With Fed Chair Jerome Powell indicating on Wednesday that interest rate hikes could slow down, all three major U.S. stock indices posted their second consecutive month of gains. This is expected to act as the wind in the sails of technology businesses.
The industry is well-positioned for long-term growth due to the rising dependency on technology products and solutions, emerging advanced technologies, and increased corporate and government spending in this space.
Demand for greater flexibility, visibility, and data security by employees and customers around the world is expected to keep the demand for ubiquitous tech goods and services growing amid the increasing adoption of cloud computing, artificial intelligence (AI), virtual reality (VR), the internet of things (IoT), and increasing automation of business processes.
The global technology market is expected to grow at a CAGR of 25.7% over the next five years to reach $3.17 billion by 2027, and the United States is expected to strengthen its leadership in this space.
Therefore, it could be wise to invest in fundamentally strong technology stocks Oracle Corporation (ORCL), Gartner Inc. (IT), Canon Inc. ADR (CAJ), Celestica, Inc. (CLS), and AstroNova, Inc. (ALOT).
Oracle Corporation (ORCL)
ORCL offers services and products tailored to the needs of enterprise IT environments worldwide. The company directly offers its license, cloud, hardware, services, and support directly to businesses in various industries, educational institutions, and government agencies.
On November 3, ORCL announced the launch of Oracle Public Safety Services, a new technology platform for law enforcement and first responders. The platform has a unified hardware and software suite and is a significant addition to the company’s offerings.
On October 20, ORCL announced its expanded partnership with NVIDIA Corp. (NVDA) to add tens of thousands of NVDA’s AI-processing graphics chips to its cloud and provide customers access to NVIDIA software tools that can extract even more performance from them. High-performance cloud computing services broaden access to self-learning, data-hungry AI systems, which were previously out of reach.
For the first quarter of the fiscal year 2023 ended August 31, 2022, ORCL’s total revenue increased 17.7% year-over-year to $11.45 billion. The company’s non-GAAP operating income increased 3.3% year-over-year to $4.48 billion. The company’s total assets stood at $130.31 billion as of August 31, 2022, compared to $109.30 billion as of May 31, 2022.
Analysts expect ORCL’s revenue and EPS for the fiscal ending May 2023 to increase 16.1% and 1.3% year-over-year to $49.29 billion and $4.96, respectively. The stock has beaten consensus EPS estimates in two of the trailing four quarters.
The stock has gained 8.5% over the past month and 15.5% over the past six months to close the last trading session at $83.03.
ORCL’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ORCL has a grade of B for Stability and Sentiment. Within the Software - Application industry, it is ranked #21 out of 139 stocks.
Click here to see additional POWR ratings for Value, Momentum, Growth, and Quality for ORCL.
Gartner Inc. (IT)
IT operates as a global research and advisory company. The company operates through three segments: Research; Conferences; and Consulting. It also provides solutions for various IT-related priorities, including cost optimization, digital transformation, and sourcing optimization.
For the third quarter of the fiscal year 2022 ended September 30, IT’s revenues increased 15.2% year-over-year to $1.33 billion. During the same period, the company’s adjusted EBITDA increased 8.9% year-over-year to $332 million, while the adjusted net income increased 12.2% year-over-year to $193 million. The company’s adjusted EPS came in at $2.41, up 18.7% year-over-year.
Analysts expect IT’s revenue to increase 14.6% year-over-year to $5.43 billion during the fiscal ending December 2022. During the same period, the company’s EPS is expected to increase 10% year-over-year to $10.15 per share.
The stock has gained 16.6% over the past month and 33.5% over the past six months to close the last trading session at $350.37.
IT has an overall rating of B, translating to a Buy in our POWR Ratings system. It has a grade of A for Quality and a B for Sentiment.
IT is ranked #4 of 10 stocks in the A-rated Outsourcing - Tech Services industry.
Additional POWR Ratings for IT’s Growth, Value, Stability, and Momentum can be found here.
Canon Inc. ADR (CAJ)
CAJ, based in Japan, operates as a developer, producer, and seller of office equipment, imaging systems, medical systems, and industrial equipment and a provider of related services. The company operates through four segments: Office Business Unit; Imaging Systems; Industrial Equipment and Others; and Medical Systems.
On November 24, CAJ announced that it has decided to establish a new subsidiary, Canon Healthcare USA, INC. By strengthening its presence in the highly influential American medical market, Canon aims to accelerate the growth of its medical business.
On October 6, CAJ announced that it had won the U.S trademark infringement lawsuit, filed in the United States District Court for the Northern District of Illinois, against 52 counterfeiters who sold counterfeit CAJ products (camera batteries, inkjet printer print heads, etc.) on U.S. e-commerce websites.
This would help CAJ protect its brand equity by preventing economic losses to consumers who would otherwise have purchased counterfeited goods.
