Geopolitical issues and lingering concerns over the health of the U.S. economy due to GDP decline, elevated inflation, and aggressive interest rate hikes significantly affected the stock market in the first half of the year. Rising recession fears primarily dampened investor sentiment. The tech sector witnessed a massive sell-off on concerns over rising borrowing costs.
However, with strong corporate earnings, positive macroeconomic data, and the possibility of a less aggressive monetary policy tightening, the interest-rate-sensitive technology sector rebounded from its lows over the past few weeks. The Nasdaq Composite gained 11.9% over the past month after entering a bear market territory during the year’s first half.
In addition, the growing reliance of businesses on tech solutions, consistent innovations, and rising corporate and government investments in this space should drive the industry’s growth. The global information technology market is expected to reach $13.81 trillion by 2026, growing at a CAGR of 10.3%.
Given this backdrop, we think it could be wise to invest in quality tech stocks Dropbox, Inc. (DBX), AstroNova, Inc. (ALOT), CTS Corporation (CTS), Avid Technology, Inc. (AVID), and Issuer Direct Corporation (ISDR) to capitalize on the industry’s long term growth prospects.
Dropbox, Inc. (DBX)
DBX is a collaboration platform provider that enables users to create, access, organize, share, collaborate and secure content. It serves customers in professional services, technology, media, education, industrial, consumer and retail, and financial services industries.
For the fiscal second quarter ended June 30, 2022, DBX’s total revenue increased 7.9% year-over-year to $572.70 million. Its non-GAAP gross profit grew 10.3% from the year-ago value to $475.50 million. The company’s non-GAAP income from operations increased 8% year-over-year to $182.90 million.
For the quarter ending September 30, 2022, DBX’s EPS and revenue are expected to increase 3.1% and 6.4% year-over-year to $0.38 and $585.65 million, respectively. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past three months, the stock has gained 21.2% to close the last trading session at $24.57.
DBX’s POWR Ratings show promise. According to our proprietary rating system, it has an overall rating of B, translating to a Buy. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Quality and a B for Value. It is ranked #16 out of 81 stocks in the Technology – Services industry. Click here to see the other ratings of DBX for Growth, Momentum, Stability, and Sentiment.
AstroNova, Inc. (ALOT)
ALOT manufactures and distributes a range of specialty printers and data acquisition and analysis systems. The company operates through two segments: Product Identification; and Test & Measurement. It sells its products via its authorized and third-party dealers and representatives.
On August 9, 2022, ALOT acquired Astro Machine. ALOT’s President and CEO Greg Woods said, “Astro Machine’s products and technologies are a great fit. We believe that this transaction brings synergistic product design and material handling expertise, expands our U.S.-based manufacturing capabilities, and adds complementary channels to market that will enhance our ability to scale the combined business and capitalize on cross-selling opportunities.”
In the fiscal first quarter (ended April 30, 2022), ALOT’s net revenue increased 6.6% year-over-year to $31.01 million. Its operating expenses declined 1.8% year-over-year to $9.97 million. The company’s operating income rose 3.9% from the year-ago value to $764K. Also, its total current assets stood at $65.39 million, representing an increase of 2.5%, compared to $63.77 million for the fiscal year ended January 31, 2022.
The consensus revenue estimate of $125.03 million for fiscal 2023 represents a 6.4% increase from the same period last year. Shares of ALOT have declined marginally over the past month to close the last trading session at $12.02.
ALOT’s strong fundamentals are reflected in its POWR Ratings. The company has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and Sentiment and a B for Momentum and Quality. Also, it is ranked first of 49 stocks in the B-rated Technology – Hardware industry. Click here to see the other ratings of ALOT for Growth and Stability.
CTS Corporation (CTS)
CTS designs, manufactures, and sells sensors, connectivity components, and actuators primarily to original equipment manufacturers (OEMs) and supplies for the aerospace and defense, industrial, medical, telecommunications, transportation, and IT markets.
