Driven by rapid digital transformation, advancements in technology, and cutting-edge technologies, the tech hardware industry is thriving, and its growth is expected to continue steadily in the upcoming years. The industry offers numerous opportunities for hardware companies to capitalize on the rising demand for computing devices and specialized hardware components.
Given the industry’s bright prospects, it could be wise to invest in fundamentally sound tech stocks NetApp, Inc. (NTAP), Ricoh Company, Ltd. (RICOY), and Iteris, Inc. (ITI) for potential gains this week.
The technology hardware is a fast-moving and constantly evolving market. It includes computer hardware and technology, storage devices, networking equipment, peripherals, infrastructures, and semiconductors. Demand for tech hardware is driven by consumer and government spending, along with capital spending by businesses.
According to a report by the Business Research Company, the global computer hardware market is expected to reach $909.80 billion by 2027, growing at a CAGR of 6.6% during the forecast period. The market is currently witnessing considerable growth due to rapid advancements in technology and increasing demand for computing devices across various end-use industries.
Further, the computer hardware market is driven by the widespread adoption of cloud computing, the rise of the Internet of Things (IoT), and the growing need for high-performance computing and data processing. Also, advancements in Artificial Intelligence (AI) and Machine learning (ML) propel demand for specialized hardware components.
Popular AI hardware components consist of Central Processing Units (CPUs), Graphics Processing Units (GPUs), Tensor Processing Units (TPUs), Field-Programmable Gate Arrays (FPGAs), Application Specific Integrated Circuits (ASICs), edge computing chips, memory systems, storage solutions, and other related devices.
As per a report by Precedence Research, the global AI in hardware market is expected to surpass around $248.09 billion by 2030, expanding at a CAGR of 24.5% from 2023 to 2030.
Investors’ interest in tech hardware stocks is evident from the S&P Technology Hardware Select Industry Index’s 16.2% returns over the past year.
Considering these encouraging trends, let’s analyze the fundamental aspects of the three best Technology – Hardware stock picks, beginning with the third choice.
Stock #3: NetApp, Inc. (NTAP)
NTAP offers cloud-led and data-centric services to manage and share data on-premises and private and public clouds internationally. The company operates in two segments: Hybrid Cloud and Public Cloud. It serves energy, financial services, technology, government, life science, media, healthcare service, entertainment, and animation markets.
On November 7, NTAP announced a new bundled virtualization solution that will be sold and marketed by Fujitsu, a VMware and NetApp reseller. This integrated and affordable virtualized infrastructure solution will help small and medium businesses simplify and accelerate the management of traditional and modern applications. This new launch might boost the company’s growth.
On the same day, NTAP announced NetApp StorageGRID for VMware Sovereign Cloud. The NetApp plugin for VMware Cloud Director Object Storage Extension will allow sovereign cloud customers to more cost-effectively store, secure, protect, and preserve unstructured data while meeting global data privacy and residency regulations.
Also, NetApp introduced NetApp ONTAP Tools for VMware vSphere (OTV 10.0) designed to simplify and centralize enterprise data management across multi-tenant vSphere environments.
Also, on August 24, NTAP extended its partnership with Google Cloud to deliver new levels of storage performance combined with the simplicity and flexibility of the cloud.
With the introduction of Google Cloud NetApp Volumes – now available as a fully-managed, first-party service on Google Cloud, customers can seamlessly bring business-critical workloads across both Windows and Linux environments to Google Cloud, even for the most demanding use cases like VMware and SAP migrations, all without refactoring code or redesigning processes.
NTAP’s trailing-12-month gross profit margin and net income margin of 67.06% and 19.49% are 35.7% and 789.6% higher than the respective industry averages of 49.41% and 2.19%. Also, the stock’s trailing-12-month levered FCF margin of 20.60% is 179.1% higher than the industry average of 7.38%.
NTAP pays a $2 per share dividend annually, translating to a 2.65% yield on the prevailing share price. Its four-year average dividend yield is 3.04%. The company’s dividend payouts have grown at a CAGR of 10.8% over the past five years.
NTAP reported net revenues of $1.43 billion for the fiscal 2024 first quarter that ended July 28, 2023. Its public cloud segment revenue rose 16.7% from the year-ago value to $154 million. Its non-GAAP net income was $249 million, or $1.15 per share, respectively. The company’s net cash provided by operating activities grew 61.2% year-over-year to $453 million.
Street expects NTAP’s EPS for the fiscal year (ending April 2024) to increase 2.5% year-over-year to $5.73. The company’s EPS and revenue are expected to grow 7.4% and 4.4% from the previous year to $6.16 and $6.41 billion for the fiscal year 2025. Moreover, it has surpassed the consensus EPS estimates in each of the trailing four quarters.
NTAP’s stock has gained 18.1% over the past six months and 24.4% year-to-date to close its last trading session at $75.60. Over the past year, it surged 9%.
NTAP’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
NTAP has an A grade for Quality. It is ranked #15 out of 38 stocks in the B-rated Technology – Hardware industry.
In addition to the POWR Ratings I’ve just highlighted, you can see NTAP’s ratings for Growth, Value, Momentum, Stability, and Sentiment here.
