Investors’ growing concerns about forthcoming Federal Reserve interest rate hikes to combat the multi-decade high inflation led to the tech-heavy Nasdaq Composite to decline in the first trading week of this year. Consequently, several technology stocks are currently trading at reasonable valuations.
Since growing demand for tech products and solutions amid remote lifestyles and ongoing digitization is expected to drive the tech industry’s growth, the impact of rising interest rates may not hamper tech stocks from moving higher for longer. Investors’ interest in this space is evident in the iShares U.S. Technology ETF’s (IYW) 25.8% gains versus the SPDR S&P 500 Trust ETF’s (SPY) 22.3% returns over the past year. The U.S. tech industry spending is expected to exceed $1.8 trillion in 2022.
International Business Machines Corporation (IBM)
Armonk, N.Y.-based IBM provides integrated solutions and services worldwide. The company operates through six segments—Cloud & Cognitive Software; Global Business Services; Global Technology Services; Systems; Global Financing; and Other. It offers application, technology consulting and support, process design and operations, cloud, digital workplace, network services, business resiliency, strategy, and design solutions.
On Jan.7, 2022, IBM’s IBM Watson Advertising announced data availability from The Weather Company, an IBM Business, on Amazon.com, Inc.’s (AMZN) AWS Data Exchange platform. By providing weather datasets through AWS Data Exchange in the cloud, IBM Watson Advertising is looking forward to harnessing the relationship between weather and consumer behavior using AI to extract deep insights and help businesses make more confident, data-driven, and insightful enterprise decisions.
IBM’s total revenues for its fiscal 2021 third quarter, ended September 30, 2021, increased marginally year-over-year to $17.62 billion. The company had $7.46 billion in cash and cash equivalents as of Sept. 30, 2021.
Analysts expect the company’s EPS to increase 11.7% year-over-year to $9.49 in its fiscal year 2021, ended Dec. 31, 2021. It surpassed the consensus EPS estimates in each of the trailing four quarters. IBM’s EPS is expected to grow at a 6.9% rate per annum over the next five years.
Over the past month, the stock has gained 9.9% in price to close yesterday’s trading session at $134.76. In terms of forward EV/EBITDA, IBM is currently trading at 9.46x, which is 42% lower than the 16.31x industry average. And the stock’s 10.83x forward Price/Cash Flow is 52.9% lower than the 23.02x industry average.
IBM’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
IBM has a B grade for Quality and Value. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for IBM’s Momentum, Stability, Growth, and Sentiment here. IBM is ranked #11 of 49 stocks in the B-rated Technology – Hardware industry.
HP Inc. (HPQ)
HPQ in Palo Alto, Calif., provides personal computing and other access devices, imaging and printing products, related technologies, software, solutions, and services to individual consumers, small- and medium-sized businesses, and enterprises, including government, health, and education sectors worldwide.
On Jan. 4, 2022, HPQ unveiled new devices and solutions at the CES 2022 event that are designed to enhance collaboration and creation experiences in hybrid working structures. Enhanced by HP’s new portfolio of conferencing and collaboration solutions, HP Presence, the HP Elite Dragonfly G3, the new HP Elite Dragonfly Chromebook, and the new HP E-Series Conferencing Monitors and M-Series Webcam Monitors deliver premium audio and video experiences and authentic face-to-face meetings, respectively. Also, the new HP ENVY Desktop and HP Z2 Mini with creative technology and a detachable magnetic camera are likely to generate high demand among creators in the coming months.
HPQ’s net revenue for its fiscal 2021 fourth quarter, ended Oct. 31, 2021, increased 9.3% year-over-year to $16.68 billion. The company’s non-GAAP earnings from operations were $1.35 billion, indicating a 27.7% year-over-year improvement. HPQ’s non-GAAP net income came in at $1.08 billion, up 28.9% from its year-ago period. Its non-GAAP EPS increased 51.6% year-over-year to $0.94. The company had $4.30 billion in cash and cash equivalents as of Oct. 31, 2021.
A $4.17 consensus EPS estimate for its fiscal year 2022 ending Oct. 31, 2022, represents a 10% rise from the prior-year period. It surpassed the consensus EPS estimates in each of the trailing four quarters. Analysts expect HPQ’s revenue to rise 3.3% year-over-year to $65.55 billion in the same fiscal year. And its EPS is expected to grow at 17.3% per annum over the next five years.
Over the past month, the stock has gained 9.7% in price and ended yesterday’s trading session at $38.70. HPQ’s 7.32x forward EV/EBITDA is 55.2% lower than the 16.31x industry average. And in terms of forward Price/Cash Flow, the stock is currently trading at 7.61x, which is 67% lower than the 23.02x industry average.
