Robust tech spending globally, coupled with the widespread adoption of cloud-based services and continuous innovation in technologies, including artificial intelligence (AI), machine learning (ML), and the Internet of Things (IoT), are expected to drive growth in the tech industry.
Given the industry’s bright prospects, it could be wise to invest in fundamentally strong tech stocks HP Inc. (HPQ), Teledyne Technologies Incorporated (TDY), TD SYNNEX Corporation (SNX), and Dropbox, Inc. (DBX) for explosive returns.
Digital transformation initiatives among businesses have created an increasing need for tech services that enable companies to optimize their operations, enhance efficiency, and improve customer experiences. Key tech trends include cloud adoption, integration of AI and ML into several IT services, and demand for cybersecurity solutions and data analytics.
According to Statista, the revenue in the IT services market is expected to grow at a CAGR of 6.2%, resulting in a market volume of $628.80 billion by 2028. Moreover, as per the latest forecast by Gartner, Inc., worldwide IT spending is expected to increase by 8% compared to 2023, totaling $5.06 trillion this year.
With the significant growth in the IT industry, the IT hardware market is also blooming. With its essential role across sectors, including finance, entertainment, business, healthcare, education, and government, the industry keeps evolving constantly. The IT hardware market is estimated to reach $191.03 billion by 2029, growing at a CAGR of 7.9%.
On top of it, investors’ confidence in the prospects of tech stocks amid ongoing technological advancements and changing business needs is reflected in the robust performance of the Vanguard Information Tech ETF (VGT), which returned 31.5% over the past year.
Given the industry’s solid outlook, investing in fundamentally strong software stocks such as HPQ, SNX, DBX, and TDY could be wise for future gains.
Let’s discuss the fundamentals of these stocks in detail:
HP Inc. (HPQ)
HPQ provides personal computing and other digital access devices, imaging and printing products, and related technologies, solutions, and services worldwide. The company operates through three segments: Personal Systems; Printing; and Corporate Investments.
On April 24, 2024, HPQ and Ferrari, a wholly-owned Italian subsidiary of Ferrari N.V. (RACE), announced a historic, multi-year partnership. This partnership features a shared commitment to advance sustainable innovation and accelerate purposeful technology across the Scuderia Ferrari Formula 1 team, the Scuderia Ferrari Esports team, and the Scuderia Ferrari Driver Academy.
On March 7, HPQ announced new services and solutions that drive value and enable partners to build and grow their services and software businesses. These new solutions include HP WEX, HP’s first AI-enabled digital experience platform, and services and programs to extend the life of devices and accelerate a circular economy.
HPQ’s trailing-12-month EBIT margin of 8.20% is 70.6% higher than the industry average of 4.81%. Also, the stock’s trailing-12-month net income margin of 6.43% is 136.6% higher than the industry average of 2.72%. Its trailing-12-month EBITDA margin of 9.79% is marginally higher than the industry average of 9.78%.
In the first quarter that ended January 31, 2024, HPQ reported net revenue of $13.19 billion. The company’s non-GAAP net earnings and non-GAAP earnings from operations grew 10.5% and 5% year-over-year to $808 million and $1.11 billion, respectively. Its net earnings per share increased 11% from the prior year’s quarter to $0.81.
Analysts expect HPQ’s EPS for the second quarter (ending April 2024) to increase 1.1% year-over-year to $0.81. Similarly, its EPS for the fiscal year (ending October 2024) is expected to grow 4.6% year-over-year to $3.43. Additionally, the company has surpassed the consensus EPS estimates in three of the trailing four quarters, which is remarkable.
Shares of HPQ have surged 1.5% intraday to close the last trading session at $28.10.
HPQ’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
HPQ has an A grade for Momentum and Value. It is ranked #9 out of 37 stocks in the B-rated Technology - Hardware industry.
In addition to the POWR Ratings we’ve stated above, we also have HPQ ratings for Growth, Sentiment, Quality, and Stability. Get all HPQ ratings here.
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 April 23, 2024, TDY’s company, Teledyne e2v, announced a new technology and design collaboration with Airy3D (Montreal, Canada), a leading 3D vision solution provider. The initial outcome of this collaboration is the co-engineering of Topaz5D™, a low-cost, low-power, passive, 2-megapixel global shutter sensor that produces 2D images and 3D depth maps.
On March 12, TDY entered into an agreement to acquire Valeport Holdings Limited and its affiliates. Valeport, headquartered in Totnes, United Kingdom, designs and manufactures underwater sensors for environmental, energy, construction, and defense applications. This strategic acquisition should bode well for the company.
TDY’s trailing-12-month EBIT margin of 18.58% is 286.4% higher than the industry average of 4.81%. Further, the stock’s trailing-12-month EBITDA margin and net income margin of 24.19% and 15.72% are considerably higher than the industry averages of 9.78% and 2.72%, respectively.
For the fourth quarter that ended March 31, 2024, TDY reported revenue of $1.35 billion. Non-GAAP net income attributable to TDY grew marginally from the prior year’s quarter to $218.30 million. Also, its non-GAAP earnings per common share increased marginally year-over-year to $4.55.
