The rapid urbanization and digitalization have resulted in an increased appetite for advanced technologies. Given this heightened demand, robust electronics stocks, EchoStar Corporation (SATS), Vishay Intertechnology, Inc. (VSH), and CTS Corporation (CTS) could leverage the sector's expansion. Let’s understand this in detail.
Electronics have become the linchpin of modern existence in an era of rapid progress. Facilitating communication, revolutionizing healthcare, enabling seamless transportation, and enhancing entertainment, these technological strides are shaping industries and societies alike.
Gartner forecasts a global upsurge in IT spending to $4.7 trillion this year, marking a 4.3% increase from the previous year. Moreover, IT spending worldwide is anticipated to rise by 8.8% year-over-year, reaching $5.14 trillion in 2024.
The surge of advancements in electronic technology is stimulating an unceasing appetite for newer and faster electrical and electronic wares. Anticipated to foster ingenious electronic product evolution, digital marvels such as the Internet of Things (IoT) and 5G communication are aiding in developing innovative electronic products.
Furthermore, the increased adoption of cloud-based software is highly benefiting the sector, allowing for substantial investment in technology and management services. It facilitates the transformation of operations, fostering customer relationships and improving transparency, governance, and business agility.
Going forward, as per a report by Contrive Datum Insights, the electronics industry is expected to grow at a 7.5% CAGR and reach $4.99 trillion by 2030.
In light of these encouraging trends, let's look at the fundamentals of the three best Technology - Electronics stocks, beginning with number 3.
Stock #3: EchoStar Corporation (SATS)
SATS offers global networking solutions. Its Hughes segment provides broadband tech, hardware, and satellite solutions to government and enterprise clients, whereas its EchoStar Satellite Services arm offers owned/leased satellites on a full-time/occasional basis to U.S. government, ISPs, news, content, and private sector customers.
On August 8, SATS and DISH Network Corporation (DISH) announced a definitive agreement, merging DISH with SATS through an all-stock merger at a set exchange ratio. After finalization, SATS shareholders will obtain 2.85 DISH Class A and Class B common stock shares for each corresponding SATS stock.
Anticipated to yield substantial cost and revenue synergies, the merger aims to leverage the robust asset portfolio and improve the free cash flow of the united entity. This fortified position, coupled with a stronger capital structure, could intricately enhance value for shareholders and other stakeholders over the long haul.
On July 29, Hughes Network Systems, a SATS company, announced the successful launch of its high-capacity satellite, JUPITER™ 3. This launch propels Hughes Network Systems to enhance its HughesNet® offerings, providing increased broadband capacity and accelerated plans in various markets.
For the second quarter that ended June 30, 2023, SATS’ revenue from EchoStar Satellite Services increased 26.2% year-over-year to $6.12 million. Its income before income taxes grew 75.6% from the year-ago value to $27.86 million.
In addition, as of June 30, 2023, the company’s current assets stood at $2.40 billion, compared to $2.13 billion as of December 31, 2022. Moreover, cash, cash equivalents, and current marketable investment securities were $1.9 billion as of June 30, 2023, up from $1.7 billion as of March 31, 2023.
The consensus revenue estimate of $1.93 billion for the fiscal year ending December 2024 reflects a 5.7% rise year-over-year. Likewise, the consensus EPS estimate of $0.92 for the next fiscal year indicates a 2.4% year-over-year improvement. Moreover, the company surpassed the consensus revenue estimates in three of four trailing quarters.
SATS’ shares have gained 3.9% year-to-date to close the last trading session at $17.42.
SATS’ positive fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
SATS’ has a B grade for Quality and Value. It has ranked #9 in the 60-stock Technology - Electronics industry.
In addition to the POWR Ratings I’ve just highlighted, you can see SATS’ ratings for Growth, Sentiment, Momentum, and Stability here.
Stock #2: Vishay Intertechnology, Inc. (VSH)
VSH manufactures discrete semiconductor and passive electronic components for automotive, industrial, computing, consumer, telecom, military, aerospace, and medical sectors. Its segments include Metal Oxide Semiconductor Field Effect Transistors (MOSFETs); Diodes; Optoelectronic Components; Resistors; Inductors; and Capacitors.
On August 22, VSH unveiled an innovative line of IHPT solenoid-based haptic actuators, harmonized with Immersion Corporation's (IMMR) haptic tech patent licenses. This comprehensive package streamlines device design and eliminates the need for a separate license, thus significantly enhancing VSH's operational efficiency.
On August 15, VSH announced that it had opened a new state-of-the-art production facility in Las Torres, Ciudad Juárez, Chihuahua, Mexico. Positioned strategically, this plant substantially amplifies WSLx Power Metal Strip® resistor output and reduces core case lead times to eight weeks.
Given rising demand across automotive, industrial, consumer, and aerospace sectors, VSH's expanded production capacity could ensure superior service, customer satisfaction, and a foothold in expanding markets.
For the six months that ended July 1, 2023, VSH’s net revenues increased 2.7% year-over-year to $1.76 billion. Its cash inflow from operating activities rose 118.9% from the year-ago value to $237.13 million.
In addition, VSH’s cash inflow from investing activities came in at $171.11 million, compared to a cash outflow of $36.53 million in the prior year’s period. As of July 1, 2023, the company’s cash and cash equivalents stood at $1.09 billion, compared to $610.83 million as of December 31, 2022.
For the fiscal year ending December 2024, analysts expect VSH’s revenue to marginally increase year-over-year to $3.51 billion. The stock has gained 35.7% over the past year, closing the last trading session at $27.23.
VSH’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
VSH has an A grade for Value. It is ranked #6 in the Technology – Electronics industry.
Click here to access the additional VSH ratings (Growth, Momentum, Sentiment, Quality, and Stability).
Stock #1: CTS Corporation (CTS)
CTS manufactures and markets sensors, connectivity components, and actuators. The company's product range encompasses sensors and actuators for vehicles, connectivity components for high-speed applications, switches, temperature sensors, potentiometers, and piezoelectric materials.
In its fiscal second quarter release, CTS highlighted robust double-digit growth in transportation sales, effectively counterbalancing persistent sluggishness in distribution and industrial segments. The quarter also witnessed substantial headway in CTS' long-term objectives, marked by impressive business victories.
Notably, the company secured its inaugural eBrake™ award and achieved notable successes across numerous EV platforms. In line with diversification initiatives, CTS expanded its client base in non-transportation sectors. Such continual positive developments should bode well for the company’s growth.
For the second quarter that ended June 30, 2023, CTS’ net sales marginally increased year-over-year to $145.18 million. Its free cash flow rose 56% from the year-ago value to $19.5 million. Furthermore, the company’s net earnings and EPS rose 2.4% and 5.1% year-over-year to $12.88 million and $0.41, respectively.
The company’s revenue for the fiscal year ending December 2024 is expected to increase 5.4% year-over-year to $600.35 million. Similarly, analysts expect CTS’ EPS for the next year to come in at $2.55, up 9.6% from the previous year. The stock has gained 12.1% year-to-date, closing the last trading session at $44.96.
CTS’ robust outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
CTS has an A grade for Quality and a B for Stability and Sentiment. It is ranked #5 within the same industry.
Click here to access additional CTS ratings for Growth, Value, and Momentum.
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VSH shares were trading at $27.49 per share on Tuesday morning, up $0.26 (+0.95%). Year-to-date, VSH has gained 28.51%, versus a 17.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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