The tech industry has been the biggest beneficiary of the COVID-19 pandemic because the public health crisis has heightened demand for technology at an accelerated pace with the adoption of remote work structures and digital ways of operating businesses. In addition, rapid tech integration in most sectors around the globe has allowed tech stocks to enjoy greater investor interest. And in the U.S., tech budgets are expected to expand 7.4% in 2021 and 6.7% in 2022. Furthermore, substantial federal investments to boost domestic semiconductor chip production should boost the tech industry’s growth over an extended period.
The tech heavy Nasdaq Composite has gained 7.4% over the past three months to hit its all-time high on September 7. The broader S&P 500 index gained 5.3% over this period. Moreover, the Technology Select Sector SPDR Fund (XLK) gained 38.7% over the past year compared to the broader SPDR S&P 500 ETF Trust’s (SPY) 33.3% gain.
Given this backdrop, fundamentally sound tech stocks Canon Inc. (CAJ), Amkor Technology, Inc. (AMKR), and ScanSource, Inc. (SCSC) have been gaining momentum over the past few months. Currently trading above their 50-day and 200-day moving averages, these stocks appear to have plenty of upside remaining.
Canon Inc. (CAJ)
CAJ is a multinational corporation headquartered in Tokyo, Japan, that produces and sells cameras, lenses, semiconductor equipment, printers, and other products.
In August, the CAJ’s U.S. branch launched its new inkjet printer bearing enhanced features, such as a large capacity paper tray that reduces paper refilling, and easier insertion and displacement of ink cartridges and paper. In addition, the model was designed considering customer feedback to improve user experience. Thus, this product is likely to be in demand and should help the company to gain significantly.
Also last month, CAJ launched a new portable zoom lens for 8K broadcast cameras with a fast constant aperture and greater zoom magnification capacity. The new lens should gain popularity in no time, given the increasing demand for high-resolution broadcasting solutions.
In the second fiscal quarter, ended June 30, the company’s net sales increased 31% year-over-year to $7.95 billion. Its operating profit improved 535.2% from the prior-year quarter to $696.12 million. In addition, CAJ’s net income and EPS improved significantly from their negative year-ago values to $550.89 million and $0.53, respectively.
A $0.36 consensus EPS estimate for the current quarter (ending September 2021) indicates a 157.1% year-over-year increase. Likewise, the $8.08 billion consensus revenue estimate for the current quarter reflects an 18.3% increase from the prior-year quarter. Furthermore, CAJ has an impressive surprise earnings history; it has topped consensus EPS estimates in all four trailing quarters.
The stock has gained 26.6% in price year-to-date to close Friday’s trading session at $24.57. It is currently trading above its 50-day and 200-day moving averages of $23.84 and $23.30, respectively, indicating an uptrend.
CAJ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to 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.
CAJ has a Sentiment and Quality grade of A, and a Growth, Value, and Stability grade of B. It is ranked #1 of 46 stocks in the B-rated Technology – Hardware industry.
To see additional POWR Ratings for Momentum for CAJ, click here.
Amkor Technology, Inc. (AMKR)
AMKR provides semiconductor chip testing and packaging solutions for customers globally. The company’s operations span over production facilities, product development centers, and support offices. AMKR is headquartered in Tempe, Ariz.
On August 10, AMKR announced that it is advancing its 5G RF module design, addressing the need for advanced RF front-end module packaging for 5G devices. Concerning this development, Giel Rutten, AMKR President and CEO, said, “With our DSMBGA platform, we’ve established a preferred advanced packaging solution for this domain.”
In its second fiscal quarter, ended June 30, AMKR’s net sales increased 19.9% year-over-year to $1.41 billion. Its operating income rose to $155.12 million, up 79.3% from the prior-year quarter. Its net income increased 125.3% year-over-year to $126.46 million, while its EPS came in at $0.51, up 121.7% from the same period last year.
Analysts expect AMKR’s EPS to increase 71.4% year-over-year to $2.4 in the current year (fiscal 2021). Likewise, a $6.14 billion consensus revenue estimate for the current year indicates a 21.5% year-over-year rise. In addition, AMKR has topped consensus EPS estimates in all four trailing quarters.
AMKR’s stock has gained 155.2% in price over the past year and 84.2% year-to-date. It is currently trading above its 50-day and 200-day moving averages of $26.24 and $23.35, respectively.
It’s no surprise that AMKR has an overall A rating, which translates to Strong Buy in our POWR Ratings system.
AMKR has an A grade for Value and Momentum, and a B grade for Growth and Sentiment. In addition, the stock is ranked #9 of 98 stocks in the Semiconductor & Wireless Chip industry. And this industry is rated A.
Click here to see the additional POWR Ratings for AMKR (Stability and Quality).
ScanSource, Inc. (SCSC)
SCSC distributes technology products and solutions. The company’s offerings include Point of Sale solutions, electronic security products as well as infrastructure services. SCSC is based in Greenville, S.C.
In June , SCSC’s wholly owned subsidiary, Intelisys, expanded its longstanding relationship with Cisco Systems, Inc. (CSCO). The company expects this collaboration to enhance its customer experience and accelerate the adoption of cloud and recurring revenue.
For its fourth fiscal quarter, ended June 30, SCSC’s net sales increased 34% year-over-year to $852.70 million. Its gross profit rose 29.2% from the prior-year quarter to $95.78 million. The company’s non-GAAP net income and non-GAAP EPS increased 404.9% and 405.3%, respectively, from the same period last year to $24.52 million and $0.96.
The Street’s $0.66 EPS estimate for the current quarter (ending September 2021) indicates a 57.1% year-over-year increase, while its $810.83 million revenue estimate for the current quarter reflects a 7.1% rise from the prior-year quarter. Also, the stock has beat consensus EPS estimates in each of the four trailing quarters.
The stock has gained 34.1% in price year-to-date and 89.8% over the past year to close Friday’s trading session at $35.38. SCSC is currently trading above its 50-day moving average of $31.00 and 200-day moving average of $29.85.
SCSC’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy.
SCSC has a Sentiment grade of A, and a Growth, Value, and Quality grade of B. Among 75 stocks in the Technology – Services industry, it is ranked #3.
In addition to the POWR Ratings we’ve stated above, one can see SCSC ratings for Momentum and Stability here.
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CAJ shares were trading at $24.69 per share on Monday afternoon, up $0.12 (+0.49%). Year-to-date, CAJ has gained 28.99%, versus a 19.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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