The technology industry is brimming with opportunities in 2024 due to the rapid technological integration across various sectors. Therefore, quality tech stocks Canon Inc. (CAJPY), Zoom Video Communications, Inc. (ZM), Hewlett Packard Enterprise Company (HPE), and AUO Corporation (AUOTY), which are currently trading at discounted valuations, could be wise portfolio additions in March.
But before delving into the fundamentals of the stocks listed above, let’s understand the tech sector's potential.
Technology’s illustrious evolution over the past few decades has transformed our lifestyle. Every sector of modern life can attribute its growth and dynamism to these technological strides, underscoring the profound influence and critical role technology plays across all facets of our existence.
In today’s globalized world, digital transformation has become paramount for businesses to remain resilient and competitive. The global digital transformation market is projected to reach $3.14 trillion by 2030, growing at a CAGR of 24.1%.
As businesses continually seek strategies to optimize operations, reduce expenses, and enhance efficiency, IT services are increasingly in demand. Additionally, the rise in remote working has amplified the reliance on IT infrastructure and cybersecurity, thereby stimulating organizations to boost investments in hardware that sustains seamless connectivity and fortifies security protocols.
Moreover, the integration of cutting-edge technologies, including Artificial Intelligence (AI), Internet of Things (IoT), Virtual and Augmented Reality (VR & AR), 5G, and Machine Learning, within both personal and business spheres is stimulating hardware demand. The global hardware market is expected to grow to $164.21 billion in 2027 at a CAGR of 7.9%.
The Consumer Technology Association (CTA) projects the U.S. consumer technology revenues to rise 2.8% year-over-year to $512 billion by 2024. This growth is driven by escalating expenditures on audio and video streaming platforms and gaming hardware, as well as an estimated 230 million smartphones and PCs embedded with Generative AI.
Furthermore, the tech-heavy Nasdaq Composite gained 16.4% over the past six months, outpacing the broader market and substantiating investors’ confidence in the tech industry.
With these favorable trends in mind, let's delve into the fundamentals of the four tech sector stocks.
Canon Inc. (CAJPY)
Headquartered in Tokyo, Japan, CAJPY manufactures and sells office multifunction devices (MFDs), laser and inkjet printers, cameras, medical equipment, and lithography equipment worldwide. The company operates through Printing Business Unit; Imaging Business Unit; Medical Business Unit; Industrial Business Unit; and Others segments.
On November 28, 2023, CAJPY and Cleveland Clinic announced their intentions to form a strategic research partnership to develop innovative imaging and healthcare IT technologies aimed at improving diagnosis, care, and outcomes for patients. The two organizations expect to establish a comprehensive imaging research center.
The initiative brings joint research projects focusing on cardiology, neurology and musculoskeletal medicine. It will also enable local and global research collaborations. This $500 million public-private partnership is accelerating research, creating jobs and educating the workforce of the future.
On November 6, 2023, CAJPY announced that Canon-brand equipment comprised the number one share – approximately 58% of cameras used by press photographers at four matches of Rugby World Cup France 2023.
Throughout the tournament, CAJPY empowered professional photographers aiming to capture decisive moments and contributed to the success of the tournament. In addition, the company has responded to customer needs by launching the EOS R series, as well as the RF lens series, as photographers have come to use more mirrorless cameras.
It pays an annual dividend of $0.95 per share, which translates to a dividend yield of 3.25% on the current share price. Its four-year average yield is 3.93%. CAJPY’s dividend payments have grown at an 8.9% CAGR over the past three years.
In terms of forward Price/Sales, CAJPY is trading at 1x, which is 65.8% lower than the industry average of 2.93x. The stock’s forward EV/Sales multiple of 1.08 is 63.3% lower than the industry average of 2.96.
CAJPY’s trailing-12-month cash from operations of $3.20 billion is significantly higher than the industry average of $84.52 million. Its trailing-12-month EBITDA and net income margins of 14.69% and 6.33% are 60.7% and 155.5% higher than the industry averages of 9.14% and 2.48%, respectively.
