A substantial 55.9% surge in the NASDAQ Composite over the past year underscores significant growth and bullish sentiment in the technology sector, indicative of strong investor confidence and positive projections for tech companies.

Thus, investors could consider monitoring top tech stocks Kimball Electronics, Inc. (KBAL), Daktronics, Inc. (DAKT), and Outbrain, Inc. (OB). These stocks are rated B (Buy) in our proprietary POWR Ratings system.

The technology market is witnessing significant expansion driven by AI integration into consumer products, the emergence of spatial computing, and the growth of home health techs. Additionally, antitrust pressures on major tech firms and the advancement of satellite connectivity are shaping market trends and consumer preferences.

This year, the U.S. consumer technology industry is forecasted to grow by 2.8% year-over-year, reaching $512 billion in retail revenues, indicating increased consumer spending. This represents a $14 billion uptick from 2023 and reflects continued growth in audio streaming services by 6% and video streaming by 4%.

In addition, the consumer electronics market is growing due to rising disposable income, technological advancements, and increased demand for innovative products, alongside the impact of the pandemic accelerating digitalization trends. The global consumer electronics market is poised to grow at a CAGR of 5.8% to hit $1.26 trillion by 2032.

The IT hardware industry is rapidly expanding due to increased digitization and demand for advanced solutions, driven by the growth of the IT sector, cloud computing, and remote work needs. The global IT hardware market is estimated at $130.86 billion in 2024 and is expected to grow at a CAGR of 7.9% to reach $191.03 billion by 2029.

Considering these conducive trends, let’s examine the fundamentals of three tech stocks.

Kimball Electronics, Inc. (KBAL)

KBAL provides electronics manufacturing and supply chain services to automotive, medical, and industrial sectors worldwide. Its offerings include contract manufacturing, engineering support, and product lifecycle management across a range of industries and global locations.

KBAL’s trailing-12-month ROTA of 4.28% is 427% higher than the industry average of 0.81%. The stock's trailing-12-month asset turnover ratio of 1.49x is 142.3% higher than the 0.61x industry average.

During the second quarter, which ended December 31, 2023, KBAL reported net sales of $421.24 million. The company achieved adjusted operating income and net income of $17.09 million and $8.29 million, respectively. Its adjusted EPS amounted to $0.33. As of December 31, 2023, its total assets amounted to $1.28 billion, compared to its total assets of $1.26 billion as of June 30, 2023.

Street expects its revenue and EPS for the fiscal year ending June 2024 to be $1.76 billion and $1.61, respectively. Moreover, the company topped its EPS estimates in three of the trailing four quarters, which is promising.

The stock has surged 2.9% intraday to close the last trading session at $22.14.

KBAL’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. 

It has a B grade for Value. Within the Technology - Electronics industry, it is ranked #13 among 44 stocks.

Click here to see KBAL’s ratings for Growth, Momentum, Stability, Sentiment, and Quality.

Daktronics, Inc. (DAKT)

DAKT specializes in designing, manufacturing, and marketing electronic display systems for various applications globally. Its product range includes video displays, scoreboards, message displays, and intelligent transportation systems, catering to sporting, commercial, transportation, and other sectors.

DAKT’s trailing-12-month net income margin of 5.62% is 148.6% higher than the industry average of 2.26%. Its trailing-12-month ROTA of 9.10% is significantly higher than the 0.81% industry average.

DAKT’s net sales grew 6.4% year-over-year to $199.37 million in the second quarter, which ended October 28, 2023. The company's operating income for the same quarter rose significantly from a year-ago quarter to $19.44 million. Its adjusted net income amounted to $12.82 million, compared to its prior-year quarter’s adjusted net loss of $12.98 million, respectively. Also, it achieved EPS of $0.05, compared to its prior-year quarter’s loss per share of $0.29.

DAKT’s shares have increased 86.7% over the past year and 28.7% over the past nine months to close the last trading session at $7.58.

DAKT’s sound fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system.

It has an A grade for Value and a B for Growth. Within the A-rated Technology - Hardware industry of 37 stocks, it is ranked #18.

In addition to the POWR Ratings stated above, access DAKT’s Momentum, Stability, Sentiment, and Quality ratings here.

Outbrain Inc. (OB)

OB runs a global recommendation platform, optimizing user engagement for media partners through data-driven solutions and advertising options. Its suite, Outbrain Engage, includes a dashboard for content and ad management, alongside engaging ad formats and programmatic buying capabilities.

OB’s trailing-12-month asset turnover ratio of 1.37x is 179% higher than the industry average of 0.49x.

In the third quarter ended September 30, 2023, OB’s revenue grew marginally from the previous-year quarter to $230.01 million. The company’s adjusted net income and net income per share amounted to $272 million and $0.01, respectively, compared to its prior-year quarter’s adjusted net loss and net loss per share of $5.50 billion and $0.10. Moreover, its adjusted EBITDA increased 508.1% year-over-year to $10.25 million.

OB’s revenue and EPS are expected to be $939.29 million and $0.23 for the fiscal year ended December 2023.

The stock has gained 11% over the past three months to close the last trading session at $4.22.

OB’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

The stock has an A grade for Value and Sentiment and a B for Growth. Within the Technology - Services industry, it is ranked #16 of 74 stocks.

To see OB’s additional POWR Ratings for Momentum, Stability, and Quality, click here.

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KBAL shares were trading at $12.30 per share on Wednesday morning, down $0.11 (-0.89%). Year-to-date, KBAL has gained 90.63%, versus a 4.19% rise in the benchmark S&P 500 index during the same period.

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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