The technology sector is struggling with global supply chain disruptions, material scarcity, rising transportation costs, and labor shortages. Furthermore, looming interest rate hikes are expected to mar the industry’s growth. However, the growing dependency of businesses on tech solutions and associated emerging trends should help the industry more than offset the negatives. According to Forrester’s U.S. Tech Market Outlook, the U.S. tech budget is expected to expand by 6.7% in 2022.
Furthermore, technology plays a vital role in decarbonization because many carbon-intensive companies are adopting high-cost technology to cut their carbon emissions. Investors’ interest in tech stocks is evidenced by the Technology Select Sector SPDR Fund’s (XLK) 22.6% gains over the past year.
Quality tech stocks NXP Semiconductors N.V. (NXPI), Toshiba Corporation (TOSYY), Teradata Corporation (TDC), and Kulicke and Soffa Industries, Inc. (KLIC) are currently trading at discounts to their peers. So, we think these stocks could be solid bets now.
NXP Semiconductors N.V. (NXPI)
Incorporated in 2006, NXPI in Eindhoven, Netherlands, is a global semiconductor company that provides solutions to enable secure connections and infrastructures. The company’s product portfolio includes microcontrollers, analog and interface devices, radio frequency power amplifiers, security controllers, semiconductor-based environmental and inertial sensors. It operates in China, the Netherlands, the United States, Singapore, Germany, Japan, South Korea, Malaysia, and internationally.
This month, NXPI launched its IW612, a tri-radio device to support the Wi-Fi 6, Bluetooth 5.2, and 802.15.4 protocols. The device should enable seamless, secure connectivity for smart home, automotive, and industrial use cases and support the new groundbreaking Matter connectivity protocol.
NXPI’s revenue increased 26.2% year-over-year to $2.86 billion for the third quarter, ended Oct. 3, 2021. The company’s gross profit grew 45.2% from its year-ago value to $1.58 billion. Its operating income rose 2,121.9% from the prior-year quarter to $711 million. Also, the company’s net income amounted to $526 million, versus an $18 million net loss in the third quarter of 2020.
Analysts expect NXPI’s revenue for its fiscal year 2022 to be $12.3 billion, representing11.5% growth year-over-year. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Also, its EPS is expected to grow 73.2% in fiscal 2021 and 12.8% in fiscal 2022. Its stock price has increased 15.3% over the past year.
In terms of forward EV/EBIT, NXPI is currently trading at 16.09x, which is 10.8% below the 18.04x industry average. Also, in terms of its forward non-GAAP P/E, the stock is currently trading at 17.86x, which is 17% lower than the 21.53x industry average.
NXPI’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 assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has an A grade for Growth and a B grade for Value and Quality. We have also graded NXPI for Sentiment, Momentum, and Stability. Click here to access all NXPI’s ratings. NXPI is ranked #20 of 100 stocks in the A-rated Semiconductor & Wireless Chip industry.
Toshiba Corporation (TOSYY)
Headquartered in Tokyo, Japan, TOSYY is an energy system solution provider dedicated to advanced carbon neutrality through its technologies, products, and services. The company operates through Energy Systems and Solutions; Infrastructure Systems and Solutions; Building Solutions; Retail and Printing Solutions; Electronic Devices and Storage Solutions; and Digital Solutions segments. TOSYY also offers rechargeable lithium-ion batteries, modules, packs, computers and tablets, visual products, and home appliances.
This month, TOSYY launched an innovative 20Ah-HP rechargeable lithium-ion battery cell and expanded its SCiB product offering. This battery cell delivers high energy and high power simultaneously. The company expects the new cell to be deployed in automobiles, industrial equipment, and storage battery systems through this expansion.
For the second quarter, ended Sept. 30, 2021, TOSYY’s net sales increased 12.8% year-over-year to ¥1.55 trillion ($13.39 billion). The company’s operating income grew 1,351.6% from its year-ago value to ¥45 billion ($390 million). Its net income rose 1,608.6% from the prior-year quarter to ¥59.8 billion ($520 million).
TOSYY has an impressive earnings surprise history; it beat the consensus EPS estimates in three of the trailing four quarters. And over the past year, the stock has soared 22.4% in price.