For the fiscal fourth quarter that ended December 31, 2023, CAJPY’s net sales increased marginally year-over-year to ¥1.16 trillion ($7.72 billion), while gross profit increased 5.7% from the prior-year quarter to ¥548.08 billion ($3.64 billion).
For the same quarter, its income before income taxes and net income attributable to CAJPY stood at ¥114.79 billion ($761.91 million) and ¥80.57 billion ($534.77 million), respectively.
Street expects CAJPY’s revenue for the fiscal year ending December 2024 to increase 153.9% year-over-year to $28.69 billion.
The stock has gained 34.7% over the past year to close the last trading session at $28.91. Over the past six months, it has gained 17.9%.
CAJPY’s POWR Ratings reflect its positive prospects. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an A grade for Momentum and Quality and a B for Value and Stability. Within the A-rated 37-stock Technology - Hardware industry, it is ranked #5.
To see additional POWR Ratings for Growth and Sentiment for CAJPY, click here.
Zoom Video Communications, Inc. (ZM)
ZM provides a unified communications platform. The company offers Zoom Meetings that offers HD video, voice, chat, and content sharing through mobile devices, desktops, laptops, telephones, and conference room systems; Zoom Phone, an enterprise cloud phone system; and Zoom Chat enables users to share messages, images, audio files, and content in desktop, laptop, tablet, and mobile devices.
ZM’s Board of Directors authorized a stock repurchase program of up to $1.50 billion of ZM’s outstanding Class A common stock.
On December 6, 2023, ZM announced enhancements across its AI-powered customer experience suite and new pricing plans that are expected to be available soon. To support its growing customer base and its various business needs, Zoom Contact Center will be available in new tiered plans that each include voice, video, chat, and Short Message Service channels, real-time transcription, remote control, Agent Computer-Telephony Integration, surveys, and AI Companion capabilities including summarization.
In terms of forward Price/Book, ZM is trading at 2.44x, 41.5% lower than the industry average of 4.17x. The stock’s forward EV/EBIT multiple of 7.96 is 60.9% lower than the industry average of 20.36.
ZM’s trailing-12-month cash from operations of $1.60 billion is significantly higher than the industry average of $84.52 million. Its trailing-12-month net income and levered FCF margins of 14.08% and 36.67% are 468.6% and 308.9% higher than the industry averages of 2.48% and 8.97%, respectively.
For the fiscal fourth quarter that ended January 31, 2024, ZM’s revenue and non-GAAP income from operations increased 2.6% and 9.6% year-over-year to $1.15 billion and $443.75 million, respectively. Moreover, its non-GAAP free cash flow stood at $332.69 million, up 81.5% from the prior-year quarter.
For the same quarter, its non-GAAP net income and non-GAAP net income per share stood at $443.97 million and $1.42, up 21.1% and 16.4% from the year-ago quarter, respectively.
Street expects ZM’s revenue and EPS for the fiscal first quarter ending April 2024 to increase 1.9% and 2.5% year-over-year to $1.13 billion and $1.19, respectively. The company surpassed consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 5.1% over the past nine months to close the last trading session at $69.62. Over the past three months, it has gained 3.1%.
ZM’s POWR Ratings reflect this promising outlook. It has an overall rating of B, which indicates Buy in our proprietary rating system.
ZM has a B grade for Growth, Value, and Quality. Within the 77-stock Technology - Services industry, it is ranked #7.
For ZM's other ratings (Momentum, Stability, and Sentiment), click here.
Hewlett Packard Enterprise Company (HPE)
HPE provides solutions that allow customers to capture, analyze, and act upon data seamlessly. It operates in six segments: Compute, HPC, & AI; Storage; Intelligent Edge; Financial Services; and Corporate Investments; and Other.
On February 26, HPE announced that it is working with TELUS, which is building Canada’s first 5G open radio access network (Open RAN) by providing infrastructure across 3,000 sites. The new TELUS Open RAN 5G network, after completion, will give instantaneously responsive connectivity, enhancing the customer experience with faster connectivity and mobile access.
