The coronavirus pandemic had a significant impact on the computer hardware industry in 2020 due to the supply chain disruptions and labor shortages it precipitated. But the shift to a new way of life/work it ushered in forced organizations to change their operations, and the need to work and learn remotely spiked the demand for computer hardware. This trend is expected to continue, with many businesses now seeking to move to a virtual work environment permanently or allow workers to work remotely for the foreseeable future.
The global computer hardware market is expected to hit $1178.15 billion in 2025, growing at a 6% CAGR. The rapid pace of digital transformation across almost all industries and increasing adoption of advanced technologies should drive the growth of the computer hardware industry.
Dell Technology Inc. (DELL)
DELL Technology, based in Round Rock, Tex., is a leading IT solutions company. Its Client Solutions and Enterprise Solutions Group (ESG) are the two segments in which the company operates. Its products and services include hardware, desktop computers, laptop PCs, tablets, and third-party software and accessories. It also provides cloud-based data analytics and infrastructure services.
In May, DELL expanded its partnership with Equinix, a global digital infrastructure provider, to widen the availability of Dell Technologies APEX via Equinix’s data centers. Using Equinix data centers, businesses will have access to near-infinite storage scalability. This collaboration should enable DELL to provide a secure, on-demand hybrid cloud solution to its customers to meet their business requirements.
Also last month, the company unveiled new solutions and collaborations to derive more value from its Edge strategy, which enables workloads to be managed across multiple applications and clouds. DELL’s upgraded Dell EMC Streaming Data Platform (SDP) and the edge infrastructure should allow it to be instrumental in the shift to the next technology frontier.
During the first quarter, ended April 30, 2021, DELL’s non-GAAP net revenue increased 12% year-over-year to $24.5 billion. Its non-GAAP operating income rose 26% from its year-ago value to $2.71 billion, while its adjusted EBITDA surged 24% year-over-year to $3.24 billion. Its non-GAAP net income increased 59% year-over-year to $1.82 billion, while its EPS grew 59% from the prior-year quarter to $2.13.
An $8.6 consensus EPS estimate for its fiscal year 2022 represents a 7.5% improvement year-over-year. Furthermore, DELL has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. The $101.44 billion consensus revenue estimate for the current year represents a 7.5% increase from the same period last year. The stock has gained 106.6% over the past year and 36.1% year-to-date.
DELL’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.
DELL is also rated B for Value and Sentiment. Within the B-rated Technology-Hardware industry, it is ranked #6 of 45 stocks.
To see additional POWR Ratings for Growth, Momentum, Quality, and Stability for DELL, Click here.
HP Inc. (HPQ)
Founded in 1920, Palo Alto, Cal.-based leading computer hardware component developer HPQ operates mainly in three segments: personal systems, printing, and corporate investments. It offers personal computing, imaging and printing products, software solutions, and technologies to individuals, small- and medium-sized businesses, and large enterprises.
On June 21, HPQ added the new Engage Go 10 to its Engage portfolio. The product is a convertible system designed to thrive on the go and serve clients from anywhere. HPQ also introduced a Flex Small mini, which is meant to meet customers’ needs in a variety of verticals. Since HPQ is developing technologies to assist organizations in providing their customers with the consistent performance and agility they demand, we believe the company is well positioned to maintain its market leadership and drive business growth.
Also this month, HPQ completed the acquisition of HyperX, the gaming division of Kingston Technology Company. HyperX’s diverse gaming portfolio should give a boost to HPQ’s personal systems business and open new revenue generating prospects for the company.
During its second fiscal quarter, ended April 30, 2021, HPQ’s net revenue increased 27.3% year-over-year to $15.87 billion. Its non-GAAP operating income rose 53.7% from its $1.44 billion year-ago value, while its non-GAAP operating margin was 9.1% versus 7.55% in the prior-year period. The company’s non-GAAP net earnings increased 56.3% year-over-year to $1.16 billion, while its EPS grew 82.4% from the prior-year quarter to $0.93.
HPQ is expected to generate 12.1% revenue growth for the current year. Its EPS is estimated to increase 71.4% from its year-ago value to $0.84 in the current quarter, ending July 2021, and 53.1% year-over-year to $3.49 in 2021. Over the past year, HPQ’s stock has gained 72.1%. It has returned 18.5% so far this year.
HPQ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Value, and a B for Quality. In the same industry, it is ranked #3 of 45 stocks.
In total, we rate HPQ on eight different levels. Beyond what we’ve stated above, we have also given HPQ grades for Sentiment, Growth, Momentum, and Stability. Get all the HPQ ratings here.
Note that XXXX is one of the few stocks handpicked by our Chief Value Strategist, David Cohne, currently in the POWR Value portfolio. Learn more here.
Canon Inc. (CAJ)
Headquartered in Tokyo, Japan, CAJ is a manufacturer and seller of office equipment, imaging systems, medical systems, industrial equipment, and associated services. Its Office Business Unit, Imaging System Business Unit, Medical System Business Unit, and Industry and Others Business Unit are the four business segments through which the company operates.
This month, NBC Olympics, a part of the NBC Sports Group, chose Canon U.S.A., Inc., a pioneer in digital imaging solutions, to supply a wide range of 4K UHD and HD Field, Portable, and Studio lenses for its coverage of the XXXII Olympiad in Tokyo, Japan. This will help CAJ extend its brand awareness and further stimulate its future growth.
Also, on June 8, CAJ introduced its new advanced quality control automation modules—Sensing Unit, Inspection Unit, and a new optional Cooling Unit—for the imagePRESS C10010VP Series of digital color presses. This will provide sophisticated and consistent printing to users to improve their productivity and quality in production situations.
CAJ’s net sales increased 7.7% year-over-year to ¥842.65 billion ($7.59 billion) in the first quarter, ended March 31, 2021. Its net operating profit surged 114.6% year-over-year to ¥70.56 billion ($635.71million). The company’s net income increased 102.9% from its year-ago value to ¥44.45 billion ($400.48 million) over this period. CAJ’s EPS has increased 105.5% year-over-year to ¥42.50 ($0.38).
The company’s EPS is expected to grow 95.9% year-over-year to $1.45 in 2021. Also, CAJ surpassed the consensus EPS estimates in three of the trailing four quarters. Analysts expect CAJ’s revenue to increase 8.7% in its fiscal year 2021. CAJ’s stock has gained 10.8% over the past year. Also, the stock has surged 18.4% over the past six months.
It is no surprise that CAJ has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has a B Grade for Growth, Value, Quality, and Stability. In the same industry, it is ranked #2 of 45 stocks.
In addition to the POWR Ratings grades I have just highlighted, you can see the CAJ ratings for Sentiment and Momentum here.
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DELL shares were trading at $99.64 per share on Wednesday afternoon, down $0.12 (-0.12%). Year-to-date, DELL has gained 35.95%, versus a 13.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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