Multi-decade high inflation and the Fed’s aggressive monetary tightening to bring prices down have led to massive tech sell-offs over the past few months. The tech-heavy Nasdaq Composite has declined more than 27% year to date.
Tech stocks usually command rich valuations, but they have been badly hit as higher interest rates lowered the present value of their future cash flows, lowering their appeal to investors.
However, the industry is expected to grow as enterprises increasingly invest in tech upgrades to stay relevant in a fast-changing business environment. Emerging technologies such as the internet of things (IoT), artificial intelligence, cloud computing, AR & VR are expected to drive the industry’s growth.
With the growing tech dependency, the technology market revenue is expected to reach $1.57 trillion by 2027, growing at a 7.1% CAGR. Therefore, it could be wise to add fundamentally sound tech stocks Dell Technologies Inc. (DELL), GoDaddy Inc. (GDDY), and Extreme Networks, Inc. (EXTR) to your watchlist.
Dell Technologies Inc. (DELL)
DELL offers information technology solutions, products, and services globally. The company operates through three segments: Infrastructure Solutions Group (ISG), Client Solutions Group (CSG), and VMware.
On June 7, the company’s Board of directors declared a quarterly cash dividend of $0.33 per common share, payable on July 29, 2022. This reflects the company’s strong cash flows.
In the fiscal 2023 first quarter (ended April 29, 2022), DELL’s net revenue increased 16% year-over-year to $26.12 billion. Its non-GAAP operating income rose 21% from its year-ago value to $2.14 billion, while its non-GAAP net income grew 36% to $1.44 billion. The company’s non-GAAP EPS increased 36% from the year-ago value to $1.84.
The consensus EPS estimate of $7.10 for fiscal 2023 represents a 14.1% improvement year-over-year. The consensus revenue estimate of $106.92 billion for the current year indicates a 5.6% increase from the same period last year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of DELL have gained 18.9% over the past month to close yesterday’s trading session at $49.04.
DELL’s POWR Ratings reflect solid prospects. The stock has an overall B rating, translating to a Buy in our proprietary rating system. It has an A grade for Value and a B grade for Growth and Sentiment. Within the Technology - Hardware industry, it is ranked #9 out of 45 stocks.
To see the other ratings of DELL for Momentum, Stability, and Quality, click here.
GoDaddy Inc. (GDDY)
GDDY provides cloud-based solutions to individuals, businesses, and organizations to establish an online presence, connect with customers, and manage their ventures. It offers various solutions, including domains, hosting and presence, business applications and connected commerce, and access to third-party products and platforms.
On June 13, GDDY’s Venture Forward partnered with mySidewalk to launch an online tool that would deliver microbusiness impact data directly to communities. This is expected to expand the company’s market reach and overall growth prospects.
GDDY’s revenue increased 11.3% year-over-year to $1 billion in the fiscal first quarter (ended March 31, 2022). Its operating income grew 188.4% from the year-ago value to $109.60 million, while its net income attributable to the company increased 533.3% year-over-year to $68.40 million over the period. The company’s net income per share attributable to the company’s stockholders increased 583.3% from the year-ago value to $0.41.
Analysts expect GDDY’s EPS and revenue to increase 13.7% and 9.2% year-over-year to $0.71 and $1.02 billion, respectively, in the fiscal second quarter (ending June 2022).
The stock has lost 5.3% over the past nine months to close the last trading day at $67.76.
GDDY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. GDDY also has a B for Growth, Value, and Quality. The stock is ranked #13 of 55 stocks in the Software - Business industry.
In addition to the POWR Ratings I’ve just highlighted, click here to see the GDDY ratings for Momentum, Stability, and Sentiment.
Extreme Networks, Inc. (EXTR)
EXTR is a software-driven networking solutions provider. It offers wireless network infrastructure equipment and develops software for network management, policy, analytics, security, and access controls.
On June 7, the company introduced a suite of new solutions: AIOps and SD-WAN for intelligent, flexible, and more secure networking. The new solutions with twin digital capabilities enhance the ExtremeCloud portfolio and are expected to witness high demand across organizations.
On May 24, the company announced that world-famous casinos and resorts are leveraging EXTR solutions to streamline operations and provide first-class guest experiences. This reflects the growing demand for EXTR's services and the company's vast market reach.
For the fiscal 2022 third quarter (ended March 31, 2022), EXTR’s revenue increased 13% year-over-year to $285.51 million. Its non-GAAP operating income grew 24.6% from its year-ago value to $35.66 million, while its non-GAAP net income increased 33% year-over-year to $27.42 million. The company’s non-GAAP net income per share came in at $0.21, representing a 31.2% increase year-over-year.
Analysts expect EXTR’s EPS and revenue for fiscal 2022 to increase 35.1% and 9.3% year-over-year to $0.77 and $1.10 billion, respectively. The company surpassed the consensus EPS estimates in each of the trailing four quarters, which is excellent.
Over the past five days, the stock has gained 3.8% to close the last trading session at $9.03.
The company has an overall rating of A, equating to a Strong Buy in our POWR Ratings system. EXTR has a B grade for Growth, Value, and Quality. The stock is ranked first out of 54 stocks in the Technology - Communication/Networking industry.
Click here to see the other ratings of EXTR for Momentum, Stability, and Sentiment.
DELL shares were trading at $50.30 per share on Friday morning, up $1.26 (+2.57%). Year-to-date, DELL has declined -9.82%, versus a -18.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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