The technology industry’s growth is fueled by the ubiquitous integration of generative AI, evolving cloud computing, and escalating demand for hardware solutions. In light of these trends, I think it could be wise to capitalize on the industry tailwinds by investing in A-rated tech stocks, Panasonic Holdings Corporation (PCRFY), Box, Inc. (BOX), and Spirent Communications plc (SPMYY).
The growing popularity of cloud-based software and rising concern to automate business processes are continuously increasing the demand for IT services worldwide. Cloud-based IT services have been experiencing rapid growth among SMEs since 2022 and are expected to capture more than 80% of the market share by 2025.
The global IT services market is expected to grow at a CAGR of 9.5% until 2032.
In addition, according to projections by Gartner, global IT spending is anticipated to reach $5.10 trillion in 2024, marking an 8% increase from the preceding year. While the impact of generative AI on IT spending is presently limited, substantial investments in AI are playing a crucial role in the overall growth of IT expenditures.
Furthermore, the increasing need to store data amid the growing usage of data analytics, AI, blockchain, IoT, cloud computing, and all Internet-based services is driving demand for advanced hardware. The IT hardware market is projected to grow at a CAGR of 7.9% to reach $177.11 billion by 2028.
With these favorable trends in mind, let's delve into the fundamentals of the three best technology stock picks mentioned above.
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. Its operations span lifestyle, automotive, connect, industry, and energy segments.
On January 9, 2024, PCRFY announced a collaboration with Amazon.com, Inc. (AMZN) to incorporate Fire TV into its smart TVs from 2024, offering users a personalized and seamless viewing experience. The collaboration aims to enhance image and sound quality while providing connectivity across devices.
New products with Fire TV as the operating system will prioritize enhancing the experiential value of smart TVs.
PCRFY’s trailing-12-month net income margin and ROTA of 5.29% and 4.89% are 13.5% and 21.6% higher than the respective industry averages of 4.66% and 4.02%.
In the second quarter that ended September 30, 2023, PCRFY generated net sales of ¥2.09 trillion ($14.12 billion). The company’s gross profit and net profit grew 8.2% and 44.2% year-over-year to ¥606.71 billion ($4.10 billion) and ¥91.47 billion ($617.91 million), respectively. Moreover, its EPS attributable to PCRFY stockholders rose 49.7% from the previous-year quarter to ¥37.45.
PCRFY’s revenue and EPS are expected to grow significantly and 45.2% year-over-year to $57.60 billion and $1.22, respectively, for the fiscal year ending March 2024. The company surpassed the revenue and EPS estimates in three of the trailing four quarters, which is impressive.
Over the past year, the stock has surged 8.6% to close the last trading session at $9.56.
PCRFY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Value and a B in Momentum and Stability. Within the A-rated Technology - Hardware industry, it is ranked #4 out of 36 stocks.
In addition to the POWR Ratings stated above, one can access PCRFY's ratings for Growth, Sentiment, and Quality here.
Box, Inc. (BOX)
BOX provides a cloud content management platform that enables organizations of various sizes to manage and share their content from anywhere on any device. The company’s Software-as-a-Service platform enables users to perform various services both internally and with external parties. It also offers web, mobile, and desktop applications for cloud content management on a platform for custom applications.
On December 14, 2023, BOX announced new consulting services that help customers safely and securely implement an AI content strategy across their organizations. These offerings are available through Box Consulting, providing tailored workshops, implementation roadmaps, and managed deployments to assist organizations in safely implementing AI content strategies.
“The promise of AI combined with the value of an enterprise’s unique business content is potentially transformative, but the steps you can take to harness the full power of this new technology are not always clear,” said Jon Herstein, Chief Customer Officer at Box.
“These new offerings merge Box Consulting’s deep expertise in enterprise content with access to Box’s groundbreaking AI technology and the experts who built it. By executing a robust AI content strategy with Box Consulting, organizations can unlock the value of their unstructured data and realize the power of AI much more quickly,” he added.
BOX’s trailing-12-month gross profit margin of 74.90% is 53.3% higher than the industry average of 48.86%, while its trailing-12-month levered FCF of 32.64% is 277.1% higher than the industry average of 8.65%.
BOX’s revenue for the fiscal third quarter that ended October 31, 2023, increased 4.6% year-over-year to $261.54 million. Its non-GAAP operating income increased 7.8% over the prior year quarter to $64.63 million. The company’s non-GAAP net income attributable to common stockholders increased 14.1% year-over-year to $53.23 million. Also, its non-GAAP EPS came in at $0.36, representing an increase of 16.1% year-over-year.
Analysts expect BOX’s revenue and EPS for the quarter ending January 31, 2023, to increase 2.5% and 4.2% year-over-year to $262.81 million and $0.39, respectively. It surpassed the Street EPS estimates in three of the trailing four quarters.
Shares of BOX increased 1.5% over the past three months to close the last trading session at $25.79.
It’s no surprise that BOX has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Quality and a B in Growth and Value. Within the Technology - Services industry, it is ranked #5 out of 77 stocks.
Beyond what is stated above, we’ve also rated BOX for Momentum, Sentiment, and Stability. Get all BOX ratings here.
Spirent Communications plc (SPMYY)
Based in Crawley, the United Kingdom, SPMYY’s Lifecycle Service Assurance segment offers testing solutions for 5G mobile core networks and cellular and Wi-Fi devices in both lab and live environments. The Networks & Security segment develops test methodologies, tools, and services for virtualized networks and the cloud.
On December 6, 2023, SPMYY announced a strategic partnership with Anritsu to enable the automotive industry to more efficiently meet the unique testing requirements presented by cellular vehicle-to-everything (C-V2X) and autonomous driving technologies.
The collaboration establishes a complete C-V2X and automotive 5G testing portfolio with a unified framework that delivers unparalleled versatility and adaptability to verify designs incorporating autonomous driving technologies.
SPMYY’s trailing-12-month EBIT margin of 14.66% is 202.8% higher than the industry average of 4.84%. The stock’s trailing-12-month levered FCF margin of 19.63% is 126.9% higher than the industry average of 8.65%.
For the six months that ended June 30, 2023, SPMYY’s adjusted revenue registered at $223.90 million. Its adjusted profit before tax and adjusted EPS amounted to $14.80 million and $2.10, respectively. Moreover, cash inflow from investing activities came in at $600 thousand, compared to a cash outflow of $3.60 million in the prior year’s period.
For the fiscal year ending December 2024, analysts expect SPMYY’s revenue to 1.3% increase year-over-year to $493.13 million.
SPMYY’s shares have surged 33.8% over the past three months to close the last trading session at $6.37.
SPMYY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has an A grade in Quality and Stability and a B in Value. It is ranked #2 out of 43 stocks in the Technology - Hardware industry.
Click here to see the other ratings of SPMYY (Momentum, Growth, 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.
PCRFY shares were trading at $9.47 per share on Friday morning, down $0.09 (-0.89%). Year-to-date, PCRFY has declined -3.76%, versus a 0.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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