Also, on October 6, CAJ announced the installation of new manufacturing facilities at its Utsunomiya Office, which produces semiconductor lithography systems and other devices. The new facilities are scheduled to commence operation in the first half of 2025.
On September 1, CAJ announced that it had acquired 14,631,200 of its shares of common stock for around ¥50 billion ($356 million). This would increase the intrinsic value of the holdings of the company’s remaining shareholders.
For the third quarter of the fiscal year ended September 30, CAJ’s net sales increased 19.5% year-over-year to ¥996.10 billion ($7.18 billion), driven by the price adjustment of products and depreciation of the yen. During the same period, the company’s operating profit increased 38.7% year-over-year to ¥81.44 billion ($587.22 million).
The quarterly net income attributable to CAJ came in at ¥54.12 billion ($390.23 million) or ¥52.88 per share, up 9.7% and 12.2% year-over-year, respectively.
Analysts expect CAJ’s revenue and EPS for the fiscal ending December 2023 to increase 2.3% and 5.7% year-over-year to $29.85 billion and $1.78, respectively.
The stock has gained 10.3% over the past month to close the last trading session at $23.36.
CAJ has an overall rating of B, which translates to a Buy in our POWR Ratings system. It also has a B grade for Value, Stability, and Quality.
CAJ is ranked #3 of 42 stocks in the Technology – Hardware industry. Click here for additional ratings for CAJ’s Growth, Sentiment, and Momentum.
Celestica, Inc. (CLS)
As an electronics company headquartered in Toronto, Canada, CLS is involved in designing and manufacturing hardware platforms and supply chain solutions. It operates through two segments: Advanced Technology Solutions (ATS) and Connectivity & Cloud Solutions (CCS).
On October 18, CLS launched its DS1000 high-performance Gigabit Ethernet Layer 3 switch. This compact, resilient, cost-effective, open network switch is the newest addition to CLS’ Hardware Platform Solutions (HPS) portfolio of cutting-edge storage, computing, networking, and web-scale solutions.
On August 2, CLS launched three new storage arrays: the Athena G2 next-generation 2U rackmount NVMe storage array, the Nebula G2 all-flash storage expansion with PCIe 4.0 NVMe SSDs, and the Titan G2 next-generation 4U dense storage array.
These new additions to the company’s product portfolio are expected to offer flexibility and bespoke options for today’s most demanding applications, broadening the company’s consumer base with customized solutions.
During the third quarter of fiscal 2022 ended September 30, CLS’ revenue increased by 31.1% year-over-year to $1.92 billion, while its adjusted gross profit increased by 33.5% year-over-year to $171.5 million. During the same period, the company’s adjusted net earnings came in at $63.6 million and $0.52 per share, up 46.5% and 48.6% year-over-year, respectively.
CLS’ revenue for fiscal 2022 is expected to increase 27.2% year-over-year to $7.17 billion, while its EPS is expected to increase 44.5% year-over-year to $1.88 during the same period. The company has also impressed by surpassing EPS estimates in each of the trailing four quarters.
The stock has gained 1.5% over the past month to close the last trading session at $11.16.
CLS’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It has grade A for Growth and Value and grade B for Momentum and Sentiment.
CLS is ranked #2 of 77 stocks in the Technology -Services industry.
Click here to see additional POWR ratings for Stability and Quality for CLS.
AstroNova, Inc. (ALOT)
ALOT designs, manufactures, develops, and distributes specialty printers and analysis and data acquisition systems globally. The company primarily operates through two segments: Test & Measurement and Product Identification.
On October 24, ALOT announced the production release of the QL-E100, an entry-level addition to its successful QuickLabel product line-up. It is a compact, user-friendly, full-color tabletop label printer, ideal for smaller businesses and larger enterprises that require multiple on-demand label printers at the point of sale or distributed locations throughout their facilities.
With this release, the company expects the printer to open up an enormous untapped market opportunity to reach customers with smaller budgets or those just beginning to leverage the many advantages of in-house label printing.
ALOT’s revenue for the second quarter of fiscal 2023, ended July 30, 2022, came in at $32.26 million, up 8.1% year-over-year, led by the increased revenue in the Test & Measurement segment. During the same period, the company reported a non-GAAP net income of $584 thousand, translating to a non-GAAP EPS of $0.08
The stock has gained 2.7% over the past month to close the last trading session at $11.75.
ALOT's overall rating of A translates to a Strong Buy in our POWR Ratings system. The stock also has grade A for Value and Sentiment and grade B for Momentum and Quality.
ALOT tops the list of 49 stocks in the Technology – Hardware industry.
Additional POWR Ratings for ALOT’s Growth and Stability can be found here.
ORCL shares were trading at $84.42 per share on Thursday afternoon, up $1.39 (+1.67%). Year-to-date, ORCL has declined -1.52%, versus a -13.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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