Stock #2: Ricoh Company, Ltd. (RICOY)
Based in Tokyo, Japan, RICOY offers office and commercial printing and related solutions. It operates through Digital Services; Digital Products; Graphic Communications; and Industrial Solutions segments. The company sells multifunctional printers (MDPs), laser printers, scanners, personal computers, network equipment, and related parts and supplies.
On August 24, RICOY and Toshiba Tec Corporation announced that they will proceed with necessary procedures, such as a simplified absorption-type company split to integrate their business of the development and manufacturing of multifunction printers and organize a joint venture company which shareholders will be Ricoh and Toshiba Tec to develop multifunction printers.
On June 19, RICOY launched the RICOH SC-20, a work inspection camera utilizing image recognition technology to allow real-time confirmation of proper manual work process performance.
The RICOH SC-20, the successor model to the RICOH SC-10A, is a smart camera that can prevent work errors by automatically checking the status of manufacturing operations to assemble parts and other components via image recognition technology. The new product offering should benefit the company significantly.
RICOY’s trailing-12-month net income margin of 2.55% is 16.3% higher than the industry average of 2.19%. Likewise, the stock’s trailing-12-month ROCE and ROTA of 5.93% and 2.51% are significantly higher than the industry averages of 0.62% and 0.31%, respectively.
For the half year that ended September 30, 2023, RICOY’s sales increased 14.3% year-over-year to ¥1.11 trillion ($7.38 billion). Its gross profit grew 11.5% year-over-year to ¥386.20 billion ($2.57 billion). The company’s profit attributable to owners of the parent rose 4.7% from the year-ago value to ¥15.60 billion ($103.74 million).
Furthermore, RICOY’s earnings per share attributable to owners of the parent stood at ¥25.62, an increase of 7.3% year-over-year. Cash inflows from operating activities were ¥31.40 billion ($208.81 million), compared to cash outflows from operating activities of ¥3.70 billion ($24.60 million) in the same period of 2022.
Analysts expect RICOY’s revenue for the fiscal 2024 second quarter (ended September 2023) to increase 4.3% year-over-year to $3.66 billion. The company’s revenue is expected to grow 302.5% year-over-year to $15.03 billion for the fiscal year ending March 2024. Additionally, RICOY topped the consensus revenue estimates in each of the trailing four quarters.
Shares of RICOY have gained 4.4% over the past six months and 16.3% over the past year to close the last trading session at $8.30.
RICOY’s POWR Ratings reflect its solid prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
RICOY has a B grade for Value and Stability. It is ranked #6 of 38 stocks in the B-rated Technology – Hardware industry.
To see RICOY’s additional ratings for Growth, Momentum, Sentiment, and Quality, click here.
Stock #1: Iteris, Inc. (ITI)
ITI offers intelligent transportation systems technology solutions worldwide. Its smart mobility infrastructure solutions include traveler information systems, transportation performance measurement software, traffic analytics software, and advanced sensing devices. It offers products like ClearGuide, ClearRoute, BlueArgus, TrafficCarma, Vantage Apex, and Vantage Fusion.
On October 31, ITI awarded the Federal Highway Administration contract with a ceiling of $9.5 million to provide continued development, evolution and deployment support for the nation’s Intelligent Transportation Systems (ITS) reference architecture program.
Under the three-year agreement, ITI will support the evolution of the Architecture Reference for Cooperative and Intelligent Transportation (ARC-IT) content to reflect ongoing changes in ITS, including new capabilities enabled by automation, connectivity, and emerging technology. This deal should bode well for the company.
In September, ITI launched Vantage Next Max™, a new central control unit (CCU) that doubles the supported sensors on the Vantage Next® platform from four to eight sensors per in-cabinet processor. This expansion is designed to enhance traffic detection in larger or uniquely configured intersections and save time and effort for traffic engineers and system integrators.
For the first quarter that ended June 30, 2023, ITI’s revenues increased 29.3% year-over-year to $43.55 million. Its gross profit rose 65.4% year-over-year to $16.80 million. Its adjusted EBITDA came in at $3.68 million, compared to an adjusted EBITDA of negative $2.45 million in the prior year’s quarter.
In addition, the company’s net income was $2.13 million, or $0.05 per share, compared to a net loss of $4.87 million, or $0.11 per share a year ago, respectively. As of June 30, 2023, its cash and cash equivalents stood at $19.99 million versus $16.59 million as of March 31, 2023.
Analysts expect ITI’s revenue to increase 10.9% year-over-year to $173.02 million for the fiscal year ending March 2024. Its revenue and EPS for the fiscal year 2025 are estimated to grow 10.7% and 34.2% year-over-year to $191.52 million and $0.37, respectively. Also, the company has surpassed the consensus revenue estimates in each of the trailing four quarters.
ITI’s stock has gained 46.4% year-to-date and 60% over the past year to close the last trading session at $4.48.
ITI’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has a B grade for Growth and Sentiment. ITI is ranked #3 in the same industry.
Beyond what is stated above, we’ve also rated for Value, Quality, Stability, and Momentum. Get all ITI ratings here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
Want More Great Investing Ideas?
NTAP shares were unchanged in premarket trading Wednesday. Year-to-date, NTAP has gained 29.61%, versus a 15.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|NTAP||Get Rating||Get Rating||Get Rating|
|RICOY||Get Rating||Get Rating||Get Rating|
|ITI||Get Rating||Get Rating||Get Rating|