Edge computing is quickly expanding across industries as businesses focus on achieving new levels of performance and productivity by investing in a variety of technological innovations, including sensors and other data-producing and analysis tools. As such, the Edge computing market is expected to grow at a 29.4% CAGR to $10.97 billion by 2026.
Furthermore, driving the growth of the edge ecosystem is the accelerated adoption of artificial intelligence, IoT, and machine learning (ML), which work on larger data sets and perform massive algorithmic parallelism on models. “Organizations investing in edge computing combined with AI and modern application design will have an advantage when it comes to tackling whatever challenge comes next,” according to Dave McCarthy, research vice president for Cloud and Edge Infrastructure Services at IDC.
Given this backdrop, we believe edge computing stocks International Business Machines Corporation (IBM), Hewlett Packard Enterprise Company (HPE), Akamai Technologies, Inc. (AKAM) could be ideal investments now. These stocks have outperformed the benchmark S&P 500 index’s 11.8% decline year-to-date.
International Business Machines Corporation (IBM)
IBM in Armonk, N.Y. is a technology company that provides integrated solutions and services worldwide. It operates through four business segments: Software; Consulting; Infrastructure; and Financing.
On March 9, 2022, IBM announced a multi-million-dollar investment in a new IBM Security Command Center and a Security Operation Center to help organizations prepare for and manage the growing threat of cyberattacks across the Asia-Pacific (APAC) region. The accelerated digital transformation and growing hybrid work structures across industries has led to a greater exposure to attacks, and this expansion in IBM’s capabilities should help strengthen its position in the cybersecurity space.
Last month, Worley, ABB, and IBM signed a Memorandum of Understanding to collaborate and develop an integrated digital solution that helps energy companies build and operate green hydrogen facilities more efficiently, safely, and at a large scale. Given the growing green energy and emission control initiatives worldwide, this collaboration should prove beneficial for IBM.
IBM’s total revenue increased 6.5% from the prior-year quarter to $16.70 billion in its fiscal fourth quarter, ended Dec. 31, 2021. Its income from continuing operations came in at $2.46 billion, reflecting a 106.9% increase year-over-year, while the net income stood at $2.33 billion, up 72% year-over-year. The company’s EPS from continuing operations increased 106.1% year-over-year to $2.72.
The Street expects IBM’s revenue for its fiscal year ending Dec. 31, 2022, to come in at $60.75 billion, indicating a 5.9% increase year-over-year, while its EPS is expected to grow 26.5% year-over-year to $10.03 for the same period. It has an impressive earnings surprise history; it topped the Street’s EPS estimates in each of the trailing four quarters.
IBM’s shares have slumped 7.3% in price year-to-date to close the last trading session at $123.96.
IBM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which translates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
IBM also has a B grade in Quality and Value. It is ranked #18 of 78 stocks in the Technology – Services industry.
Beyond what is stated above, we have also rated IBM for Momentum, Stability, Sentiment, and Growth. Get all the IBM ratings here.
Hewlett Packard Enterprise Company (HPE)
HPE is an edge-to-cloud platform-as-a-service company that allows customers to capture, analyze, and work upon data seamlessly. Its segments include Compute; High-Performance Computing & Mission-Critical Solutions (HPC & MCS); Storage; Intelligent Edge; Financial Services (FS); and Corporate Investments and Other. HPE is headquartered in Palo Alto, Calif.
On March 2, 2022, HPE announced that KDDI, a leading Japanese telecommunications provider, is using the HPE ProLiant DL110 Gen10 Plus – Telco server to operate O-RAN compliant 5G standalone base stations. “With more than 30 years of expertise and innovation working with the telco industry, we look forward to joining forces with KDDI in propelling the 5G economy and contributing to a sustainable society,” said Hirokazu Mochizuki, managing director, HPE Japan.
In late February, the company announced a multi-year strategic collaboration with Ayar Labs, a leader in chip-to-chip optical connectivity, to make innovations in the new era of data by developing silicon photonics solutions based on optical I/O technology. This partnership should support HPE’s innovations in high-performance computing (HPC) and artificial intelligence (AI) solutions and help meet growing demands in scale and performance.
HPE’s revenue increased 1.9% year-over-year to $6.96 billion in its fiscal first quarter, ended Jan. 31, 2022. Its earnings from operations totaled $448 million, representing a 101.8% increase from the same period last year, while its net earnings increased 130% from the prior-year quarter to $513 million. Its non-GAAP EPS increased 1.9% from its year-ago value to $0.53.
The $2.11 consensus EPS estimate for the fiscal year ending Oct. 31, 2022, represents a 7.6% improvement year-over-year. The $28.65 billion consensus revenue estimate for the same period represents a 3.1% year-over-year increase. In addition, the company topped the Street’s EPS estimates in each of the trailing four quarters.
HPE has gained 4.7% over the past year and 4.9% year-to-date to close its last trading session at $16.55.
It is no surprise that HPE has an overall B rating, which equates to Buy in our POWR Ratings system.
HPE also has a B grade in Value and Sentiment. Among the 55 stocks in Technology – Communication/Networking industry, HPE is ranked #9.
In addition to the POWR Rating grades I have just highlighted, one can see the HPE’s Growth, Momentum, Stability, and Quality ratings here.
Akamai Technologies, Inc. (AKAM)
AKAM in Cambridge, Mass., provides cloud services to secure, deliver, and optimize content and business applications over the internet in the United States and internationally. The company offers solutions to keep infrastructure, websites, applications, interfaces, and users safe from online threats and cyberattacks and improve performance. Its solutions include the Security Technology Group and the Edge Technology Group.
On Feb. 15, 2022, AKAM announced an agreement to acquire Linode, one of the most trusted and easy infrastructure-as-a-service (IaaS) platform providers. The company aims to leverage Linode’s cloud computing capabilities to create a unique cloud platform to build, run and secure applications from the cloud to the edge. Thus, this acquisition might prove strategic for AKAM.
AKAM’s revenue increased 7% year-over-year to $905.36 million in its fiscal fourth quarter, ended Dec. 31, 2021. Its income from operations grew 45.7% from its year-ago value to $196.09 million, while its net income improved 41.6% year-over-year to $160.53 million. Its EPS increased 42.6% from its year-ago value to $0.97.
Analysts expect AKAM’s revenue for the first quarter, ending March 31, 2022, to come in at $905.03 million, indicating 7.4% year-over-year growth. The company’s EPS is expected to increase 3% year-over-year to $1.42 for the same quarter. The company also surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 8.5% in price to close yesterday’s trading session at $108.44. However, the stock has slumped 7.3% in price year-to-date.
AKAM’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system.
AKAM is also rated B in Growth, Value, and Quality. It is ranked #7 of 58 stocks in the Software – Business industry.
To see additional POWR Ratings for Momentum, Stability, and Sentiment for AKAM, click here.
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IBM shares were trading at $124.16 per share on Monday afternoon, up $0.20 (+0.16%). Year-to-date, IBM has declined -5.99%, versus a -12.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...
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