Businesses across several end-use industries are undergoing digital transformation, creating a growing market for tech products and services. Also, continuous innovation in areas such as AI, machine learning, quantum computing, AR&VR, and 5G is boosting the tech industry’s prospects.
Considering the industry’s robust outlook, investors could consider buying top tech stocks Dell Technologies Inc. (DELL), Teledyne Technologies Incorporated (TDY), and Leidos Holdings, Inc. (LDOS) for substantial returns.
Tech spending will likely remain robust this year and beyond as organizations increasingly invest in emerging technologies to drive business and digital transformation. According to a forecast by Gartner, global IT spending is expected to increase by 8% from 2023, reaching a total of $5.10 trillion in 2024.
The IT services market in the United States has experienced solid growth in recent years, driven by factors such as technological advancements, high demand for cloud computing, and the need for digital transformation across sectors. Customers are increasingly looking for IT services that can help them optimize their business processes, reduce costs, and improve efficiency.
According to Statista, revenue in the IT services - United States market is anticipated to total $495.30 billion in 2024. Further, the market is projected to exhibit a CAGR of 6.2% from 2024 to 2028, resulting in a volume of $628.80 billion by 2028.
Moreover, the growing deployment and advancements of dynamic hardware related to AI applications are expected to lead to growth in the hardware industry. AI hardware is widely adopted in various sectors like telecom, banking, and IT. Due to advanced developments in computing applications and emerging technologies, the market is well-placed to expand.
As per the Precedence Research report, the U.S. artificial intelligence in hardware market is expected to reach approximately $128.69 billion by 2033, growing at a CAGR of 23.9% during the forecast period (2024-2033).
Considering these conducive trends, let's look at the fundamentals of the three best tech stocks: DELL, TDY, and LDOS.
Dell Technologies Inc. (DELL)
DELL designs, develops, manufactures, markets, sells, and supports various comprehensive and integrated solutions, products, and services in the Americas, Europe, the Middle East, Asia, and internationally. The company operates through two segments: Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG).
On February 26, 2024, DELL announced the introduction of the broadest portfolio of commercial AI laptops and mobile workstations designed to bring organizations and employee productivity into the AI era. New Dell AI PCs and workstations boost performance, productivity, and collaboration for daily workers and power users.
Also, the company’s new services leverage AI, telemetry, and automation to deliver self-healing capabilities for PCs. DELL further expanded its intelligence headset portfolio with new AI-driven technology.
On February 15, DELL and Nokia (NOK) extended their partnership to use each company’s expertise and industry-leading solutions, including infrastructure solutions from Dell and private wireless connectivity from Nokia, to advance open network architectures in the telecom ecosystem and private 5G use cases among businesses.
DELL’s trailing-12-month EBIT margin of 5.38% is 10.5% higher than the 4.87% industry average. Likewise, the stock’s trailing-12-month net income margin of 2.92% is 18.1% higher than the industry average of 2.48%.
For the third quarter that ended November 3, 2023, DELL reported net revenue of $22.25 billion. The company’s non-GAAP net income and non-GAAP EPS came in at $1.39 billion and $1.88, respectively. Also, its cash inflow from operating activities increased 443.4% year-over-year to $2.15 billion.
Street expects DELL’s revenue and EPS for the fiscal 2025 first quarter (ending April 2024) to increase 3% and 7.7% year-over-year to $21.55 billion and $1.41, respectively. Moreover, the company has topped the consensus EPS estimates in each of the trailing four quarters, which is impressive.
DELL’s shares have gained 129.5% over the past year to close the last trading session at $93.25.
DELL’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
DELL has an A grade for Momentum and a B for Sentiment, Growth, and Value. It is ranked #13 out of 37 stocks in the A-rated Technology - Hardware industry.
Click here to see the additional POWR Ratings for DELL (Stability and Quality).
Teledyne Technologies Incorporated (TDY)
TDY offers enabling technologies for industrial growth markets internationally. The company operates through Digital Imaging; Instrumentation; Aerospace and Defense Electronics; and Engineered Systems segments.