In terms of forward EV/EBITDA, TOSYY is currently trading at 8.43x, which is 29.4% lower than the 11.93x industry average. In addition, its 12.69x forward EV/EBIT is 23.8% lower than the 16.65x industry average.
TOSYY’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. Also, the stock has an A grade for Value B grade for Growth and Stability.
In addition to the POWR Rating grades I have just highlighted, one can see TOSYY’s ratings for Sentiment, Momentum, and Quality here. TOSYY is ranked #6 of 48 stocks in the Technology – Hardware industry.
Teradata Corporation (TDC)
Incorporated in 1979, TDC in San Diego, Calif., is a hybrid cloud analytics software provider that connects multi-cloud data platforms for enterprise analytics. Also, the company provides software, hardware, and related business consulting and support solutions. TDC also offers the Teradata Vantage platform and serves various industries, including financial services, healthcare, and other sectors.
This month, TDC and Telefónica España announced that the companies would be continuing their relationship by migrating their on-premises data analytics ecosystem to Vantage on Google Cloud. Through this partnership, TDC should help Telefónica to innovate and achieve its analytic goals through the power of a proven, enterprise-scale data analytics platform in the cloud.
TDC’s total revenue increased 1.3% year-over-year to $460 million for the third quarter, ended Sept. 30, 2021. The company’s gross profit grew 1.8% from its year-ago value to $282 million. Its operating income rose 6% from the prior-year quarter to $71 million. Also, the company’s net income increased 2.1% year-over-year to $49 million.
Analysts expect TDC’s revenue to increase 1.3% year-over-year to $1.95 billion in its fiscal year 2022. It has surpassed the consensus EPS estimates in each of the trailing four quarters. The company’s EPS is estimated to increase 61.8% in fiscal 2021. The stock has gained 50.4% in price over the past year.
In terms of forward EV/Sales, TDC is currently trading at 2.27x, which is 39.1% lower than the 3.72x industry average. Also, in terms of its forward Price/Sales, the stock is currently trading at 2.27x, which is 37.2% lower than the 3.61x industry average.
It is no surprise that TDC has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has an A grade for Value and a B grade for Growth and Quality.
Kulicke and Soffa Industries, Inc. (KLIC)
Headquartered in Singapore, KLIC is a semiconductor and electronics assembly solutions provider that serves the global automotive, consumer, communications, computing, and industrial markets. It operates through Capital Equipment and Aftermarket Products and Services (APS) segments. KLIC manufactures and sells advanced displays, flip-chip, TCB advanced packaging products, and other system software products.
This month, KLIC launched KNeXt, the new web-based industry 4.0 software solution. This solution should connect K&S equipment and enable fleet management, factory automation, and productivity improvement. KNeXt is also designed to serve different market segments by providing the most comprehensive solutions.
KLIC’s net revenue increased 173.1% year-over-year to $485.33 million for its fiscal fourth quarter, ended Oct. 2, 2021. The company’s gross profit grew 160.2% from its year-ago value to $231.32 million. Its income from operations rose 5.72% from the prior-year quarter to $154.84 million. Also, the company’s net income increased 747.1% year-over-year to $133.71 million.
For its fiscal year 2022, analysts expect KLIC’s revenue to increase 3.9% year-over-year to $1.58 billion. It has surpassed the consensus EPS estimates in each of the trailing four quarters. The company’s EPS is estimated to grow 20% per annum in the next five years. The stock has gained 41.2% in price over the past year.
In terms of forward EV/Sales, KLIC is currently trading at 1.62x, which is 56.4% lower than the 3.72x industry average. Also, in terms of its forward non-GAAP P/E, the stock is currently trading at 8.99x, which is 58.23% lower than the 21.43x industry average.
KLIC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has an A grade for Value and a B grade for Growth and Quality. We have also graded KLIC for Sentiment, Momentum, and Stability. Click here to access all KLIC’s ratings. KLIC is ranked #29 in the Semiconductor & Wireless Chip industry.
Note that KLIC is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.
What To Do Next?
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NXPI shares were trading at $201.22 per share on Monday morning, up $11.77 (+6.21%). Year-to-date, NXPI has declined -11.66%, versus a -6.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research. More...
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