The tech industry has been able to capitalize on the growing demand for its products and solutions from startups to large-scale enterprises and gain expanding reach since the onset of the COVID-19 pandemic. However, increasing concerns about  high inflation, weak job growth reports for November, the Federal Reserve’s more hawkish monetary policy, and the rapid spread of a highly infectious COVID-19 variant, omicron, caused the broader market to pull back. Markets sold off last Friday, with the tech-heavy Nasdaq Composite losing 1.9%.

But because these factors are not likely to dissipate soon, analysts anticipate a significant market correction sometime soon. However, the continuation of remote and hybrid working structures amid the resurgence of COVID-19 cases, and the industry’s sound long-term growth, should allow tech companies to prosper, despite the market’s weakness. Thus, betting on fundamentally sound, undervalued tech stocks could hedge one’s investment portfolio against market fluctuations.

We think fundamentally sound tech stocks Amkor Technology, Inc. (AMKR), Teradata Corporation (TDC), NetScout Systems, Inc. (NTCT), and Himax Technologies, Inc. (HIMX) have the potential to capitalize on their respective industry tailwinds and deliver stable returns.

Amkor Technology, Inc. (AMKR)

AMKR in Tempe, Ariz., provides outsourced semiconductor packaging and test services worldwide. The company offers deep submicron wafer fabrication, wafer probe testing, integrated circuit packaging assembly and design, final testing, reliability testing, burn-in, and electrical characterization. It serves integrated device manufacturers, fabless semiconductor companies, OEMs, and contract foundries.

On November 4, 2021, AMKR announced plans to build a state-of-the-art smart factory in Bac Ninh, Vietnam. The first phase of the new factory will focus on providing Advanced System in Package (SiP) assembly and test solutions to the world’s leading semiconductor and electronic manufacturing companies. Expecting the market demand for assembly and test solutions to continue, investing in Bac Ninh expands the company’s manufacturing footprint in support of customer demand for an alternative cost-competitive supply chain solution for packaging  in the future.

For its fiscal third quarter, ended September 30, 2021, AMKR’s net sales increased 24.2% year-over-year to $1.68 billion. The company’s gross profit came in at $324.83 million, indicating a 34.7% rise from the prior-year period. Its operational income came in at $211.46 million for the quarter, representing a 65.9% year-over-year improvement. AMKR’s net income came in at $180.85 million, up 96.3% from the year-ago period. Its EPS increased 94.7% year-over-year to $0.74. The company had $545.59 million in cash and cash equivalents as of September 30, 2021.

Analysts expect the stock’s EPS to increase 71.4% year-over-year to $2.40 in the current year. A $6.06 billion consensus revenue estimate for the current year represents a 20% rise from the prior-year period. In addition, it surpassed The Street’s EPS estimates in each of the trailing four quarters. AMKR’s EPS is expected to grow at a 21.4% rate per annum over the next five years.

Over the past year, the stock has gained 53.4% in price and closed Friday’s trading session at $22.79. AMKR’s 1x forward EV/Sales is 75.3% lower than the 4.04x industry average. In terms of forward Price/Sales, AMKR is currently trading at 0.92x, which is 76.9% lower than the 3.98x industry average.

AMKR’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has an A grade for Value and a B grade for Growth and Momentum. Click here to see the additional ratings for AMKR’s Stability, Sentiment, and Quality. Of the 100 stocks in the A-rated Semiconductor & Wireless Chip industry, AMKR is ranked #34.

Click here to checkout our Semiconductor Industry Report for 2021

Teradata Corporation (TDC)

TDC focuses on providing a connected multi-cloud data platform for enterprise analytics. Its Teradata Vantage data warehouse and analytics platform allow customers to integrate and simplify their multi-cloud data and analytic ecosystems. The San Diego, Calif-based concern serves financial services, government, healthcare, manufacturing, retail, telecommunications, and travel/transportation industries, and markets its solutions and services through a direct sales force.

On November 4, 2021, TDC announced a three-year Strategic Collaboration Agreement with Amazon.com, Inc. (AMZN) Amazon Web Services, Inc. (AWS) subsidiary. The collaboration will launch joint go-to-market programs designed to help customers migrate, modernize, and de-risk their cloud adoption journey using Teradata Vantage multi-cloud data platform on AWS. The companies are looking forward to delivering impactful business outcomes from start to enterprise scale.

For its fiscal third quarter, ended September 30, 2021, TDC’s total revenue increased 1.3% year-over-year to $460 million. The company’s total gross profit came in at $275 million, up 8.3% from the prior-year period. Its income from operations was $30 million, indicating a 2900% rise from the year-ago period. TDC’s net income came in at $17 million for the quarter, compared to a  $1 million loss in the prior-year period. Its EPS came in at $0.15, versus a $0.01 loss per share in the year-ago period. The company had $613 million in cash and equivalents as of September 30, 2021.

