A rapid shift to cloud-based services, demand for cybersecurity solutions, and growing adoption of new technologies, including generative AI, machine learning, the Internet of Things (IoT), and 5G, are primary drivers propelling the technology industry’s growth.
Given the industry’s bright prospects, investors could consider buying fundamentally sound tech stocks PC Connection, Inc. (CNXN), LiveRamp Holdings, Inc. (RAMP), Leidos Holdings, Inc. (LDOS), and Box, Inc. (BOX) for substantial gains.
The tech sector navigated a few challenges last year, with a drop in global tech spending and industry-wide layoffs. However, analysts are optimistic about the industry’s outlook for 2024. More than 62% of leaders believe that this is a good time for their company to take risks.
Companies are increasingly investing in learning how to leverage generative AI (GenAI), migrate more workloads to the cloud, and adapt to new regulatory procedures. AI, cloud computing, cybersecurity, and advanced connectivity will enable the highest growth prospects for the industry this year.
According to the latest forecast by Gartner, global IT spending is expected to increase 8% year-over-year to $5.06 trillion in 2024. This is an increase from the prior quarter’s forecast of a 6.8% rise. The planning for genAI initiatives among enterprises will help boost tech spending this year and beyond.
The worldwide IT services market revenue is anticipated to reach $1.77 trillion by 2028, growing at a CAGR of 6.7% during the forecast period (2024-2028). Meanwhile, the revenue of the U.S. IT services market is projected to reach $495.30 billion in 2024 and grow at a CAGR of 6.2% by 2028.
Moreover, investors’ interest in tech stocks is evident from the Vanguard Information Tech ETF’s (VGT) 30.2% returns over the past year.
Considering the favorable market trends, let’s delve into the fundamentals of the top Technology - Services stocks, beginning with the fourth choice.
Stock #4: PC Connection, Inc. (CNXN)
CNXN provides various IT solutions globally. It operates through three segments: Business Solutions; Enterprise Solutions; and Public Sector Solutions. The company offers IT solutions, like computer systems, data center solutions, software and peripheral equipment, networking communications, and other products and accessories.
On December 14, 2023, CNXN launched the Helix Center for Applied AI and Robotics. Helix helps realize the benefits of artificial intelligence and automation by bringing together industry-leading experts, resources, and support to help organizations of all sizes.
In the fourth quarter that ended December 31, 2023, CNXN reported net sales of $696.47 million. Its gross profit grew 4.4% from the year-ago value to $129.77 million. Its income from operations increased 16.9% year-over-year to $27.94 million. Its net income and EPS came in at $23.78 million and $0.90, up 26.3% and 26.8%year-over-year, respectively.
In addition, the company’s adjusted EBITDA rose 26% from the prior year’s quarter to $36.86 million.
Street expects CNXN’s revenue and EPS to increase 2.9% and 9.4% year-over-year to $754.73 million and $0.88 for the second quarter ending June 2024, respectively. Further, CNXN topped the consensus EPS estimates in three of the trailing four quarters.
CNXN’s stock gained 19.1% over the past six months and 52.2% over the past year to close the last trading session at $62.36.
CNXN’s bright prospects are reflected in its POWR Ratings. 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, each weighted to an optimal degree.
The stock has a B grade for Quality, Sentiment, Stability, and Momentum. CNXN is ranked #5 among 78 stocks in the Technology - Services industry.
Click here to access additional CNXN ratings for Growth and Value.
Stock #3: LiveRamp Holdings, Inc. (RAMP)
RAMP is a technology company that operates a data collaboration platform internationally. Its LiveRamp Data collaboration platform supports people-based market solutions like data collaboration, analytics, and data marketplace. It sells its solutions to enterprise marketers, agencies, and data providers in multiple industry verticals.
On April 11, 2024, RAMP announced a strategic partnership with Cross Screen Media, a CTV activation managed service provider for local agencies. It marked a significant step toward enhancing Cross Screen Media's targeting and measurement capabilities and positioning them toward a cookie-less future. The partnership should bode well for the companies.
