The digital transformation by businesses during the COVID-19 pandemic powered the tech sector to a rocket-like rally last year. This is evidenced by iShares Global Tech ETF’s (IXN) 41.8% returns in 2020. However, the economic recovery this year has motivated investors to bail out of expensive tech stocks in favor of potential post-pandemic winners. This has resulted in a selloff of tech stocks.
However, the adoption of hybrid working models by many companies during the pandemic, combined with huge demand for cloud services, cybersecurity and connected devices and sensors, and rising interest and investments in the 5G technology and artificial intelligence (AI), make analysts predict the global information technology market will hit $11.87 trillion by 2025, representing a 9% CAGR.
Given this outlook, we believe Intel Corporation (INTC), International Business Machines Corporation (IBM), Panasonic Corporation (PCRFY), and Canon, Inc. (CAJ) are well positioned to deliver solid returns in the coming months.
Intel Corporation (INTC)
INTC designs, manufactures, and sells computer products and technologies. The company operates through six segments—Data Center Group, Internet of Things (IoT), Non-Volatile Memory Solutions Group, Programmable Solutions Group, Client Computing Group and All Other. It serves original equipment manufacturers, original design manufacturers, and cloud service providers.
In an announcement dated May 3, INTC revealed that it will invest $3.50 billion in the Rio Rancho campus to equip its New Mexico operations for manufacturing advanced semiconductor packaging technologies, including Foveros, INTC’s breakthrough 3D packaging technology. With innovative economic development tools and global demand for this technology, INTC hopes to create high-paying and high-quality jobs in Mexico.
Beyond accelerated memory scanning capabilities, Microsoft Corporation (MSFT) has collaborated with INTC to expand the use of Intel Threat Detection Technology in Microsoft Defender for Endpoint, to activate central processing unit (CPU) based cryptomining machine learning (ML) detection. This further accelerates end-point detection and protection from cryptojacking malware.
During its fiscal year 2021 first quarter, ended March 27, 2021, INTC’s non-GAAP operating margin was 32.8%, which represented a 130-basis-point rise sequentially. The company’s revenue from its IoT segment increased 13.5% year-over-year to $1.29 billion. And its revenue from its Client Computing Group increased 8.5% year-over-year to $10.61 billion.
Analysts expect the stock’s EPS to grow at 5.4% per annum over the next five years. INTC stock has climbed 24.5% over the past six months to close yesterday’s trading session at $56.85. Over the past nine months, the stock has gained 16.2%.
INTC’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. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Value, and a B grade for Sentiment and Quality. We have also graded INTC for Growth, Stability and Momentum. Click here to access all INTC’s ratings.
INTC is ranked #9 of 98 stocks in the B-rated Semiconductor & Wireless Chip industry.
International Business Machines Corporation (IBM)
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, and network services, as well as business resiliency, strategy, and design solutions.
On May 5, the company introduced a new Software as a Service (SaaS) version of IBM Cloud Pak for Security that is designed to simplify how organizations deploy a zero-trust architecture across the enterprise. It also announced an alliance partnership with leading cloud and network security provider, Zscaler, and new blueprints for building a security program designed by applying the core principles of zero trust.
In late April, IBM agreed to acquire Turbonomic, an Application Resource Management (ARM) and Network Performance Management (NPM) software provider based in Boston on April 29. This acquisition will enable businesses to assure application performance using AI and cut costs by optimizing the deployment of IT resources across development, test and production environments.
For its fiscal year 2021 first quarter, ended March 31, IBM’s total revenue was $17.73 billion, which represented a significant improvement from the prior-year period. Its revenue from its Cloud & Cognitive Software segment increased 3.8% year-over-year to $5.44 billion. The company’s $8.38 billion non-GAAP gross profit represents a 3.4% improvement from the prior-year period. Its Net cash provided by operating activities came in at $4.91 billion for the quarter, up 9.8% year-over-year.
Analysts expect IBM’s EPS to improve 4.6% year-over-year for the next quarter, ending June 30, to $2.28. The stock had achieved and surpassed consensus EPS estimates in each of the trailing four quarters. And its $18.29 billion consensus revenue estimate for the next quarter represents a 3.2% rise on a year-over-year basis. Analysts expect the stock’s EPS to grow at 5.6% per annum over the next five years.
IBM ended yesterday’s trading session at $145.22, surging 26.5% over the past six months. During the past three months, the stock has plunged 19.2%.
IBM’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system.
The stock has a B grade for Value and Quality also. In addition to the POWR Ratings grades we’ve just highlighted, one can see IBM’s ratings for Growth, Momentum, Stability, and Sentiment here.
IBM is ranked #16 of 48 stocks in the B-rated Technology – Hardware industry.
Panasonic Corporation (PCRFY)
Headquartered in Japan, PCRFY develops, manufactures, and sells various electronic products worldwide. The company operates through five segments: Appliances, Life Solutions, Connected Solutions, Automotive and Industrial Solutions. It produces home appliances, audio and video, computer peripherals, telecommunications, industrial equipment, and electronic parts, and is also engaged in the sale of raw materials.