HPQ’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. HPQ has a B grade for Value and Quality. Click here to see the additional ratings for HPQ’s Stability, Sentiment, Growth, and Momentum. The stock is ranked #13 in the B-rated Technology – Hardware industry.
NortonLifeLock Inc. (NLOK)
NLOK is a Mountain View, Calif.-based software company that provides cyber security solutions to consumers worldwide. Its products and services enable users to protect their devices, online privacy, identity, and home networks. NLOK sells its products and related services through retailers, telecom service providers, hardware OEMs, and e-commerce platforms.
On Oct. 5, 2021, NLOK unveiled an all-new privacy offering, Norton AntiTrack, to help people protect their digital footprints from companies and websites that track online activity and collect personal data. With key features that include anti-fingerprint capabilities, tracker cookie blocking, faster browsing, and tracking dashboard in the Norton AntiTrack app, NLOK is looking to provide a safe browsing experience to users. Also, it introduced PayDay Loan Lock, which helps customers block the opening of fraudulent payday loans and other short-term loans. The company expects to witness high demand for its new products in the coming months.
NLOK’s net revenues for its fiscal 2022 second quarter, ended Oct. 1, 2021, increased 10.5% year-over-year to $692 million. The company’s gross profit came in at $592 million, indicating a 10.5% rise from the year-ago period. Its non-GAAP operating income was $363 million, representing a 15.6% year-over-year improvement. NLOK’s non-GAAP net income was $1.94 billion for the quarter, indicating a 19.7% rise from its year-ago period. Its non-GAAP EPS was $0.43, up 19.5% from the prior-year period. The company had $1.53 billion in cash and equivalents as of Oct 1, 2021.
Analysts expect the company’s EPS to be $1.74 for its fiscal year 2022, ending March 31, 2022, representing a 20.8% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. A $2.80 billion consensus revenue estimate for the same fiscal year indicates a 9.8% year-over-year improvement. NLOK’s EPS is expected to grow 12.7% per annum over the next five years.
Over the past month, the stock has gained 8.3% in price and closed yesterday’s trading session at $26.60. NLOK’s 12.25x forward EV/EBITDA is 24.9% lower than the 16.31x industry average. In terms of forward Price/Cash Flow, NLOK is currently trading at 16.72x, which is 27.4% lower than the 23.02x industry average.
NLOK’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. It has an A grade for Quality and a B grade for Value. Click here to see the additional ratings for NLOK (Stability, Sentiment, Momentum, and Growth). Of 27 stocks in the Software – Security industry, NLOK is ranked #5.
Click here to checkout our Cybersecurity Industry Report Cirrus Logic, Inc. (CRUS)
CRUS provides integrated circuits (ICs) for audio and voice signal processing applications. The Austin, Tex.-based company provides its portable products in smartphones, tablets, digital headsets, and wearables. Its non-portable audio and other products include analog and mixed-signal components that target the consumer market, including smart home applications and the automotive, energy, and industrial markets.
On July 8, 2021, CRUS agreed to acquire Lion Semiconductor, an electronic parts supplier, for $335 million in cash. The acquisition affords CRUS access to Lion’s proprietary fast-charging products and robust intellectual property portfolio and accelerates its growth in the high-performance mixed-signal business.
CRUS’ net sales for its fiscal 2022 second quarter, ended Sept. 25, 2021, increased 34.1% year-over-year to $465.89 million. The company’s non-GAAP gross profit came in at $237.18 million, representing a 32.6% rise from the prior-year period. Its non-GAAP operating income was $124.64 million, up 50.8% from the prior-year period. While its non-GAAP net income increased 43.4% year-over-year to $108.49 million, its non-GAAP EPS increased 44.5% to $1.26. The company had $386.74 million in cash and cash equivalents as of Sept. 25, 2021.
A $5.39 consensus EPS estimate for its fiscal year 2022, ending March 31, 2022, represents a 2.4% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. For the same fiscal year, analysts expect CRUS’ revenue to improve 17.5% from the prior-year period to $1.61 billion. The company’s EPS is expected to grow 11% per annum over the next five years.
Over the past month, the stock has gained 0.9% in price and closed yesterday’s trading session at $92.61. The stock’s 12.70x forward EV/EBITDA is 22.1% lower than the 16.31x industry average. In terms of forward Price/Cash Flow, CRUS is currently trading at 14.81x, which is 35.7% lower than the 23.02x industry average.
It is no surprise that CRUS has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has a B grade for Sentiment, Value, Momentum, and Quality. Click here to see the additional ratings for CRUS’ Growth and Stability. CRUS is ranked #16 of 100 stocks in the A-rated Semiconductor & Wireless Chip industry.
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IBM shares were trading at $134.54 per share on Friday morning, down $0.22 (-0.16%). Year-to-date, IBM has gained 0.66%, versus a -2.75% 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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