As office-reopening plans are delayed due to the resurgence of COVID-19 cases, an extension of remote working should keep computer hardware in demand. Furthermore, the ongoing global, digital transformation is increasing dependency on reliable hardware. As such, the global computer hardware market is expected to grow at 6% CAGR to $1.18 trillion in 2025.
Given this backdrop, we think it could be wise to bet now on fundamentally sound computer hardware stocks Dell Technologies Inc. (DELL), Canon Inc. (CAJ), Toshiba Corporation (TOSYY), and Lenovo Group Limited (LNVGY).
Dell Technologies Inc. (DELL)
DELL designs, manufactures, sells and supports information technology solutions, products, and services worldwide. The company operates through its Infrastructure Solutions Group (ISG); Client Solutions Group (CSG); and VMware. It also provides information security, cloud software and infrastructure-as-a-service solutions, cloud-based integration services, and financial services.
On May 5, 2021, DELL expanded its collaboration with global digital infrastructure company Equinix to broaden the availability of Dell Technologies APEX, DELL’s on-premises storage-as-a-service offering, via Equinix International Business Exchange data centers. This should enable businesses to simplify a public cloud experience while still maintaining control over their data. The companies expect to generate high demand for this service in the coming months.
DELL’s non-GAAP net revenue for its fiscal second quarter, ended July 30, 2021, came in at $26.13 billion, representing a 14.7% year-over-year improvement. The company’s non-GAAP gross profit was $8.34 billion, up 9.4% from the year-ago period. Its non-GAAP operating income was $2.81 billion for the quarter, up 7.4% from the prior-year period. While its non-GAAP net income increased 17.9% year-over-year to $1.91 billion, its non-GAAP EPS increased 16.7% to $2.24. As of July 30, 2021, the company had $11.72 billion in cash and cash equivalents.
A $2.32 consensus EPS estimate for the current quarter, ending October 31, 2021, indicates a 14.3% rise from the prior-year period. Analysts expect DELL’s revenue to increase 16.4% year-over-year to $27.39 billion in the current quarter. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock’s EPS is expected to grow at a 7.8% rate per annum over the next five years.
The stock has gained 44.2% in price over the past year and 11.4% over the past six months. It closed yesterday’s trading session at $96.38.
DELL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
DELL has a B grade for Growth, Value, and Sentiment. In the 46-stock B-rated Technology – Hardware industry, it is ranked #3. To see additional POWR Ratings for Stability, Momentum, and Quality for DELL, click here.
Canon Inc. (CAJ)
CAJ is a Japan-based professional and consumer imaging solutions company and patent-holder of digital imaging technologies. The company operates through four business segments—Printing; Imaging; Medical; Industrial; and Others. Its products include networked multifunction devices, digital and analog copiers, computer peripherals, cameras and lenses, semiconductors, and broadcast and medical equipment.
CAJ acquired Redlen Technologies Inc., a leading developer, and manufacturer of high-resolution Cadmium-Zinc-Telluride (CZT) semiconductor radiation detector products, on September 9, 2021. Set to operate as CAJ’s wholly owned subsidiary, Redlen’s advanced technology used in CZT semiconductor detector modules should help CAJ’s Canon Medical Systems Corporation accelerate the development of competitive PCCT systems to strengthen the medical systems business.
During the fiscal second quarter, ended June 30, 2021, CAJ’s net sales increased 31% year-over-year to $7.95 billion. The company’s operating profit came in at $696.12 million, versus a $164.40 million loss in the prior-year period. CAJ’s net income was $550.89 billion for the quarter, versus $81.81 million in the year-ago period. Its EPS came in at $0.53, compared to an $0.08 loss per share in the prior-year period. The company had ¥523.57 billion ($4.76 billion) in cash and cash equivalents as of June 30, 2021.
Analysts expect CAJ’s EPS to grow 137.5% year-over-year to $0.36 in the current quarter, ending September 30, 2021. An $8.13 billion consensus revenue estimate for the current quarter represents a 12.3% rise from the prior-year period. The stock surpassed consensus EPS estimates in each of the trailing four quarters. CAJ’s EPS is expected to grow at a marginal rate per annum over the next five years.