On June 30, 2022, CTS acquired Ferroperm Piezoceramics. With this acquisition, the company diversified its operations in Europe, enabling it to accelerate its long-term growth prospects.
For the fiscal second quarter ended June 30, 2022, CTS’ net sales increased 11.9% year-over-year to $144.98 million. The company’s adjusted net earnings increased 17% year-over-year to $19.90 million, while its adjusted EBITDA grew 16.5% from the year-ago value to $32.50 million. Also, its adjusted EPS came in at $0.62, representing an increase of 19.2% year-over-year.
For the third quarter (ending September 30, 2022), CTS’ EPS and revenue are expected to increase 34.1% and 22.7% year-over-year to $0.62 and $150.22 million, respectively. It surpassed consensus EPS estimates in three of the trailing four quarters. The stock has gained 21.9% over the past six months to close the last trading session at $42.78.
CTS’ POWR Ratings reflect these solid prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
It has an A grade for Growth and Quality and a B for Stability and Sentiment. Within the Technology – Electronics industry, it is ranked #3 of 48 stocks. To see the other ratings of CTS for Value and Momentum, click here.
Avid Technology, Inc. (AVID)
AVID develops, markets, sells and supports software and integrated video and audio content creation, management, and distribution solutions. It operates as a technology provider to the media and entertainment industry.
On August 2, 2022, the company announced a three-year agreement with Amazon Studios (AMZN) to deliver advanced cloud-based editorial to Amazon Studios. AVID’s CEO & President, Jeff Rosica, said, “Avid is delighted that our open technologies are being chosen by more customers who are innovating how content is produced in the cloud, on a global scale.”
AVID’s net revenues increased 2.9% year-over-year to $97.68 million for the second quarter ended June 30, 2022. Its gross profit grew 5.4% year-over-year to $63.37 million, while its non-GAAP operating income rose 5.8% from the year-ago value to $14.40 million. The company’s non-GAAP net income increased marginally year-over-year to $11.81 million. Also, its non-GAAP EPS came in at $0.26, up 4% year-over-year. In addition, its adjusted EBITDA increased 4.1% from the prior-year value to $16.47 million.
Analysts expect AVID’s EPS for the quarter ending September 30, 2022, to increase 16.7% year-over-year to $0.32. Its revenue for the ongoing quarter is expected to increase 3.8% year-over-year to $105.46 million. It surpassed Street EPS estimates in three of the trailing four quarters. Over the past three months, the stock has gained 13.9% to close the last trading session at $27.81.
AVID’s POWR Ratings reflect a promising outlook. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
It has an A grade for Quality and a B for Value. It is ranked #23 in the Technology – Services industry. Click here to see the other ratings of AVID for Growth, Momentum, Stability, and Sentiment.
Issuer Direct Corporation (ISDR)
ISDR provides communications and compliance technology solutions in the United States. Platform id is the company’s flagship platform, which assists companies in managing events while attempting to send messages to important constituents, investors, markets, and regulatory systems.
ISDR’s revenues increased 3.7% year-over-year to $11.09 million for the six months ended June 30, 2022. Its gross profit grew 8.6% from the year-ago value to $8.50 million. The company’s non-GAAP net income increased marginally year-over-year to $1.90 million, while its non-GAAP EPS came in at $0.50, up 2% year-over-year.
The consensus revenue estimate of $5.92 million for the third quarter ending September 30, 2022, represents a growth of 8.4% from the same period last year. The consensus EPS estimate of $0.27 for the current quarter indicates a 12.5% year-over-year increase.
Over the past three months, the stock has gained 5.4% to close the last trading session at $22.96.
ISDR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our POWR Ratings system.
ISDR has an A grade for Sentiment and Quality and a B for Value. Within the same industry, the stock is ranked #4. Click here to see ISDR’s Growth, Momentum, and Stability grades.
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DBX shares were trading at $24.15 per share on Wednesday afternoon, down $0.42 (-1.71%). Year-to-date, DBX has declined -1.59%, versus a -9.41% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions. More...
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