The consecutive interest rate increases implemented so far this year, and the possibility of further hikes to fight record-high inflation, have driven a massive sell-off in the tech sector over the past few weeks. However, the tech sector might eventually absorb the tight monetary policies and rebound, given the increasing dependence on tech solutions. Yesterday, the tech-heavy Nasdaq composite rebounded 1.6% on talks of a possible easing of tariffs on China.
Furthermore, the demand for solutions remains strong and is expected to continue growing. Microsoft recently declared pay hikes for its workers, implying that the tech labor market is strong. Considering rapid digitization and widespread hybrid work culture, undervalued tech stocks with robust financials might rebound soon.
The stocks of fundamentally sound tech companies Telefonaktiebolaget LM Ericsson (publ)(ERIC), ASE Technology Holding Co., Ltd. (ASX), and Benefitfocus, Inc. (BNFT) are currently trading at less than $10 per share and look undervalued considering their growth prospects. So, we think it could be wise to scoop up their shares now.
Telefonaktiebolaget LM Ericsson (publ)(ERIC)
Headquartered in Stockholm, Sweden, ERIC and its subsidiaries provide communication infrastructure, services, and software solutions mainly to the telecom industry. The company operates through four segments: Networks; Digital Services; Managed Services; and Emerging Business and Other.
On May 17, 2022, ERIC and Intel announced a collaboration for R&D excellence to create high-performing Cloud RAN solutions. Per Narvinger, ERIC’s Head of Product Area Networks, said, “Cloud RAN technologies and virtualization have enormous potential to impact networks of the future. Through the Tech Hub, we will accelerate Cloud RAN technology in areas like energy efficiency and performance, while reducing time to market.”
For the quarter ended March 31, 2022, ERIC’s net sales increased 10.6% year-over-year to SEK 55.06 billion ($5.60 billion). Its cash and cash equivalents came in at SEK 76.86 billion ($7.81 billion) for the period ended March 31, 2022, compared to SEK 54.05 billion ($5.50 billion) for the period ended Dec. 31, 2021. Also, its total current assets were SEK 207.13 billion ($21.06 billion), compared to SEK 174.81 billion ($17.77 billion), for the same period.
In terms of forward EV/S, ERIC’s 0.87x is 68.9% lower than the 2.79x industry average. The stock’s 1.03x forward P/S is 62.8% lower than the 2.77x industry average.
ERIC’s revenue is expected to be $26.91 billion in 2023, representing a 2.2% year-over-year rise. In addition, the company’s EPS is expected to increase 11.8% to $0.85 in 2023. The stock closed yesterday’s trading session at $7.98.
It is no surprise that ERIC has an overall B rating, which equates to a Buy in our proprietary POWR Ratings system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting. In addition, it has an A grade for Value and a B grade for Quality.
ASE Technology Holding Co., Ltd. (ASX)
Headquartered in Kaohsiung, Taiwan, ASX provides a range of semiconductor packaging and testing and electronic manufacturing services in the United States, Taiwan, the rest of Asia, Europe, and internationally. It offers packaging services; stacked die solutions in various packages; and copper and silver wire bonding solutions.
ASX’s total net revenues increased 20.9% year-over-year to NT$144.39 billion ($4.88 billion) for the quarter ended March 31, 2022. Its net income came in at NT$12.91 billion ($435.91 million), up 52.3% year-over-year. Furthermore, its EPS came in at NT$2.92, up 52.1% year-over-year.
The stock’s 0.88x and 0.66x respective forward EV/S and P/S are lower than the 2.79x and 2.77x industry averages.
Analysts expect ASX’s revenue to increase 7.9% to $23.37 billion in 2023. Its EPS is estimated to grow 34.2% per annum over the next five years. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. And over the past month, the stock has gained marginally to close yesterday’s trading session at $6.70.
ASX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system.
ASX has an A grade for Value and a B grade for Sentiment. Within the B-rated Semiconductor & Wireless Chip industry, it is ranked #15 of 95 stocks. Click here to see the additional POWR Ratings for Growth, Momentum, Stability, and Quality for ASX.
Benefitfocus, Inc. (BNFT)
BNFT in Charleston, S.C., provides cloud-based benefits management technology solutions for employers and health plans in the United States. Its products for employers comprise Benefitplace; Health Insights; ACA Management and Reporting; Billing & Payments; and COBRA Administration.
On May 3, 2022, Matt Levin, president, and CEO, said, “We hit a number of strategic milestones in the quarter, and we believe we are on our way to repositioning Benefitfocus for sustainable growth. We have improved our go-to-market relationships and have a solid sales pipeline. We believe our efforts to date will enable us to grow market share and solidify our position as an industry leader.”
For the period ended March 31, 2022, BNFT’s cash, cash equivalents, and restricted cash came in at $58.97 million, compared to $31 million for the period ended Dec. 31, 2021. Its total current liabilities were $66.12 million, compared to $72.24 million for the same period. In addition, its sales and marketing expenses were $9.92 million, down 8.9% year-over-year.
In terms of forward EV/S, BNFT’s 2.04x is 26.8% lower than the 2.79x industry average. In addition, the stock’s 1.18x forward P/S is also lower than the 2.78x industry average.
BNFT’s revenue is expected to be $264.84 million in 2023, representing a 3.9% year-over-year rise. In addition, the company’s EPS is expected to increase 150% to $0.05 in 2023. It surpassed EPS estimates in three of the four trailing quarters. The stock closed yesterday’s trading session at $8.80.
It is no surprise that BNFT has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Value and Sentiment.
What To Do Next?
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ERIC shares were trading at $7.90 per share on Tuesday morning, down $0.08 (-1.00%). Year-to-date, ERIC has declined -26.63%, versus a -18.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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