The tech industry is thriving and continues to be a primary driver of global economic growth. The rising integration of technology into various aspects of daily life and business operations fuels demand for tech products and services, boosting the tech sector’s prospects.
Given the industry’s strong foothold, it could be wise to invest in fundamentally strong tech stocks Panasonic Holdings Corporation (PCRFY), Leidos Holdings, Inc. (LDOS), and Ceragon Networks Ltd. (CRNT) for solid gains.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the technology industry.
The tech industry continues to grow thanks to several end-use industries increasingly adopting digital solutions for efficiency, accessibility, and flexibility. Companies are rapidly undergoing digital transformation to remain competitive, which involves incorporating digital technologies into their operations, supply chains, and business models.
According to a report by the Business Research Company, the information technology market is predicted to increase at an 8.3% CAGR to reach $12.42 trillion by 2028. This year is expected to witness a notable upsurge in enterprise IT spending, particularly in software and IT services.
The IT services industry is predicted to expand to $5.07 trillion by 2028, with a CAGR of 8.8%. The growth of e-commerce and online services has led to an increased demand for IT services to support digital transactions and optimize user experience.
In addition, the growing adoption of cutting-edge technologies like cloud computing, big data analytics, artificial intelligence (AI), and the Internet of Things (IoT) are fueling demand for IT services. Also, IT service providers offer a wide range of cybersecurity solutions, driving the growth of this tech segment.
Moreover, investors’ interest in tech stocks is evident from the iShares Expanded Tech Sector ETF’s (IGM) 30% returns over the past six months and 39.9% over the past nine months.
Considering these conducive trends, let’s examine the fundamentals of the three best tech stock picks: PCRFY, LDOS, and CRNT.
Panasonic Holdings Corporation (PCRFY)
Headquartered in Kadoma, Japan, PCRFY is a global electronics company known for developing and selling a wide range of products, from household appliances to automotive technologies. It operates through Lifestyle; Automotive; Connect; Industry; and Energy segments.
On February 15, 2024, Panasonic Energy Co., Ltd., a wholly owned subsidiary of PCRFY and Nouveau Monde Graphite Inc. (NMG), signed a binding offtake agreement under which NMG will supply Panasonic Energy with 18,000 tonnes per annum of its planned Phase-2 active anode material production for an initial period of seven years.
Along with this offtake agreement, NMG and Panasonic entered into a subscription agreement for a $25 million equity investment to support NMG's Phase-2 operations, which include the Matawinie Mine and the Bécancour Battery Material Plant. This strategic partnership should bode well for both companies.
PCRFY’s trailing-12-month ROTA of 5.63% is 36.2% higher than the industry average of 4.14%. Likewise, the stock’s trailing-12-month CAPEX/Sales of 5.58% is 87% higher than the industry average of 2.99%.
In the nine months that ended December 31, 2023, PCRFY generated net sales of ¥6.30 trillion ($41.80 billion), a marginal year-over-year increase. The company’s operating profit and net profit grew 36.7% and 140% year-over-year to ¥320.26 billion ($2.12 billion) and ¥414.18 billion ($2.75 billion), respectively.
Moreover, EPS attributable to PCRFY stockholders rose 149.1% from the previous year’s period to ¥170.96.
Analysts expect PLTK’s revenue to increase significantly year-over-year to $56.02 billion for the fiscal year ending March 2024. Its EPS is expected to grow 54.1% year-over-year to $1.30 for the ongoing year. Also, the company surpassed the consensus EPS estimated in all four trailing quarters.
The stock has gained 10.2% over the past year to close the last trading session at $9.45.
PCRFY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PCRFY has an A grade for Value and Stability and a B for Sentiment and Momentum. Within the A-rated Technology - Hardware industry, it is ranked #6 out of 36 stocks.
To see additional POWR Ratings for Growth and Quality for PCRFY, click here.
