The Federal Reserve is trying to fight sky-high inflation with its aggressive rate hikes. This has led the capital-intensive tech industry to witness a massive selloff due to investors’ concerns over their rising borrowing costs.

However, the industry is expected to thrive over the long run, given the growing tech inclination and increasing investment in advancing technologies worldwide.

IDC projects that the technology industry is on pace to exceed $5.3 trillion in 2022. In addition, the United States is the largest tech market in the world, representing 33% of the total, or approximately $1.8 trillion, for 2022.

Hence, we think fundamentally strong tech stocks, Extreme Networks, Inc. (EXTR) and Hackett Group Inc. (HCKT), might be solid buys, given their solid growth prospects.

Extreme Networks, Inc. (EXTR)

EXTR operates as a software-driven networking solutions provider that designs, develops, and manufactures wired and wireless network infrastructure equipment and engages in software development.

On October 6, EXTR announced that it had selected Verizon Business, a Verizon Communications Inc. (VZ) division, to deploy wireless connectivity service at Liverpool FC’s Anfield Stadium to enhance the in-stadium experience. The deployment, expected to begin later this year, should benefit the company.

On September 7, EXTR announced that Minor League Baseball (MiLB) had selected Extreme as an Official Technology Innovation Partner. Additionally, the company has been named the official Wi-Fi solution, Wi-Fi analytics solution, and WAN edge solution provider of MiLB in a five-year partnership, demonstrating its strong positioning in the industry.

EXTR’s net revenue increased 11.2% year-over-year to $297.69 million in the fiscal first quarter ended September 30, 2022. Its total gross profit grew 7.1% from the year-ago value to $166.71 million. The company’s cash flow provided by operations improved 23.6% year-over-year to $49.73 million, while its total free cash flow rose 26.5% year-over-year to $46.60 million.

Analysts expect EXTR’s revenue for the fiscal year ending June 2023 to be $1.25 billion, indicating an increase of 12.1% year-over-year, while its EPS is expected to improve 31.9% from the prior year to $1.02. In addition, EXTR has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.

EXTR has gained 71.3% over the past year and 44.4% over the past three months to close its last trading session at $16.56.

It is no surprise that EXTR has an overall A rating, which translates to Strong Buy in our POWR Rating system.

EXTR’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

The stock has an A grade for Quality and a B grade for Growth and Value. It is ranked #2 out of 49 stocks in the Technology – Communication/Networking industry.

In addition to the POWR Rating grades we’ve stated above, we have also given EXTR grades for Momentum, Stability, and Sentiment. Get all ETR ratings here.

Hackett Group Inc. (HCKT)

HCKT operates as a business and technology consulting firm. The company offers benchmarking, executive advisory, business transformation, and cloud enterprise application implementation.

On September 22, HCKT announced the launch of a new Market Intelligence Service for software and service providers and users. Research reports from the Market Intelligence Service will be offered to its clients and sold individually, with results available for licensing by solution providers for use in their marketing and sales efforts. This might bolster the income of the company.

HCKT’s total revenue increased 3.7% year-over-year to $75.93 million for the second quarter of 2022. Its S&BT segment’s revenue increased 26% year-over-year to $33.39 million, while the company’s EPS remained constant at $0.32.

Streets expect HCKT’s revenue and EPS for the fiscal year 2022 to increase 6.6% and 10.4% year-over-year to $297.20 million and $1.45, respectively. Additionally, it has surpassed the consensus EPS estimates in each of the trailing four quarters.

HCKT’s stock has gained 18.1% over the past month to close the last trading session at $21.36.

It’s no surprise that HCKT has an overall POWR Rating of A, which translates to a Strong Buy in our proprietary rating system.

The stock has a grade of A for Quality and B for Stability and Sentiment. It also tops the list of 10 stocks in the A-rated Outsourcing – Tech Services industry.

Click here for additional ratings of HCKT (Growth, Value, and Momentum).

EXTR shares were trading at $17.11 per share on Friday afternoon, up $0.55 (+3.32%). Year-to-date, EXTR has gained 8.98%, versus a -17.56% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...

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