Technology has transformed itself in leaps and bounds over the last decade. According to Forrester, with increasing vaccination rates and more people going back to their offices, United States tech budgets are expected to grow 6.7% in 2022, with software spending growing just over 11%.
Over the past six months, the Technology Select Sector SPDR Fund (XLK) gains of 20.8% outperformed the SPDR S&P 500 ETF Trust’s (SPY) 7.3% gains. However, due to the omicron variant, inflationary pressures, and climbing treasury yields, popular tech stocks with high prices might experience a pullback.
Hence, lesser-known tech stocks Nutanix, Inc. (NTNX), Cerence Inc. (CRNC), and Desktop Metal, Inc. (DM) might be ideal additions to one’s watchlist. Wall Street analysts see more than 55% upside potential for these stocks.
Nutanix, Inc. (NTNX)
NTNX is an enterprise cloud platform provider. The company’s offerings include Acropolis converges virtualization, enterprise storage services, networking visualization, and security services.
On September 21, NTNX announced the introduction of new cloud platform capabilities that simplify data management and optimize the database for customers. This new capability should add to the company’s revenue stream. On the same day, the company declared its strategic partnership with the digital workspace technology provider, Citrix Systems, Inc. (CTXS), for providing on-demand, elastic access to apps, devices, and data from any gadget. The move might give the companies a competitive advantage in the field of hybrid workspace.
For the fiscal first quarter ended October 31, NTNX’s total revenue increased 21% year-over-year to $378.52 million. This can be attributed to a rise of 26.4% from the prior-year quarter in revenues from support, entitlements, and other services to $198.41 million. Non-GAAP gross profit improved 21.4% from the same period last year to $310.75 million.
Analysts expect NTNX’s EPS to improve 39.9% year-over-year in the current year (fiscal 2022). Likewise, the consensus revenue estimate of $1.62 billion for the ongoing year reflects an increase of 16% from the prior year. Moreover, NTNX has an impressive surprise earnings history as it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 15.3% over the past year to close yesterday’s trading session at $32.04. It has gained marginally year-to-date.
Of the 10 Wall Street analysts rating NTNX, eight have rated it Buy, while two have rated it Hold. The 12-month median price target of $49.78 indicates a 55.4% potential upside. The price targets range from a low of $38.00 to a high of $71.00.
Cerence Inc. (CRNC)
CRNC operates as an AI-powered virtual assistant provider for the worldwide mobility or transportation market. The company provides edge-software components, cloud-connected components, conversational AI-based solutions, and related professional services.
On September 28, CRNC announced that it was chosen by Vietnamese electric vehicle (EV) company, VinFast, a VinGroup subsidiary, to power conversational AI in VinFast’s smart EV lineup. The venture is expected to be profitable for the company.
Earlier in September, CRNC announced the continuation of its work with popular Volkswagen AG (VWAGY) brand, Audi, for powering its in-car assistant platform for the new Audi e-Tron GT and Audi Q4 e-Tron compact electric SUV. About this partnership, Sanjay Dhawan, CEO, CRNC, said, “We are proud to continue our work with Audi and support their commitment to innovation as they create the next generation of uniquely Audi experiences for their drivers.”
CRNC’s total revenues increased 7.5% year-over-year to $98.08 million in the fiscal fourth quarter ended September 30. Non-GAAP gross profit improved 10.8% from the same period last year to $76.64 million, while non-GAAP net income rose 9.3% from the prior-year quarter to $28.41 million. Non-GAAP net income per share increased 6.5% year-over-year to $0.66.
The consensus EPS estimate of $3.22 for the next year (fiscal 2023) indicates an improvement of 34.2% from the current year. Likewise, the consensus revenue estimate for the upcoming year of $519.58 million reflects a 24.6% year-over-year rise. In addition, CRNC has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
CRNC has declined 4.6% intra-day to close yesterday’s trading session at $71.82.
Eight out of the nine analysts rating CRNC have rated it Buy, while one has rated it Hold. The 12-month median price target of $122.78 indicates a 71% potential upside. The price targets range from a low of $91.00 to a high of $165.00.
Desktop Metal, Inc. (DM)
DM is an additive manufacturing solution manufacturer and seller for engineers, designers, and manufacturers. The company’s offerings include a Production System, Studio System, and a Shop System, serving automotive, aerospace, and consumer products industries.
On November 23, DM announced that it had qualified the use of versatile high-carbon D2 tool steel for the Production System™ platform. About this new product, Jonah Myerberg, co-founder and CTO of DM, said, “We are responding to the demand from our customers across manufacturing and industrial industries for materials like D2 tool steel that enable the production of critical forming and cutting tools, and in various other applications where high hardness is valued.”
On November 12, the company announced that it had completed the acquisition of a technology company, The ExOne Company (XONE). The acquisition is expected to strengthen DM’s additive manufacturing (AM) footprint and expand its portfolio.
For the fiscal third quarter ended September 30, DM’s total revenues increased 906.6% year-over-year to $25.44 million, which can be attributed to product revenues rising 1,168.5% from the prior-year quarter to $23.95 million. Non-GAAP gross margin came in at $6.81 million, up substantially from its negative year-ago value.
Wall Street expects EPS to improve 56.1% year-over-year in the current year (fiscal 2021). Likewise, the Wall Street revenue estimate of $103.12 million indicates a rise of 526.1% from the prior year.
The stock has declined 8.9% intra-day to close yesterday’s trading session at $5.92.
The 12-month median price target of $10.67 indicates an 80.2% potential upside. The price targets range from a low of $7.00 to a high of $14.00.
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NTNX shares were trading at $33.04 per share on Thursday afternoon, up $1.00 (+3.12%). Year-to-date, NTNX has gained 3.67%, versus a 23.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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