On February 28, RAMP launched the next generation of the LiveRamp Data Collaboration Platform, which offers solutions for the end-to-end marketing lifecycle onto a single platform. Enshrined with new capabilities, it provides a simplified user interface, composable technology for cross-cloud interoperability, and a partner marketplace.
The new enhancements allow RAMP’s customers to collaborate with any partner, activate data to any destination, and access more solutions from one place.
In the fiscal 2024 third quarter that ended December 31, 2023, RAMP’s total revenues increased 9.6% year-over-year to $173.87 million. Its non-GAAP gross profit grew 8% from the year-ago value to $131 million. The company’s non-GAAP operating income was $36 million, indicating a growth of 38.5% from the previous year’s quarter.
In addition, the company’s non-GAAP net earnings came in at $32 million, or $0.47 per share, up 68.4% and 67.8% year-over-year, respectively. Its net operating cash flow increased 6.3% from the year-ago value to $17 million.
According to the financial outlook for the fourth quarter of 2024, RAMP expects revenue between $158 million and $162 million, an increase of between 6% and 9%. It also expects a non-GAAP operating income of $13 million to $14 million.
Further, RAMP updated its guidance for fiscal 2024. The company now expects revenue between $646 million and $650 million, an increase of between 8% and 9%, and its non-GAAP operating income is expected to be between $102 million and $103 million.
Street expects RAMP’s revenue to increase 8.3% year-over-year to $166.89 million for the first quarter ending June 2024. The company’s EPS for the ongoing quarter is expected to grow 2.6% year-over-year to $0.30. Moreover, RAMP topped the consensus EPS estimates in each of the trailing four quarters, which is impressive.
RAMP’s stock gained 17.2% over the past six months and 40.9% over the past year to close the last trading session at $32.42.
RAMP’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
The stock has a B grade for Value, Growth, and Quality. Within the Technology - Services industry, RAMP is ranked #4 out of 78 stocks.
In addition to the POWR Ratings I’ve just highlighted, you can see RAMP’s ratings for Stability, Sentiment, and Momentum here.
Stock #2: Leidos Holdings, Inc. (LDOS)
LDOS offers services and solutions in the defense, intelligence, civil, and health markets internationally. The company operates through Defense Solutions; Civil; and Health segments. It offers national security solutions and systems for air, land, sea, space, and cyberspace for the U.S. Intelligence Community, the Department of Defense, and the Space Development Agency.
On April 15, 2024, LDOS was awarded a follow-on prime contract to offer the U.S. Army technology-enabled services for C5ISR and COTS systems. The task order for Responsive Strategic Sourcing for Services (RS3) and indefinite delivery/indefinite quantity (IDIQ) has a base period of 11 months and a maximum value of $267 million.
Since February 2011, LDOS has fielded nearly 9,000 C5ISR systems and provided almost 13,000 training courses to more than 167,000 soldiers, highlighting its progress in delivering digital workflows required to support C5ISR hardware services for the Army.
Also, on April 9, LDOS was awarded a new prime contract to perform aviation training services and operations support for the Army National Guard. The cost-plus-award-fee contract has an approximate value of $13.7 million and one year of performance. LDOS will leverage its aviation experience and expertise to uplift the National Guard's readiness advantage further.
On March 28, LDOS Leidos Partnership for Defense Health (LPDH) successfully deployed the Federal Electronic Health Record (EHR) system – called MHS GENESIS – at the Captain James A. Lovell Federal Health Care Center (Lovell FHCC) as part of a first-of-its-kind joint Department of Defense (DOD)-Department of Veterans Affairs (VA) EHR implementation.
For the fourth quarter that ended on December 29, 2023, LDOS’ revenues increased 7.6% year-over-year to $3.98 billion. Its operating income rose 36.2% from the year-ago value to $361 million. Its non-GAAP net income attributable to Leidos common stockholders and non-GAAP EPS came in at $275 million and $1.99, up 9.1% and 8.7% year-over-year, respectively.