On April 27, PCRFY unveiled a prototype of its Walk Training Robot, which is designed to provide safe and efficient walk training for elderly citizens. Since 2015, the company has been engaged in the development and demonstration of AI-equipped walking training robots. PCRFY plans to begin offering a service using this robot to care facilities, hospitals, and other institutions going forward.
PSRFY, in collaboration with researchers at Toyohashi University of Technology, on April 26 introduced NICOBO, the company’s new small cuddly robot. The prototype was specifically designed to provide emotional support to users.
Also last month, PCRFY agreed to acquire the remaining shares of Blue Yonder, a leading end-to-end, digital fulfillment platform provider, for $7.10 billion. This acquisition strengthens PSRFY’s portfolio and accelerates the companies’ shared Autonomous Supply Chain mission, empowering customers to optimize their supply chains using the combined power of AI/ML and IoT and edge devices.
PCRFY is scheduled to release its fiscal year 2021 fourth quarter results on May 17. For its fiscal year 2021 third quarter, ended December 31, PCRFY’s sales were ¥1.81 trillion, which represented an 8.8% improvement sequentially. The company’s adjusted operating profit was ¥142.8 billion, up 50.3% sequentially. Its net profit increased 38.3% sequentially to ¥81.20 billion. The company had cash and cash equivalents of ¥1.36 trillion as of December 31, 2020, up 57.2% from the prior-year period.
Analysts expect PCRFY’s EPS for the current quarter, ending June 30, 2021, to be $0.12, up 400% year-over-year. It surpassed the Street’s EPS estimates in three of the trailing four quarters. For the current quarter, analysts expect PCRFY’s revenue to be $14.99 billion, representing a 19.6% rise from the prior-year period. The stock’s EPS is expected to grow at 9.2% per annum over the next five years.
PCRFY has gained 59.8% over the past year and 36.6% over the past nine months. It closed yesterday’s trading session at $12.
PCRFY’s POWR Ratings reflect its solid prospects. The company has an overall B rating, which translates to Buy in our proprietary ratings system.
It has an A grade for Value, and a B grade for Growth and Stability. To see additional POWR Ratings for PCRFY’s Sentiment, Quality and Momentum, click here.
PCRFY is ranked #5 in the Technology – Hardware industry.
Canon, Inc. (CAJ)
CAJ is a Japan-based professional and consumer imaging solutions company and patent-holder of digital imaging technologies. The company operates through four business segments—Printing, Imaging, Medical, and Industrial and Others. Its products include networked multifunction devices, digital and analog copiers, computer peripherals, image filing systems, cameras and lenses, semiconductor, and broadcast and medical equipment.
On April 14, CAJ announced the development of the new EOS R3 full-frame mirrorless camera, which will feature a newly developed 35mm full-frame, back illuminated, stacked CMOS sensor and a DIGIC X image processor. The company hopes this camera, with its impressive new features, will provide the high-level basic functionality required to meet the needs of professional and enthusiast users, and continue to expand its lineup of impressive cameras and RF lenses.
CAJ introduced the new Built-in AEC1 assistance technology for digital radiography on March 25. The technology provides built-in functionality in X-ray imaging devices that enhances high-speed electric signal readout and pixel value correction within the X-ray image sensor, allowing the device to simultaneously generate images and detect in real time the pixel value corresponding to emitted X-rays. CAJ hopes to include this new technology in its CXDI series of digital radiography devices and continue developing products needed for clinical purposes.
CAJ’s net sales increased 7.7% year-over-year to ¥842.65 billion for the fiscal 2021 first quarter, ended March 31, 2021. The company’s gross profit came in at ¥384.36 billion, up 7.2% year-over-year. Its operating profit was ¥70.56 billion for the quarter, which represents a 114.6% improvement year-over-year. Its ¥44.45 billion in net income for the quarter represents a 102.9% improvement from the prior-year period. The company’s EPS increased 105.5% year-over-year to ¥42.50.
A $0.26 consensus EPS estimate for the current quarter, ending June 30, 2021, represents a 425% improvement year-over-year. CAJ surpassed consensus EPS estimates in three of the trailing four quarters. The $7.63 billion consensus revenue estimate for the current quarter represents a 25.9% rise from the prior-year period. The stock has gained 40.7% over the past year to close yesterday’s trading session at $23.61.
It’s no surprise that CAJ has an overall A rating, which equates to Strong Buy in our POWR Ratings system.
CAJ has a B grade for Growth, Stability Sentiment and Quality. In addition to the POWR Ratings grades we’ve just highlighted, one can see CAJ’s ratings for Value and Momentum here.
In the Technology – Hardware industry, it is ranked #1
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INTC shares were trading at $56.89 per share on Thursday afternoon, up $0.04 (+0.07%). Year-to-date, INTC has gained 15.56%, versus a 12.13% 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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