addition, according to projections by Gartner, global IT spending is anticipated to reach $5.10 trillion in 2024, marking an 8% increase from the preceding year. While the impact of generative AI on IT spending is presently limited, substantial investments in AI are playing a crucial role in the overall growth of IT expenditures.
Furthermore, the increasing need to store data amid the growing usage of data analytics, AI, blockchain, IoT, cloud computing, and all Internet-based services is driving demand for advanced hardware. The IT hardware market is projected to grow at a CAGR of 7.9% to reach $177.11 billion by 2028.
With these favorable trends in mind, let's delve into the fundamentals of the three best technology stock picks mentioned above.
LiveRamp Holdings, Inc. (RAMP)
RAMP is a technology company that operates a data collaboration platform in the United States, Europe, the Asia-Pacific, and internationally. The company operates LiveRamp Data Collaboration platform enables an organization to unify customer and prospect data to build a single view of the customer in a way that protects consumer privacy.
On December 13, 2023, RAMP and Ad tech platform TripleLift, announced an integration of TripleLift Audiences and RampID to give marketers almost limitless and scalable first-party audience solutions. The partnership brings together TripleLift Audiences, which delivers first-party data from publishers, with RampID, RAMP's durable, privacy-centric connectivity identifier, to offer lookalike addressability across the open web without relying on cookies, IDFAs, IP addresses, or other device IDs.
RAMP’s trailing-12-month gross profit margin of 72.05% is 45.8% higher than the industry average of 49.41%, while its trailing-12-month levered FCF of 23.86% is 175.9% higher than the industry average of 8.65%.
During the second quarter ended September 30, 2023, the company’s revenues grew 8.7% year-over-year to $159.87 billion. Its non-GAAP net earnings from continuing operations amounted to $29.13 billion, up 96% from the year-ago quarter. RAMP earned non-GAAP EPS from continuing operations of $0.43, up 95.5% year-over-year. Also, its adjusted EBITDA grew 77.7% year-over-year to $32.38 billion.
Analysts expect RAMP’s EPS for the third quarter ended December 31, 2023, to increase 25.3% year-over-year to $0.35. Its revenue is expected to increase 4.3% year-over-year to $165.37 million for the same quarter. Moreover, it has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
Shares of RAMP increased 63.2% over the past nine months to close the last trading session at $37.31.
RAMP’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a B grade for Growth, Value, Sentiment, and Quality. Within the Technology - Services industry, it is ranked #2 out of 77 stocks.
Beyond what is stated above, we’ve also rated RAMP for Momentum and Stability. Get all RAMP ratings here.
Gilat Satellite Networks Ltd. (GILT)
Headquartered in Petah Tikva, Israel, GILT offers satellite-based broadband communication solutions internationally. It operates in three segments: Satellite Networks; Integrated Solutions; and Network Infrastructure and Services.
On January 11, 2024, GILT announced the launch of a new brand identity embracing the company’s commitment to the new space revolution, and reflecting the company’s vision of the right of all people to be connected.
On November 16, GILT announced that it had completed acquiring DataPath, Inc., a market leader in trusted communications for the U.S. DoD Military and Government sectors. This should bolster the company’s position in the defense market.
GILT’s trailing-12-month EBIT margin and EBITDA margin of 11.91% and 16.70% are 142% and 77.3% higher than the respective industry averages of 4.92% and 9.42%.
GILT’s revenues for the third quarter ended September 30, 2023, increased 5.9% year-over-year to $63.93 million. Its non-GAAP gross profit increased 12.1% from the prior-year period to $25.91 million. The company’s non-GAAP operating income increased 39.6% from the previous year’s value to $6.10 million.
In addition, its non-GAAP net income rose 51.2% from the prior-year quarter to $4.58 million. Its non-GAAP EPS came in at $0.08, representing an increase of 33.3% year-over-year.
Street expects GILT’s revenue for the fiscal fourth quarter ended December 2023 to increase 4.6% year-over-year to $75.99 million. Moreover, it has surpassed the consensus EPS estimates in three of the trailing four quarters.
Over the past nine months, the stock has surged 17.3% to close the last trading session at $5.76.
It’s no surprise that GILT has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Sentiment and a B in Quality, Value, and Growth. Within the Technology - Communication/Networking industry, it is ranked #first out of 46 stocks.
In addition to the POWR Ratings stated above, one can access GILT's ratings for Momentum and Stability here.
AstroNova, Inc. (ALOT)
ALOT designs, develops, manufactures, and distributes specialty printers and data acquisition and analysis systems, including hardware and software, which incorporate advanced technologies to acquire, store, analyze, and present data in multiple formats. The company operates in two segments: Product Identification (PI); and Test & Measurement (T&M).
ALOT’s trailing-12-month EBIT margin of 6.96% is 41.5% higher than the industry average of 4.94%. The stock’s trailing-12-month levered FCF margin of 18.65% is 115.6% higher than the industry average of 8.65%.
In the fiscal 2024 third quarter, which ended on October 28, 2023, ALOT’s net revenue amounted to $37.55 million and its gross profit grew 18.4% from the prior-year quarter to $14.78 million.
Moreover, the company’s non-GAAP net income and non-GAAP EPS amounted to $2.75 million and $0.37, up 231.9% and 825% from the prior-year quarter, respectively. Also, its non-GAAP operating income improved 123.8% year-over-year to $4.62 million.
ALOT’s shares have surged 36.9% over the past three months to close the last trading session at $17.20.
ALOT’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has a B grade in Value, Growth, Stability, and Sentiment. It is ranked #first out of 37 stocks in the B-rated Technology - Hardware industry.
Click here to see the other ratings of ALOT (Momentum and Quality).
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RAMP shares were trading at $38.24 per share on Friday afternoon, up $0.93 (+2.49%). Year-to-date, RAMP has gained 0.95%, versus a 0.12% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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