In addition, the company’s adjusted EBITDA of $452 million indicates growth of 13.8% from the prior year’s quarter. Its free cash flow increased 213.9% year-over-year to $226 million.
As per the guidance, the company expects revenues in a range of $15.70 billion to $16.10 billion and non-GAAP EPS of $7.50 to $7.90 in the fiscal year 2024. Also, LDOS expects cash flows provided by operating activities to be approximately $1.1 billion.
Analysts expect LDOS’ EPS for the first quarter (ended March 2024) to increase 15.9% year-over-year to $1.70, and its revenue is estimated to grow 3.5% year-over-year to $3.83 billion in the same quarter. Also, the company surpassed the consensus EPS estimates in three of the four trailing quarters.
The stock has gained 37.2% over the past six months and 37.9% over the past year to close the last trading session at $126.03.
LDOS’ promising outlook is reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has a B grade for Momentum, Stability, Sentiment, and Value. Within the Technology - Services industry, LDOS is ranked #3 out of 78 stocks.
Click here to access additional ratings of LDOS for Growth and Quality.
Stock #1: Box, Inc. (BOX)
BOX provides a cloud content management platform enabling organizations to manage and share their content from anywhere on any device. Its SaaS platform allows users to work with the content required for secure external collaboration and sharing, workspaces and portals, e-signature processes, and content workflows.
On April 9, 2024, BOX was selected by Bulletproof, an award-winning independent global brand agency based in London, as its single centralized cloud platform to manage content and production work. The company will provide integration for external collaboration with clients, Box Shield, Box Shuttle self-service, and Box Relay for automated review.
On March 14, BOX announced that the Administrative Office of the U.S. Courts had selected it to power secure cloud content management and collaboration for the Defender Services Office (DSO). With BOX, DSO can securely share content internally and externally with investigators, Federal Public Defenders, and U.S. District Courts.
Also, on March 5, BOX and Microsoft Corporation (MSFT) expanded their collaboration with a new integration of Azure OpenAI Service to bring its advanced large language models to Box AI. The integration of Azure OpenAI Service with BOX’s cloud platform will offer the most advanced intelligence models to BOX’s Content Cloud to advance enterprise-grade AI.
During the fourth quarter that ended January 31, 2024, BOX’s revenue increased 2.5% year-over-year to $262.88 million. Its non-GAAP gross profit grew 2.4% year-over-year to $206.06 million. The company’s non-GAAP operating income of $70.07 million indicates growth of 5.3% from the prior year’s quarter.
Furthermore, its non-GAAP net income attributable to common stockholders came in at $61.18 million, or $0.42 per share, up 8.7% and 13.5% year-over-year, respectively. Its non-GAAP free cash flow increased 9.6% from the year-ago value to $81.83 million.
As per its guidance, BOX expects revenue to be in the range of $261 million to $263 million, up 4% year-over-year. Its non-GAAP net income per share attributable to common stockholders is expected to be between $0.35 and $0.36 for the first quarter of fiscal year 2025.
For the full year, the company’s revenue is expected to be from $1.08 billion to $1.085 billion, and non-GAAP net income per share attributable to common stockholders is expected to be from $1.53 to $1.57.
For the first quarter (ending April 2024), Street expects BOX’s revenue and EPS to increase 3.9% and 13.2% year-over-year to $261.80 million and $0.36, respectively. Also, the company has topped the consensus revenue and EPS estimates in three of the four trailing quarters.
Shares of BOX have surged 13.1% over the past six months and 1.5% over the past year to close the last trading session at $27.12.
BOX’s robust prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Quality and a B for Growth and Value. BOX is ranked #2 out of 78 stocks in the same industry.
To access additional BOX’s ratings for Sentiment, Stability, and Momentum, click here.
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LDOS shares were unchanged in premarket trading Tuesday. Year-to-date, LDOS has gained 16.78%, versus a 5.81% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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