CAJ has gained 29.5% in price over the past nine months and 2.7% over the past month. It ended yesterday’s trading session at $24.68.
It’s no surprise that CAJ has an overall A rating, which translates to Strong Buy in our POWR Ratings system. In addition, the stock has an A grade for Sentiment and Quality, and a B grade for Growth, Value, and Stability. Furthermore, the stock is ranked #1 in the Technology – Hardware industry. Click here to see additional POWR Ratings for Momentum.
Toshiba Corporation (TOSYY)
Based in Tokyo, Japan, TOSYY provides electronic devices and storage and digital solutions worldwide. In addition, the company offers retail and printing solutions, energy systems and solutions, infrastructure systems and solutions, and building solutions.
In an announcement dated September 10, 2021, TOSYY said it has developed a new coating method for the perovskite layer that boosts power conversion efficiency (PCE) to 15.1% for TOSYY’s 703 cm2 module, the highest for any large, polymer film-based perovskite photovoltaic module. TOSYY’s coating method also dramatically reduces production time and costs, contributing to a lower cost for solar power generation. TOSYY is expected to achieve widespread recognition for the product across the industry in the coming months.
TOSYY’s net sales for its fiscal first quarter ended June 30, 2021, came in at $6.56 billion, representing a 21.3% rise from the prior-year period. The company’s pre-tax income was $236.08 million, compared to a $33.61 million loss in the prior-year period. As of June 30, 2021, the company had $5.67 billion in cash and cash equivalents.
Analysts expect TOSYY’s revenue to be $30.04 billion for the current year, indicating a 4316% rise from the prior-year period. TOSYY has gained 54.9% in price year-to-date and 29.7% over the past six months. It ended yesterday’s trading session at $21.86.
TOSYY’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which translates to Buy. TOSYY has an A grade for Growth and Value, and a B grade for Stability. Moreover, it is ranked #9 in the Technology – Hardware industry.
In addition to the POWR Rating grades we’ve highlighted, one can see TOSYY’s ratings for Sentiment, Momentum, and Quality here.
Lenovo Group Limited (LNVGY)
LNVGY is a Hong Kong-based investment holding company that develops, manufactures, and markets technology products and services worldwide. It also provides data center equipment, such as servers and storage, and offers IT services and contracting to manufacture.
At its annual Tech World event held on September 8, 2021, LNVGY introduced Lenovo TruScale, a new portfolio-spanning everything-as-a-service offering, as part of its continuing transformation toa consumption-based business model. LNVGY’s as-a-service approach helps meet the market’s demand for responsive, reliable hybrid cloud operations and gives organizations ultimate flexibility in leveraging their IT infrastructure, services, and software.
For its fiscal first quarter, ended June 30, 2021, LNVGY’s revenue increased 26.8% year-over-year to $16.93 billion. The company’s gross profit came in at $2.82 billion, indicating a 38.3% rise from the prior-year period. LNVGY’s operating profit was $743 million, representing a 70.4% rise from the prior-year period. While LNVGY’s net profit increased 96.4% year-over-year to $485 million, its EPS increased 100.6% year-over-year to $0.04. As of May 31, 2021, the company had $443.12 million in cash and cash equivalents.
Analysts expect LNVGY’s revenue to be $17.39 billion for the current quarter ending September 30, 2021, representing a 19.8% rise from the prior-year period. It surpassed the consensus revenue estimates in each of the trailing four quarters. LNVGY has gained 55.3% over the past year and 3.3% over the past nine months. It ended yesterday’s trading session at $21.10.
LNVGY’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has an A grade for Value, and a B grade for Stability and Sentiment. Click here to see the additional ratings for LNVGY (Growth, Quality, and Momentum). LNVGY is ranked #10 in the Technology – Hardware industry.
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DELL shares were unchanged in after-hours trading Friday. Year-to-date, DELL has gained 29.95%, versus a 19.92% 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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