Inflation is still hovering around the 40-year high, and the Federal Reserve is trying to fight it by hiking interest rates. This has led the capital-intensive tech industry to witness a massive sell-off on investors’ concerns over their rising borrowing costs.
However, rising investments and increasing enterprises’ dependence on technology solutions brightens the industry’s long-term prospects. On top of it, new employment data shows employers continue to hire and grow their technology teams.
CompTIA’s analysis of the U.S. Bureau of Labor Statistics report shows that the tech sector added 25,500 net new workers in August. Tech industry employment has increased by 175,700 jobs in 2022 and is tracking 46% ahead of 2021.
The global industrial networking solutions market size is estimated to be worth $13.56 billion in 2022 and is forecast to reach $34.77 billion by 2028, growing at a CAGR of 17%.
Given the backdrop, fundamentally strong tech stocks Cisco Systems, Inc. (CSCO), Extreme Networks, Inc. (EXTR), AudioCodes Ltd. (AUDC), and Aviat Networks, Inc. (AVNW), which are trading under $50, could be ideal investments now.
Cisco Systems, Inc. (CSCO)
CSCO designs, manufactures and sells Internet Protocol-based networking and other products related to the communications and information technology industry globally. It provides infrastructure platforms, collaboration products, and security products.
On August 23, CSCO declared a quarterly cash dividend of $0.38 per common share, payable to shareholders on October 26, 2022. This reflects the shareholder return ability of the company.
In July, CSCO launched a new Webex Wholesale Route-to-Market (RTM) for Service Provider partners to address the evolving needs of SMBs. This wholesale business model is expected to harness the capabilities of the Webex suite.
CSCO’s total revenue came in at $51.56 billion for the fiscal year ended July 30, 2022, representing a 3.5% year-over-year growth. Its operating income grew 8.9% from the prior year to $13.97 billion, while its non-GAAP net income rose 3.4% from last year to $14.09 billion. EPS increased 4.3% from the prior year to $3.36.
Analysts expect CSCO’s revenue for the first quarter ending October 2022 to be $13.30 billion, indicating a 3.1% year-over-year growth. The company’s EPS for the same quarter is expected to increase 1.8% from the prior-year quarter to $0.84. Additionally, CSCO has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
CSCO has gained 1.2% intraday to close its last trading session at $45.02.
CSCO’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CSCO has an A grade for Quality and a B for Stability. It is ranked #6 of 52 stocks in the Technology – Communication/Networking industry.
Beyond what we’ve stated above, we also provide Growth, Value, Momentum, and Sentiment grades for CSCO. Get all CSCO ratings here.
Extreme Networks, Inc. (EXTR)
EXTR is a software-driven networking solutions provider that designs, develops, and manufactures wired and wireless network infrastructure equipment and engages in software development.
On September 7, EXTR announced that Minor League Baseball (MiLB) had selected Extreme as an Official Technology Innovation Partner. Additionally, the company had been named the official Wi-Fi solution, Wi-Fi analytics solution, and WAN edge solution provider of MiLB in a five-year partnership.
On August 18, EXTR introduced the Extreme AP5050, the industry’s first outdoor Wi-Fi 6E Outdoor Access Point optimized for deployment across outdoor venues, convention centers, hospitals, university campuses, and large stadiums. The new offering might significantly add to the company’s revenue stream.
EXTR’s revenue increased 10.2% year-over-year to $1.11 billion in the fiscal year ended June 30. Its non-GAAP operating earnings grew 23.5% from the year-ago value to $136.18 million, while its non-GAAP net income improved 43.2% year-over-year to $103.45 million. The company’s non-GAAP net earnings per common share rose 35.1% year-over-year to $0.77.
Analysts expect EXTR’s revenue for the fiscal year ending June 2023 to be $1.23 billion, indicating an increase of 10.6% year-over-year, while its EPS is expected to improve 26.8% from the prior year to $0.98. In addition, EXTR has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
EXTR has gained 32.4% over the past year and 37.5% over the past three months to close its last trading session at $13.97.
It is no surprise that EXTR has an overall A rating, which translates to Strong Buy in our POWR Ratings system. The stock has an A grade for Quality and a B grade for Growth and Value. It is ranked #3 in the same industry.
In addition to the POWR Rating grades we’ve stated above, we have also given EXTR grades for Momentum, Stability, and Sentiment. Get all EXTR ratings here.
AudioCodes Ltd. (AUDC)
AUDC, based in Lod, Israel, offers advanced communications software, products, and productivity solutions for the digital workplace. The company’s offerings include solutions, products, and services for unified communications, contact centers, VoiceAI business lines, and service provider businesses.
On August 2, AUDC declared a cash dividend of 18 cents per share. The aggregate amount of the dividend is approximately $5.7 million. The dividend was payable on August 31. This reflects the cash generation ability of the company.
AUDC’s total revenues increased 12.9% year-over-year to $68.36 million in the second quarter ended June 30. Its gross profit grew 5.8% from the year-ago value to $44.51 million. The company’s non-GAAP net income was $11.35 million, and its non-GAAP net EPS was $0.34.
The consensus EPS for the fiscal third quarter (ending September 2022) is expected to be $0.35. The consensus revenue estimate of $70.41 million for the same quarter reflects an 11.1% increase from the same period last year.
The stock has gained 2.1% intraday to close its last trading session at $22.25.
The company’s overall A rating translates to Strong Buy in our proprietary rating system. AUDC is rated an A in Quality and a B for Value, Stability, and Sentiment. It is ranked #1 in the same industry.
To see additional POWR Ratings for Growth and Momentum for AUDC, click here.
Aviat Networks, Inc. (AVNW)
AVNW offers wireless transport solutions worldwide. It provides a comprehensive suite of products and localized professional and support services enabling customers to simplify their networks.
In July, AVNW announced the completion of the acquisition of Redline Communications Group Inc. by a subsidiary of AVNW. The acquisition is expected to enable the company to offer its customers an integrated end-to-end offering for wireless access and transport. It expands its research and development team with a new center for 5G development in Canada.
For the fourth quarter of 2022, AVNW’s total revenues increased 8% year-over-year to $77.42 million. Its operating income grew 40.4% year-over-year to $5.24 million. Its non-GAAP net earnings and non-GAAP net earnings per share came in at $7.83 million and $0.67, up 47.5% and 52.3% from the prior-year quarter.
Street EPS estimate for the first fiscal quarter ending September of $0.71 reflects a rise of 6.3% year-over-year. Likewise, Street revenue estimate for the same quarter of $81.10 million indicates an improvement of 10.9% from the prior-year period. Additionally, AVNW has topped consensus EPS estimates in each of the trailing four quarters.
Over the past six months, AVNW’s stock has gained 19.8% to close its last trading session at $31.89.
This promising prospect is reflected in AVNW’s POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system. AVNW also has a B grade for Growth and Value. It is ranked #9 in the same industry.
Click here to see the additional POWR Ratings for AVNW (Momentum, Stability, Sentiment, and Quality).
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CSCO shares rose $0.01 (+0.02%) in after-hours trading Thursday. Year-to-date, CSCO has declined -26.84%, versus a -15.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
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. More...
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