The expansion of the tech industry is propelled by the growth in the electronic and 5G markets, fostering innovation in IoT, increasing demand for network equipment, and contributing to global technological advancements. So, quality tech stocks Brother Industries, Ltd. (BRTHY), Gilat Satellite Networks Ltd. (GILT), and AstroNova, Inc. (ALOT) could be ideal buys for solid gains. The stocks are rated an A (Strong Buy) according to our proprietary rating system, POWR Ratings.
The hype around AI sent the tech industry skyrocketing in 2023. IDC anticipates a rapid and substantial shift in IT spending towards AI, influencing diverse industries and applications. By 2025, Global 2000 organizations are expected to allocate more than 40% of their core IT spending to AI-related initiatives, driving a significant increase in both product and process innovations.
By 2026, generative AI is predicted to be a standard feature in most software and hardware products at no additional cost. While currently a multi-billion-dollar opportunity, it is expected to grow to $158 billion by 2028, primarily in AI services and software development.
Additionally, the electronic market is on the rise with the widespread adoption of consumer electronic and connected devices. Besides, the electronics industry is witnessing a shift from luxury to mass adoption of smart home devices, such as connected ovens, TVs, and fridges, which are now considered essential components of an expanding interconnected ecosystem.
The U.S. consumer electronic industry is predicted to touch $293.81 billion by 2032, growing at a CAGR of 5.1%.
Furthermore, the rise of connected living will boost the 5G and edge computing market this year. The high-speed 5G network should enable "phygital" products, seamlessly blending the physical and digital worlds for an enhanced user experience. Accessible edge computing and smart device advancements will drive real-time data processing, ensuring scalability and consumer data security in smart experiences and phygital products powered by a "5G edge."
The global 5G services market is expected to expand at a CAGR of 59.4% from 2023 to 2030.
Given the industry tailwinds, it's time to examine the fundamentals of the top three stocks to watch in the tech industry.
Brother Industries, Ltd. (BRTHY)
Headquartered in Nagoya, Japan, BRTHY manufactures and sells communications and printing equipment in Japan, the Americas, Europe, Asia, Oceania, the Middle East, Africa, and internationally. It operates through Printing & Solutions; Machinery; Domino; Nissei; Personal & Home; and Network & Contents segments.
BRTHY’s trailing-12-month asset turnover ratio of 0.93x is 51% higher than the industry average of 0.62x. Its 4.61% trailing-12-month net income margin is 95.5% higher than the 2.36% industry average.
On November 24, 2023, BRTHY disclosed that its Philippines-based subsidiary, BROTHER INDUSTRIES (PHILIPPINES), INC., attained Platinum certification from the Responsible Business Alliance (RBA), a global advocate for corporate social responsibility. This certification highlights the company's dedication to fostering responsible value chains and promoting a sustainable society through ethical and environmentally conscious business practices.
BRTHY offers an annual dividend of $0.91, providing a 2.86% yield based on the current stock price. Its four-year average dividend yield is 3.06%, with an
During the fiscal second quarter that ended September 30, 2023, BRTHY’s revenue increased 1.2% year-over-year to ¥199.23 billion ($1.37 billion). The company’s operating profit rose 42.2% over the prior year’s quarter to ¥17.70 billion ($121.60 million). Moreover, its profit for the period and EPS amounted to ¥12.66 billion ($86.97 million) and ¥49.39.
Street expects BRTHY’s revenue to increase 68.8% year-over-year to $5.78 billion in the fiscal year ending March 2024.
Over the past six months, the stock has gained 15.5% to close the last trading session at $31.99.
BRTHY’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 are calculated by considering 118 different factors, each weighted optimally.
It has an A grade for Value and a B for Momentum, Stability, and Quality. Within the B-rated Technology – Electronics industry, it is ranked first out of 41 stocks.
Beyond what we stated above, we also have given BRTHY grades for Growth and Sentiment. Get all the BRTHY ratings here.
Gilat Satellite Networks Ltd. (GILT)
Headquartered in Petah Tikva, Israel, GILT offers satellite-based broadband communication solutions internationally. It operates in three segments: Satellite Networks; Integrated Solutions; and Network Infrastructure and Services.
GILT’s trailing-12-month EBIT margin and EBITDA margin of 11.91% and 16.70% are 142% and 77.3% higher than the respective industry averages of 4.92% and 9.42%, respectively.
On January 11, 2024, GILT announced the launch of a new brand identity embracing the company’s commitment to the new space revolution, and reflecting the company’s vision of the right of all people to be connected.
On November 16, GILT announced that it had completed acquiring DataPath, Inc., a market leader in trusted communications for the U.S. DoD Military and Government sectors. This should bolster the company’s position in the defense market.
GILT’s revenues increased 5.9% year-over-year to $63.93 million during the third quarter ended September 30, 2023. Its non-GAAP gross profit increased 12.1% from the prior-year period to $25.91 million. The company’s non-GAAP operating income increased 39.6% from the previous year’s value to $6.10 million.
In addition, its non-GAAP net income rose 51.2% from the prior-year quarter to $4.58 million. Its non-GAAP EPS came in at $0.08, representing an increase of 33.3% year-over-year.
Analysts expect GILT’s revenue for the fiscal fourth quarter ended December 2023 to increase 4.6% year-over-year to $75.99 million. Moreover, it has surpassed the consensus EPS estimates in three of the trailing four quarters.
Over the past nine months, the stock has surged 21% to close the last trading session at $5.82.
It’s no surprise that GILT has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Sentiment and a B in Quality, Value, and Growth. Within the Technology – Communication/Networking industry, it is ranked #first out of 45 stocks.
In addition to the POWR Ratings stated above, one can access GILT’s ratings for Momentum and Stability here.
AstroNova, Inc. (ALOT)
ALOT designs, develops, manufactures, and distributes specialty printers and data acquisition and analysis systems, including hardware and software, which incorporate advanced technologies to acquire, store, analyze, and present data in multiple formats. The company operates in two segments: Product Identification (PI); and Test & Measurement (T&M).
ALOT’s trailing-12-month EBIT margin of 6.96% is 41.5% higher than the industry average of 4.94%. The stock’s trailing-12-month levered FCF margin of 18.65% is 115.6% higher than the industry average of 8.65%.
In the fiscal third quarter, which ended on October 28, 2023, ALOT’s net revenue amounted to $37.55 million. Its gross profit grew 18.4% from the prior-year quarter to $14.78 million. Moreover, the company’s non-GAAP net income and non-GAAP EPS amounted to $2.75 million and $0.37, up 231.9% and 825% from the prior-year quarter, respectively. Also, its non-GAAP operating income improved 123.8% year-over-year to $4.62 million.
ALOT’s shares have surged 36.9% over the past three months to close the last trading session at $17.00.
ALOT’s bright fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has a B grade in Value, Growth, Stability, and Sentiment. It is ranked #first out of 37 stocks in the B-rated Technology – Hardware industry.
Click here to see the other ratings of ALOT (Momentum and Quality).
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
BRTHY shares were trading at $31.99 per share on Tuesday morning, down $0.35 (-1.08%). Year-to-date, BRTHY has gained 2.47%, versus a 0.01% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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