Analysts expect TDY’s revenue and EPS for the second quarter (ending June 2024) to increase 2.4% and 7.5% year-over-year to $1.46 billion and $4.16, respectively. Furthermore, the company surpassed the consensus EPS estimates in three of the trailing four quarters.
TDY’s stock has plunged 5.9% over the past six months to close the last trading session at $362.50.
TDY’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has a B grade for Stability. TDY is ranked #8 among 42 stocks in Technology - Electronics industry.
Click here to access all TDY’s ratings (Momentum, Sentiment, Growth, Value, and Quality).
TD SYNNEX Corporation (SNX)
SNX operates as a distributor and solutions aggregator for the information technology (IT) ecosystem. The company offers personal computing devices and peripherals, mobile phones and accessories, printers, supplies, and endpoint technology software; and data center technologies.
On April 9, 2024, SNX announced a strategic partnership with Scality, a global leader in cyber-resilient storage for the AI era, to distribute Scality's secure, simple object-storage software solutions to resellers serving enterprises in the DACH region.
The partnership extends the reach of Scality's advanced object-storage solutions to organizations seeking affordable, enterprise-grade ransomware backup solutions to strengthen their cyber security posture across hybrid-cloud environments.
SNX’s trailing-12-month ROCE of 7.72% is 125.2% higher than the 3.43% industry average. Likewise, its 6.51% trailing-12-month ROTC is 173.6% higher than the industry average of 2.38%. Furthermore, the stock’s 2.27% trailing-12-month ROTA is 70.9% higher than the industry average of 1.33%.
SNX’s revenue for the first quarter ended February 29, 2024, came in at $13.98 billion. Its gross profit increased marginally year-over-year to $1.01 billion. Its operating income rose 1.5% year-over-year to $302.60 million. The company’s non-GAAP EPS grew 2.1% from the prior year’s quarter to $2.99.
Street expects SNX’s revenue for the second quarter (ending May 2024) to increase marginally year-over-year to $14.08 billion, and its EPS for the ongoing quarter is expected to grow 15.9% year-over-year to $2.82. In addition, the company has topped the consensus EPS estimates in three of the trailing four quarters.
Over the past six months, the stock has gained 29.4% to close the last trading session at $117.24.
SNX’s POWR Ratings reflect its promising outlook. 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 Growth, Momentum, Sentiment, and Value. Within the Technology - Services industry, SNX is ranked #10 of 78 stocks.
Click here to access additional ratings of SNX for Stability and Quality.
Dropbox, Inc. (DBX)
DBX provides a content collaboration platform worldwide. The company's platform allows individuals, families, teams, and organizations to collaborate and sign up for free through its website or app and upgrade to a paid subscription plan for premium features.
On April 24, 2024, DBX announced new security, organization, and sharing features to give teams the control, flexibility, and speed to get work done from anywhere. The company introduced end-to-end encryption, Microsoft co-authoring, new Dropbox replay features, DocSend Advanced Data Rooms, Dropbox Dash (beta), and more.
“As teams become more distributed, Dropbox continues to be the trusted, easy-to-use platform for them to organize their content and collaborate—anytime and anywhere. And with the latest advancements in AI and machine learning, we have the potential to automate routine tasks, increase productivity, and free up mental space so people can get back to doing the work that matters most,” said Drew Houston, Dropbox co-founder and CEO.
On February 9, DBX and McLaren Racing announced a multi-year partnership with the McLaren Formula 1 Team for the 2024 season and beyond. The partnership marks DBX’s first entry into the sport, helping the McLaren team collaborate, share files and content, and save time.
DBX’s trailing-12-month gross profit margin of 80.87% is 65.6% higher than the industry average of 48.83%. Furthermore, the stock’s trailing-12-month EBIT margin of 15.33% is 223.3% higher than the 4.74% industry average.
For the fourth quarter that ended December 31, 2023, DBX’s revenue increased 6% year-over-year to $635 million. Its non-GAAP gross profit grew 6.3% from the year-ago value to $522.40 million. Its non-GAAP net income came in at $170.80 million, or $0.50 per share, up 21% and 25% year-over-year, respectively. Its free cash flow rose 4.7% year-over-year to $190.30 million.
Analysts expect DBX’s EPS for the first quarter (ended March 2024) to increase 18.4% year-over-year to $0.50. The company’s revenue is expected to grow 2.9% year-over-year to $628.76 million for the same period. Moreover, the company has topped the consensus EPS and revenue estimates in each of the four trailing quarters.
DBX’s stock has surged 11.7% over the past year to close the last trading session at $24.02.
DBX’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
The stock has an A grade for Quality and a B for Growth and Value. Within the Technology - Services industry, DBX is ranked #7 out of 78 stocks.
Click here to access additional ratings of DBX for Stability, Momentum, and Sentiment.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
HPQ shares were trading at $28.01 per share on Thursday morning, down $0.09 (-0.32%). Year-to-date, HPQ has declined -6.07%, versus a 5.05% 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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