Remote working, facilitated by digital integration, is expected to dominate the services sector this year as people continue to work from home. Thanks to rising productivity rates and shrinking overhead costs, most companies are adopting a hybrid working model.
Tech stocks are expected to be one of the biggest beneficiaries of changing life- and entertainment styles, with cloud computing and IT solutions being the hottest trends this year. The global IT services market is expected to grow at a CAGR of 11% over the next five years to reach $5.73 trillion.
But because large-cap IT and cloud computing companies are currently on the cusp of market saturation, we think lesser-known tech stocks such as CDW Corporation (CDW), Akamai Technologies, Inc. (AKAM) and Box, Inc. (BOX) will grow significantly in the near future.
CDW Corporation (CDW)
Based in Lincolnshire, Illinois, CDW is a provider of integrated information technology (IT) solutions to business, government, education, and healthcare customers in the U.S., Canada and the U.K. The company operates mainly through three segments — Corporate, Public and Other. CDW offers discrete hardware and software products and integrated IT solutions, including mobility, security, data center optimization, cloud computing, virtualization, and collaboration. The company also provides warranties, managed services, and consulting design and implementation services.
The company’s net sales have increased 9.2% year-over-year to $4.96 billion for the fourth quarter, ended December 31, 2020. Its gross profit was reported to be $880.90 million, which represents an improvement of 13.3% year-over-year. CDW’s operating income has increased more than 17% year-over-year to $332.20 million. Its net income was reported to be $238.30 million, up 28.4% year-over-year. And its non-GAAP EPS increased 15.9% year-over-year to $1.82.
A consensus EPS estimate of $1.79 for the quarter ending June 30, 2021 represents an improvement of 14.7% year-over-year. Moreover, CDW has surpassed the consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $19.50 billion for the fiscal 2021 represents a 5.6% rise on a year-over-year basis.
On February 10, the company’s Board of Directors authorized a $1.25 billion increase to the company’s share repurchase program and declared a quarterly cash dividend of $0.40 per common share, payable on March 10. This represents a 5.3% increase over last year’s dividend. Last December, CDW appointed Anthony Foxx to its board of directors, effective January 1. Foxx has held a variety of positions in the public and private sectors and currently serves as the chief policy officer and senior advisor to the president and CEO of Lyft, Inc. (LYFT). CDW stock has gained 25. 7% over the past year and closed Friday’s trading session at $156.89.
CDW’s POWR Ratings reflect this promising outlook. The stock has an A grade for Sentiment and B for Stability and Quality. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
We have also graded CDW for Growth, Momentum and Value. Click here to access all CDW’s ratings.
CDW is ranked #22 out of 80 stocks in the Technology – Services industry.
Akamai Technologies, Inc. (AKAM)
Headquartered in Cambridge, Massachusetts, AKAM provides cloud services for delivering, optimizing, and securing online content and business applications in the U.S. and internationally. AKAM’s services include the delivery of content, applications and software over the Internet, as well as mobile and security solutions. AKAM’s solutions also include Performance and Security Solutions, Media Delivery Solutions, and Service and Support Solutions. The company sells its solutions through direct sales and service organizations, and various channel partners.
AKAM’s revenue has increased 9.6% year-over-year to $846.29 million for the fourth quarter, ended December 31, 2020. Its non-GAAP income from operations for the fourth quarter was reported to be $255.92 million, which represents an improvement of 15.5% year-over-year. Its non-GAAP net income was reported to be $219.84 million, up more than 9% year-over-year. Also, its non-GAAP EPS increased 8.1% year-over-year to $1.33.
A consensus EPS estimate of $1.30 for the current quarter, ending March 31, 2021, represents an improvement of 8.3% year-over-year. Moreover, AKAM has surpassed the consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $829.57 million for the current quarter represents an 8.5% rise on a year-over-year basis. Wall Street analysts expect the stock to hit $126 in the near term, which indicates a potential upside of 27.5%.
AKAM announced in February 1that it had agreed to acquire Inverse, a Montreal-based company, that is expected to enhance AKAM’s enterprise security capabilities and expand its portfolio of zero trust and secure access service edge solutions for IoT. And in January AKAM announced a new partnership with Plume, a Smart Home Services pioneer.
The company also announced a new Akamai Partner Program in that expands and supports channel partners’ ability to deliver high-value services to their customers. In December, Telenor Myanmar began using AKAM’s SPS Shield product to help protect subscribers from a host of cyber security threats. The stock has gained 37.8% over the past three years and closed Friday’s trading session at $94.50.
AKAM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
The stock has a B grade for Value and Momentum also. We have also graded AKAM for Growth, Stability, Sentiment and Quality. Click here to access all AKAM ratings.
AKAM is ranked #21 in the same industry.
The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Note that AKAM is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.
Box, Inc. (BOX)
Based in Los Altos, California, BOX provides a cloud content management platform that enables organizations of various sizes to access, store, share, and manage their content and information. The company’s Software-as-a-Service (SaaS) cloud-based platform enables users to collaborate on content both internally and with external parties, automate content-driven business processes, develop custom applications, and implement data protection, security and compliance features to comply with internal policies and industry regulations.
The company is scheduled to report its financial results for its fourth quarter and fiscal 2021 (ended January 31, 2021) on March 2, 2021. BOX’s revenue has increased 10.6% year-over-year to $196 million for the fiscal 2021 third quarter ended October 31, 2020. The company’s gross profit was reported to be $139.19 million, which represents an improvement of 15.2% year-over-year. Its non-GAAP operating income was reported to be $35.22 million which is an improvement considering the company’s non-GAAP operating loss in the third quarter of fiscal 2020. Non-GAAP EPS increased 11.1% sequentially to $0.20.
The consensus EPS estimate of $0.17 for the quarter ended January 31, 2021 represents an improvement of 142.9% year-over-year. Moreover, BOX has surpassed the consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $768.37 million for the fiscal 2021 represents a 10.4% rise on a year-over-year basis. Wall Street analysts expect the stock to hit $23.33 in the near term, which indicates a potential upside of 21.9%.
Last month BOX unveiled an all-new Box Shuttle that makes it easier, faster, and less costly to migrate large amounts of content to the Box Content Cloud. It also announced that it has entered an agreement to acquire SignRequest, which is a cloud-based electronic signature company. Moreover, the company opened a new research and development engineering site in Warsaw, Poland in December to help accelerate its long-term product strategy. The stock has gained 22.50% over the past year and closed Friday’s trading session at $18.35.
BOX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system.
The stock has a B grade for Value, Growth, Quality and Momentum. We have also graded BOX for Stability and Sentiment. Click here to access all of BOX’s ratings.
BOX is ranked #4 in the same industry.
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CDW shares were unchanged in after-hours trading Monday. Year-to-date, CDW has gained 22.15%, versus a 4.20% 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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