On February 13, 2024, TDY announced that it had entered into an agreement to acquire Adimec Holding B.V. and its subsidiaries (Adimec). Adimec, founded in 1992 and headquartered in Eindhoven, Netherlands, develops customized high-performance industrial and scientific cameras for applications where image quality is of paramount importance.
On November 21, 2023, TDY announced Emerald Gen2, its new state-of-the-art CMOS image sensor family. Built on TDY e2v’s advanced imaging technologies, this new family delivers enhanced performance, making the new sensors ideal for a wide range of machine vision uses, outdoor surveillance, and traffic detection & monitoring cameras.
TDY’s trailing-12-month levered FCF margin of 11.14% is 24.2% higher than the industry average of 8.97%. Also, its trailing-12-month EBIT margin of 18.58% is 281.4% higher than the industry average of 4.87%.
TDY’s net sales for the fiscal fourth quarter that ended December 31, 2023, rose marginally year-over-year to $1.43 billion. Net income attributable to TDY grew 42.7% from the prior year’s quarter to $323.10 million. Its earnings per common share increased 42.4% year-over-year to $6.75.
Analysts expect TDY’s revenue for the first quarter ending March 2024 to increase 1% year-over-year to $1.40 billion. Its EPS is expected to increase 2.8% year-over-year to $3.84 for the current quarter. Furthermore, the company surpassed the consensus EPS estimates in each of the four trailing quarters.
Shares of TDY have gained 7.7% over the past three months to close the last trading session at $425.43.
TDY’s POWR Ratings reflect its promising prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Stability and Sentiment. TDY is ranked #13 out of 41 stocks in the Technology - Electronics industry.
Beyond what is stated above, we’ve also rated for Growth, Value, Quality, and Momentum. Get all TDY ratings here.
Leidos Holdings, Inc. (LDOS)
LDOS, together with its subsidiaries, provides services and solutions in the defense, intelligence, civil, and health markets globally. It offers national security solutions and systems for air, land, sea, and space for the U.S. Intelligence Community, systems integration services to air navigation service providers, and solutions for the health and well-being of people.
On February 15, 2024, LDOS awarded a new task order contract from the Defense Intelligence Agency’s (DIA) Science & Technology (S&T) Directorate. Through this contract, Leidos will design and implement a Tasking, Collection, Processing, Exploitation and Dissemination (TCPED) system for the DIA’s Open Source Intelligence Integration Center (OSIC).
Roy Stevens, LDOS’ National Security Sector President, said, “Our work is a testament to the Leidos legacy of innovative, mission-focused and data-driven solutions. We look forward to extending our technical and mission success at NMEC to OSIC and across the DIA S&T Directorate.”
On February 8, LDOS and Sourcegraph, the leading code intelligence platform, announced an exclusive alliance to introduce secure, generative AI-enabled software development tools to government customers.
In terms of the trailing-12-month asset turnover ratio, LDOS’ 1.20x is 49.3% higher than the 0.80x industry average. Likewise, its 8.32% trailing-12-month ROTC is 19.6% higher than the 6.95% industry average.
During the fourth quarter that ended December 29, 2023, LDOS’ revenues rose 7.6% year-over-year to $3.98 billion. Its adjusted EBITDA came to $452 million, up 13.9% from the previous year’s quarter. The company’s non-GAAP net income grew 9.1% from the year-ago value to $275 million, and its non-GAAP EPS increased 8.7% year-over-year to $1.99.
Analysts expect LDOS’ revenue to increase 3.7% year-over-year to $3.83 million for the first quarter ending March 2024. The company’s EPS is expected to increase 16.5% year-over-year to $1.71 for the same quarter. In addition, LDOS has topped the consensus revenue estimates in each of the trailing four quarters.
The stock has gained 57.6% over the past nine months to close the last trading session at $126.56.
LDOS’ sound fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
The stock has a B grade for Momentum, Sentiment, and Stability. It is ranked #2 in the 77-stock in the Technology - Services industry.
To access LDOS’ additional ratings for Value, Quality, and Growth, click here.
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DELL shares were unchanged in premarket trading Thursday. Year-to-date, DELL has gained 20.59%, versus a 6.18% 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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