The tech sector is expected to witness solid growth amid digitization across industries and the adoption of advanced technologies as business try to scale and innovate. The U.S. tech market accounts for 35% of the total world market. So, fundamentally sound stocks, Dropbox, Inc. (DBX), Spirent Communications plc (SPMYY) and AudioCodes Ltd. (AUDC) could be great investments now.
According to the latest forecast by Gartner, Inc, worldwide IT spending is projected to total $4.50 trillion this year, an increase of 2.4% from 2022. “While inflation is devastating consumer markets, contributing to layoffs at B2C companies, enterprises continue to increase spending on digital business initiatives despite the world economic slowdown,” said John-David Lovelock, Distinguished VP Analyst at Gartner.
Furthermore, the global information technology market is expected to grow at a CAGR of 10.1% by 2028. In addition, technologies like cloud computing have been gaining popularity. The global market for Cloud Computing Services is expected to reach $2.10 trillion by 2030, growing at a 14.7% CAGR until 2030.
Also, artificial intelligence, machine learning, and automation is growing exponentially in use and is expected to drive solid growth for the tech industry.
Investors’ interest in tech stocks is evident from the Technology Select Sector SPDR ETF’s (XLK) 12.7% returns over the past three months and 16.3% over the past nine months.
Take a look at the under $20 stocks mentioned above:
Dropbox, Inc. (DBX)
DBX is a provider of a collaboration platform. Its platform lets users create, access, organize, share, collaborate, and secure content. DBX supports customers in the professional services, technology, media, education, industrial, consumer and retail, and financial services industries.
In terms of forward Price/Cash Flow, DBX is currently trading at 8.17x, 51.6% lower than the industry average of 16.88x. Its trailing-12-month EV/EBITDA of 9.09x is 30.5% lower than the industry average of 13.08x.
DBX’s trailing-12-month EBITDA margin of 22.15% is 97.4% higher than the 11.22% industry average. Its trailing-12-month gross profit margin of 80.89% is 65.2% higher than the 48.97% industry average.
For the fiscal fourth quarter that ended December 31, 2022, DBX’s revenue increased 5.9% year-over-year to $598.80 million. Its net income increased 163.5% year-over-year to $328.30 million. Additionally, EPS came in at $0.93, representing a 190.6% increase from the prior-year quarter.
Street expects DBX’s revenue to increase 6.7% year-over-year to $2.48 billion in 2023. Its EPS is expected to increase 7% year-over-year to $1.69 in 2023. It surpassed EPS estimates in all four trailing quarters. Over the past nine months, the stock has gained marginally to close the last trading session at $19.96.
DBX’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall B rating equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
DBX has an A grade for Quality and a B for Value. Within the Technology – Services industry, it is ranked #16 out of 81 stocks. Beyond what is stated above, we’ve also rated DBX for Momentum, Growth, Stability and Sentiment. Get all the DBX ratings here.
Spirent Communications plc (SPMYY)
Headquartered in Crawley, the United Kingdom, SPMYY provides automated test and assurance solutions for networks, cybersecurity, and positioning across the Americas, Asia Pacific, Europe, the Middle East, and Africa. The company operates in two segments: Lifecycle Service Assurance and Networks & Security.
On February 28, 2023, SPMYY announced a partnership with Microsoft Corp. (MSFT) for third-party network functions (NFs) pre-certification on the new Microsoft Azure Operator Nexus platform.
Doug Roberts, General Manager of Spirent’s Lifecycle Service Assurance business, said, “Microsoft Azure Operator Nexus is a next-generation hybrid cloud platform for operators built for the future of telecommunications. It will enable operators to be more competitive, deliver new services and increase revenue. We’re pleased to assist Microsoft as it works to support deployments at the edge of the cloud, network, or for the enterprise.”
In terms of forward EV/Sales, SPMYY is currently trading at 1.73x, 36.4% lower than the industry average of 2.72x. Its trailing-12-month EV/EBITDA of 8.03x is 38.6% lower than the industry average of 13.08x.
SPMYY’s trailing-12-month EBITDA margin of 21.96% is 95.7% higher than the 11.22% industry average. Its trailing-12-month gross profit margin of 71.95% is 46.9% higher than the 48.97% industry average.
For the year that ended December 31, 2022, SPMYY’s adjusted revenues increased 5.5% year-over-year to $607.50 million. Also, its adjusted operating profit came in at $129.5 million, up 9.3% year-over-year. Its adjusted profit and EPS came in at $114.5 million and $18.75, up 13.5% and 14% year-over-year.
The stock has lost marginally intraday to close the last trading session at $8.60.
It’s no surprise that SPMYY has an overall A rating which equates to a Strong Buy in our POWR Ratings system.
It has an A grade for Stability and Quality and a B for Value. The stock is ranked first among 40 stocks in the Technology – Hardware industry. We’ve also rated SPMYY for Growth, Sentiment, and Momentum. Get all SPMYY ratings here.
AudioCodes Ltd. (AUDC)
Headquartered in Lod, Israel, AUDC provides advanced communications software, products, and productivity solutions for the digital workplace. The company offers solutions, products, and services for unified communications, contact centers, VoiceAI business lines, and service provider businesses.
In terms of forward EV/Sales, AUDC is currently trading at 1.24x, 54.5% lower than the industry average of 2.72x. Its trailing-12-month EV/EBITDA of 7.02x is 46.4% lower than the industry average of 13.08x.
AUDC’s trailing-12-month EBITDA margin of 12.47% is 11.2% higher than the 11.22% industry average. Its trailing-12-month gross profit margin of 64.99% is 32.7% higher than the 48.97% industry average.
AUDC’s total revenues increased 7.5% year-over-year to $70.66 million in the fourth quarter that ended December 31, 2022. Also, its gross profit came in at $46.16 million, up 3.9% year-over-year. Its net income increased 4.1% year-over-year to $7.55 million.
Analysts expect AUDC’s revenue to increased 7.5% year-over-year to $310.18 million in 2024. Its EPS is estimated to grow 13.6% year-over-year to $1.59 in 2024. AUDC’s shares have lost 3.7% intraday to close its last trading session at $14.76.
AUDC’s POWR Ratings reflect its robust outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
AUDC also has an A grade for Quality and a B for Momentum, Value, and Stability. It is ranked #5 out of 51 stocks in the B-rated Technology – Communication/Networking industry. For additional ratings for AUDC’s Growth and Sentiment, click here.
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DBX shares were trading at $20.00 per share on Friday morning, up $0.04 (+0.20%). Year-to-date, DBX has declined -10.63%, versus a 2.74% rise in the benchmark S&P 500 index during the same period.
About the Author: RashmiKumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...
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