After a solid run last year, the technology sector has witnessed a slight correction since mid-February due to investor sector rotation to capitalize on the economic recovery, fears of rising inflation and rising Treasury yields. Tech stocks’ weakness is evidenced by the Technology Select Sector SPDR Fund’s (XLK) 0.7% gains over the past three months compared to SPDR S&P 500 ETF Trust’s (SPY) 6.5% returns.
Even though the tech industry might take some time to regain its previous glory amid inflation concerns, a few tech stocks with strong fundamentals have been rallying even amid current macroeconomic conditions. With increasing demand for cloud-based and AI-integrated services, among others, the tech industry is expected to grow significantly in the near- to mid-term.
Motorola Solutions, Inc. (MSI), Seagate Technology Holdings plc (STX) and SS&C Technologies Holdings, Inc. (SSNC) have been rallying amid the broader tech slump owing to their solid financials and consistent product and service innovations. So, we think it could be wise to bet on them now.
Motorola Solutions, Inc. (MSI)
MSI provides mission critical communications and analytics internationally. The company operates through two segments: Products and Systems Integration, and Services. Its Products and Systems Integration segment offers a portfolio of infrastructure, devices, accessories, and video security devices, while its Services segment provides repair, technical support, and hardware maintenance services.
On May 18, MSI signed a framework agreement with BlueLight Commercial to provide emergency services in the United Kingdom with integrated video solutions for their vehicles. This could potentially increase the company’s sales in the near-term.
MSI announced on May 14 that the French Ministry of the Interior will acquire 30,000 body cameras (VB400) for its national police and gendarmerie. This project is one of the largest body camera deployments globally and is further expected to increase its revenue in the coming quarter.
MSI’s sales surged 7% year-over-year to $1.77 billion in the first quarter, ended March 31. Its non-GAAP operating earnings grew 18% year-over-year to $411 million. Its net earnings came in at $244 million, which represents a 23.8% year-over-year increase. The company’s non-GAAP EPS was $1.87, up 26% year-over-year.
For the current quarter, ending June 30, analysts expect MSI’s EPS and revenue to increase 38.1% and 19.7%, respectively, year-over-year to $1.92 and $1.94 billion. It surpassed Street EPS estimates in each of the trailing four quarters. The stock has gained 11.2% over the past three months to close yesterday’s trading session at $203.15.
It’s no surprise that MSI has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock also has a B grade for Sentiment, Growth and Quality. Click here to see MSI’s ratings for Value, Stability and Momentum as well. MSI is ranked #4 of 55 stocks in the B-rated Technology – Communication/Networking industry.
Seagate Technology Holdings plc (STX)
Based in Dublin, Ireland, STX provides data storage technology and solutions internationally. It offers hard disk and solid-state drives that include serial advanced technology attachments, serial attached SCSI, and non-volatile memory express products. The company sells its products primarily to OEMs, distributors, and retailers.
This month, STX launched its new Seagate One Touch SSD. It offers NVMe-competitive performance and stylish portability for technology enthusiasts and content creators alike. With increasing demand for advanced technologies in this space, STX’s sales could increase significantly in the near-term.
The company announced two new additions to its line of PC gaming storage—FireCuda Gaming Hard Drive and FireCuda Gaming Hub—on April 21. Because there is increasing demand for gaming peripherals, this line of products could sell well.
STX’s revenue surged 4.1% sequentially to $2.73 billion in the third quarter, ended April 2. Its net income came in at $329 million, which represents a 17.5% sequential increase. The company’s EPS came in at $1.39, up 24.1% sequentially.
Analysts expect STX’s EPS and revenue to increase 75.3% and 20.9%, respectively, year-over-year to $1.63 and $2.82 billion for the quarter ending September 30. It surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 17.5% over the past month to close yesterday’s trading session at $96.82.
STX’s POWR Ratings reflect this promising outlook. The stock has a B grade for Growth, Momentum and Quality.
SS&C Technologies Holdings, Inc. (SSNC)
SSNC provides software products and services mainly to the financial and healthcare industries. The company’s software-enabled services include SS&C GlobeOp, SS&C Retirement Solutions and Bluedoor. Its software products include portfolio management software, trading software, and banking and lending solutions.
On May 14, SSNC announced that it had amended the scheme implementation deed with Mainstream Group Holdings Limited and has proposed to acquire. Because mainstream is a provider of investment administration and fund accounting, among other services for leading fund managers and superannuation funds, family offices and dealer groups, the proposed acquisition might prove to be profitable for SSNC.
SSNC’s revenue increased 5.1% year-over-year to $1.23 billion for the first quarter, ended March 31 Its operating income grew 23% year-over-year to $269.10 million, while its net income increased 76.3% year-over-year to $174.90 million. The company’s EPS increased 75.7% year-over-year to $0.65.
For the current quarter, ending June 30, 2021, analysts expect SSNC’s EPS to increase 9.6% year-over-year to $1.14. It surpassed consensus EPS estimates in each of the trailing four quarters. For the quarter ending September 30, its revenue is expected to be $1.21 billion, which would represent a 7.1% year-over-year rise. The stock has surged 11.9% over the past three months to close yesterday’s trading session at $74.36.
SSNC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. It has an A grade for Momentum, and a B grade for Stability, Growth, Quality, Sentiment and Value.
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MSI shares were trading at $201.91 per share on Friday afternoon, down $1.24 (-0.61%). Year-to-date, MSI has gained 19.20%, versus a 11.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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