Open RAN technology enables HPE’s telco customers the interoperability to design and manage their network with the equipment and software they desire. HPE enables success by providing the most energy-efficient, open, and flexible solutions at the edge.
HPE pays an annual dividend of $0.52 per share, which translates to a dividend yield of 3.49% on the current share price. Its four-year average yield is 3.51%. HPE’s dividend payments have grown at a 3.5% CAGR over the past five years.
In terms of forward Price/Sales, HPE is trading at 0.66x, 77.6% lower than the industry average of 2.93x. The stock’s forward EV/Sales multiple of 1 is 66.1% lower than the industry average of 2.96.
HPE’s trailing-12-month cash from operations of $4.43 billion is significantly higher than the industry average of $84.52 million. Its trailing-12-month EBITDA and net income margins of 17.56% and 6.95% are 92.2% and 180.7% higher than the industry averages of 9.14% and 2.48%, respectively.
For the fiscal fourth quarter that ended October 31, 2023, HPE’s net revenue and non-GAAP earnings from operations stood at $7.35 billion and $710 million, respectively. Moreover, its free cash flow increased 16.3% year-over-year to $2.32 billion.
For the same quarter, its non-GAAP net earnings and non-GAAP net earnings per share stood at $680 million and $0.52, respectively.
Street expects HPE’s revenue for the fiscal year ending October 2024 to increase 1.2% year-over-year to $29.48 billion. Its EPS is expected to be $1.92 for the same year. The company surpassed consensus EPS estimates in each of the trailing four quarters.
The stock has declined marginally intraday to close the last trading session at $14.86.
HPE’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
HPE has an A grade for Value and Momentum. Within the 45-stock Technology - Communication/Networking industry, it is ranked #4.
Beyond what we’ve stated above, we have also rated the stock for Growth, Stability, Sentiment, and Quality. Get all ratings of HPE here.
AUO Corporation (AUOTY)
Headquartered in Hsinchu City, Taiwan, AUOTY researches, develops, produces, and sells thin film transistor liquid crystal displays and other flat panel displays for various applications. It operates through two segments: Display and Energy.
It pays an annual dividend of $0.25 per share, which translates to a dividend yield of 4.63% on the current share price. Its four-year average yield is 5.51%. AUOTY’s dividend payments have grown at an 11.5% CAGR over the past five years.
In terms of forward Price/Sales, AUOTY is trading at 0.48x, 83.6% lower than the industry average of 2.93x. The stock’s forward EV/Sales multiple of 0.59 is 80.1% lower than the industry average of 2.96.
AUOTY’s trailing-12-month cash from operations of $325.56 million is 285.2% higher than the industry average of $84.52 million, while its trailing-12-month CAPEX/Sales of 10.80% is 366% higher than the industry average of 2.32%.
For the fiscal fourth quarter that ended December 31, 2023, AUOTY’s net sales increased 20.3% year-over-year to TWD63.35 billion ($2 billion). Its gross profit stood at TWD2.13 billion ($67.38 million), compared to a gross loss of TWD4.59 billion ($144.84 million).
For the fiscal year that ended December 31, 2023, its cash and cash equivalents at end of period increased 4.2% from the year-ago quarter to TWD83.97 billion ($2.65 billion). As of December 31, 2023, AUOTY’s total current assets stood at TWD144.21 billion ($4.55 billion), compared to TWD140.18 billion ($4.43 billion) as of December 31, 2022.
Street expects AUOTY’s revenue for the fiscal first quarter ending March 2024 to increase 15.2% year-over-year to $1.91 billion. The company surpassed consensus EPS estimates in three of the trailing four quarters.
The stock has gained 3% over the past three months to close the last trading session at $5.41.
AUOTY’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system.
AUOTY has an A grade for Momentum and a B for Value and Sentiment. It is ranked #3 within the 41-stock Technology - Electronics industry.
Click here for the additional POWR Ratings for AUOTY (Growth, Stability, and Quality).
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CAJPY shares were unchanged in premarket trading Thursday. Year-to-date, CAJPY has gained 12.93%, versus a 6.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
Top Rated Tech Stocks to Buy in March for Value StockNews.com