A $2.12  consensus EPS estimate  for the current year represents a 61.8% rise from the prior-year period. Analysts expect TDC’s revenue to improve 4.7% year-over-year to $1.92 billion for the current year. It surpassed the consensus EPS estimates in each of the trailing four quarters. Its EPS is expected to grow at a 17.8% rate per annum over the next five years.

The stock has gained 92.7% in price over the past year and ended Friday’s trading session at $41.42. TDC’s 2.34x forward EV/Sales is 42.1% lower than the 4.04x industry average. In terms of forward Price/Sales, TDC is currently trading at 2.34x, which is 41.9% lower than the 3.98x industry average.

It is no surprise that TDC has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Value and a B grade for Growth and Quality. Click here to see the additional ratings for TDC’s Stability, Sentiment, and Momentum. TDC is ranked #1 of 3 stocks in the A-rated Technology – Storage industry.

NetScout Systems, Inc. (NTCT)

NTCT provides operational intelligence and performance analytics for service assurance and cybersecurity solutions. The Westford, Mass., company also offers application flow management solutions consisting of data collection devices and analysis and presentation software.

On November 30, 2021, NTCT achieved AMZN’s Amazon Web Services (AWS) Migration & Modernization Competency status for AWS Partners. Given its technical proficiency in migration and application modernization tooling, NTCT’s collaboration with AWS enables enterprises to accelerate deployments of services to the cloud while ensuring business continuity with complete confidence.

NTCT’s non-GAAP revenue for its fiscal second quarter ended September 30, 2021, increased 3.2% year-over-year to $211.92 million. The company’s non-GAAP gross profit came in at $165.86 million, representing an 8.2% year-over-year improvement. Its non-GAAP income from operations was  $47.35 million, up 18.9% from the prior-year period. NTCT’s non-GAAP net income came in at $35.30 million, indicating a 25% rise from the year-ago period. Its non-GAAP EPS increased 23.7% year-over-year to $0.47. As of September 30, 2021, the company had $475.82 million in cash, cash equivalents, and marketable securities.

Analysts expect the stock’s EPS to grow 2.9% year-over-year to $1.75 in the current year. The $852.29 million consensus revenue estimate for the current year represents a 2.5% rise from the prior-year period. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expect the stock’s EPS to grow at a rate of 1.8% per annum over the next five years.

Over the past year, the stock has gained 22.6% in price and closed Friday’s trading session at $29.63. In terms of forward EV/Sales, NTCT’s 2.50x is 38% lower than the 4.04x industry average. And in terms of forward Price/Sales, NTCT is currently trading at 2.57x, which is 35.5% lower than the 3.98x industry average .

NTCT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The stock has an A grade for Value and a B grade for Growth and Quality. Click here to see the additional ratings for NTCT’s Stability, Sentiment, and Momentum. NTCT is ranked #3 of 75 stocks in the Technology – Services industry.

Himax Technologies, Inc. (HIMX)

Headquartered in Taiwan, HIMX is a semiconductor solution provider that manufactures display driver integrated circuits, digital camera solutions, and timing controllers used in TVs, laptops, monitors, mobile phones, tablets, digital cameras, car navigation, virtual reality (VR) devices, and many other consumer electronics devices.

On May 19, 2021, HIMX unveiled its latest phase modulation liquid crystal on silicon (LCoS) technology that will be used for AR Head-Up Display (AR HUD) and Wavelength Selective Switch (WSS) applications in the automotive and communication industries. With AR HUD, using holographic display offers an intuitive multi-focal plane viewing experience, and WSS triggers flexible high-bandwidth data manipulation, HIMX is expected to generate good sales in the future.

HIMX’s revenues for its fiscal third quarter, ended September 30, 2021, increased 75.4% year-over-year to $420.94 million. The company’s gross profit came in at $216.73 million, representing a 304.3% rise from the prior-year period. HIMX’s operating income was $148.24 million, up 1469.7% from the prior-year period. While its net profit increased 1304.8% year-over-year to $118.72 million, its EPS increased 1260% to $0.68. The company had $229.20 million in cash and cash equivalents as of September 30, 2021.

Analysts expect HIMX’s EPS to rise 773.3% year-over-year to $2.62 in the current year. A $1.54 billion consensus revenue estimate for the current year represents a 74% rise from the prior-year period. It surpassed the consensus EPS estimates in three of the trailing four quarters. PEP’s EPS is expected to grow at a rate of 84.7% per annum over the next five years.

AMKR shares were trading at $22.81 per share on Monday afternoon, up $0.02 (+0.09%). Year-to-date, AMKR has gained 52.01%, versus a 23.92% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...

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