Leidos Holdings, Inc. (LDOS)
LDOS, together with its subsidiaries, provides services and solutions in the defense, intelligence, civil, and health markets internationally. The company operates through three segments: Defense Solutions; Civil; and Health.
On February 15, 2024, LDOS was awarded a new task order contract from the Defense Intelligence Agency’s (DIA) Science & Technology (S&T) Directorate. With this award, Leidos will design and implement a Tasking, Collection, Processing, Exploitation and Dissemination (TCPED) system for the DIA’s Open Source Intelligence Integration Center (OSIC).
“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,” said Roy Stevens, LDOS’ National Security Sector President.
LDOS’ revenues came in at $3.98 billion in the fiscal fourth quarter that ended December 29, 2023, up 7.7% year-over-year. Its adjusted EBITDA came to $452 million, an increase of 13.9% year-over-year. The company’s non-GAAP net income grew 8.2% from the year-ago value to $276 million, while its non-GAAP EPS increased 8.7% year-over-year to $1.99.
The consensus revenue estimate of $16.01 billion for the fiscal year ending December 2024 reflects a 3.7% year-over-year improvement. Its EPS is expected to grow 7% year-over-year to $7.81 for the same period. Moreover, Leidos has topped consensus revenue estimates in each of the trailing four quarters, which is impressive.
Shares of LDOS have gained 55.9% over the past nine months to close the last trading session at $124.75.
It’s no surprise that LDOS has an overall A rating, equating to a Strong Buy in our POWR Ratings system. The stock has a B grade for Stability, Sentiment and Momentum. It is ranked first among the 76 stocks in the Technology - Services industry.
Beyond what is stated above, we’ve also rated LDOS for Growth, Value, and Quality. Get all LDOS ratings here.
Ceragon Networks Ltd. (CRNT)
Based in Rosh HaAyin, Israel, CRNT offers wireless transport solutions for cellular operators and other wireless service providers. Its solutions use microwave and millimeter wave radio technologies to transfer telecommunication traffic between base stations, service provider’s networks, wireless 5G and 4G, 3G, and other cellular base stations.
On January 11, 2024, CRNT signed an agreement with a global integrator in support of a network modernization project for a Tier 1 Operator in India. Under the agreement, Ceragon will support a massive modernization project focused on upgrading existing network capabilities, expanding capacity, and enhancing country-wide connectivity.
The scale and scope of this new project in India reaffirm CRNT’s solid brand recognition as an innovative and trustworthy partner in the wireless transport space.CRNT’s trailing-12-month asset turnover ratio of 1.10x is 80.4% higher than the 0.61x industry average. Its trailing-12-month ROTC of 4.05% is 70.7% higher than the 2.37% industry average.
In the fourth quarter that ended December 31, 2023, CRNT’s revenue increased 19.6% year-over-year to $90.36 million. The company’s non-GAAP gross profit was $31.76 million, indicating a growth of 27.1% from the previous year’s quarter. Its non-GAAP operating income came in at $7.77 million versus an operating loss of $9.14 million in the same period of 2022.
In addition, its non-GAAP net income came in at $3.74 million, or $0.04 per share, compared to net loss and loss per share of $12.53 million and $0.15 for the prior year’s quarter, respectively.
Street expects CRNT’s revenue to come in at $394.13 million for the fiscal year ending December 2024, up 13.5% year-over-year. Its EPS is expected to grow 55% year-over-year to $0.31 for the same period. Additionally, the company surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
Shares of CRNT have gained 61.8% over the past three months to close the last trading session at $2.88.
CRNT’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
The stock has an A grade for Sentiment and a B for Value. CRNT is ranked #2 out of 45 stocks in the Technology - Communication/Networking industry.
To see additional CRNT ratings for Growth, Stability, Momentum, and Quality, click here.
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PCRFY shares were trading at $9.49 per share on Friday afternoon, up $0.04 (+0.47%). Year-to-date, PCRFY has declined -3.56%, versus a 7.00% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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