Digital transformation across almost every industry, together with the wide adoption of hybrid work structures, is driving the tech industry’s growth. The Technology Select Sector SPDR Fund (XLK) ETF has gained 36.4% over the past year, outperforming the broader SPDR S&P 500 ETF Trust’s (SPY) 31.3% returns.
Companies are investing heavily in software and analytics solutions to make their operations efficient. Analysts expect the U.S. tech market to expand by 7.4% in 2021 and by a further 6.7% in 2022. In addition, software spending is expected to accelerate significantly—10% in 2021 and just over 11% in 2022.
Given this backdrop, fundamentally sound tech stocks QUALCOMM Incorporated (QCOM), Teradata Corporation (TDC), Box, Inc. (BOX), and Yelp Inc. (YELP), which are currently trading significantly below their 52-week price highs, could soar higher in the near term. These stocks are rated ‘Buy’ or ‘Strong Buy’ in our proprietary POWR Ratings system.
QUALCOMM Incorporated (QCOM)
QCOM develops and sells technologies for wireless devices. The San Diego, Calif.-based company holds crucial patent rights for CDMA, LTE, and 5G services. The company operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI).
In the third fiscal quarter ended June 27, QCOM’s non-GAAP revenue increased 63.5% year-over-year to $8 million while non-GAAP Earnings Before Taxes (EBT) improved 130.5% from the prior-year quarter to $2.55 billion. The company’s non-GAAP net income and non-GAAP EPS rose 124% and 123.3%, respectively, year-over-year to $2.2 billion and $1.92.
A $2.26 consensus EPS estimate for the current quarter (ending September 2021) indicates a 55.9% year-over-year increase. Likewise, the $8.86 billion consensus revenue estimate for the current ongoing quarter reflects a 36.3% improvement from the same period last year. Furthermore, QCOM has an impressive earnings surprise history; it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 19.9% in price over the past year to close yesterday’s trading session at $132.76. It is currently trading 20.9% below its 52-week high of $167.94.
QCOM’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 distinct factors, with each factor weighted to an optimal degree.
QCOM has a Value, Momentum, Sentiment, and Quality grade of B. In the B-rated Semiconductor & Wireless Chip industry, it is ranked #12 out of the 97 stocks.
To see additional POWR Ratings for Growth and Stability for QCOM, click here.
Teradata Corporation (TDC)
TDC provides hybrid cloud analytics software across various industries. The San Diego, Calif., company also offers hardware solutions and consulting services.
On September 21, TDC announced that Tesco PLC (TSCDY) is continuing its existing relationship with TDC by leveraging TDC Vantage as part of its data platform. This demonstrates TDC’s technological prowess in the data analytics space.
On September 9, TDC highlighted the company’s successful cloud-first transformation and ongoing strategic initiatives to deliver sustainable growth and value creation. The company also reaffirmed its outlook for its fiscal year 2021. TDC expects its public cloud Annual Recurring Revenue (ARR) to increase by at least 100% year-over-year, while its free cash flow is expected to be at least $400 million in its fiscal year 2021.
For the three months ended June 30, TDC’s total revenue increased 7.4% year-over-year to $491 million. Its non-GAAP operating income came in at $117 million, up 82.8% from the prior-year quarter. Its non-GAAP net income improved 219.2% from the same period last year to $83 million, while its non-GAAP EPS rose 208.3% year-over-year to $0.74.
Analysts expect TDC’s EPS to increase 50.4% year-over-year to $1.97 in the current year (fiscal 2021). The Street’s $1.92 billion revenue estimate for the current year indicates a 4.6% year-over-year rise. In addition, TDC beat the consensus EPS estimates in each of the four trailing quarters.
The stock has gained 134% in price over the past year and 135.8% year-to-date. TDC is currently trading 11.1% below its 52-week high of $59.58.
It’s no surprise that TDC has an overall A rating, which translates to Strong Buy in our POWR Ratings system.
TDC has an A grade for Growth and Value, and a B grade for Quality. It is ranked #1 out of the three stocks in the A-rated Technology – Storage industry.
Click here to see the additional POWR Ratings for TDC (Momentum, Stability, and Sentiment).
Box, Inc. (BOX)
BOX is the provider of a cloud-content management platform that allows organizations to share their content from anywhere. The company’s offerings include web, mobile, and desktop applications for content management and industry-specific solutions. Box is based in Los Altos, Calif.
On September 14, it was announced that South Korean conglomerate Lotte Corporation had adopted Box company-wide as a part of its digital transformation program. Earlier, BT, a leading provider of global communications services and solutions, expanded its relationship with BOX for cloud content management. This demonstrates BOX’s global presence and its dominance in the market.
In its fiscal second quarter, ended July 31, BOX’s revenue was up 11.5% year-over-year to $214.49 million. Its non-GAAP operating margin improved 500 basis points from the same period last year to 21%. Its non-GAAP net income attributable to common stockholders stood at $34.75 million, reflecting a 16.2% year-over-year increase, while its non-GAAP net income per share improved 16.7% from the prior-year quarter to $0.21.
The Street expects BOX’s EPS to come in at $0.80 for the current year (fiscal 2022), indicating a 14.3% year-over-year increase. A $858.27 million consensus revenue estimate for the current year reflects an 11.4% improvement from the same period last year. In addition , BOX beat the Street’s EPS estimates in each of the trailing four quarters.
BOX’s stock has gained 26.4% in price over the past year to close yesterday’s trading session at $22.57. It is currently trading 17.7% below its 52-week high of $27.41.
BOX has an overall B rating, which translates to Buy. In addition, it has a B grade for Growth and Value, and an A grade for Quality. The stock is ranked #3 of 73 stocks in the Technology – Services industry.
We also have graded BOX for Momentum, Stability, and Sentiment. Click here to access all of BOX’s ratings.
Yelp Inc. (YELP)
San Francisco-based YELP delivers a platform that connects local businesses like restaurants, shopping, beauty and fitness, health, and others to customers. The company also provides free and paid advertisement products to businesses.
On July 14, YELP launched its new advertising platform, Yelp Audiences, to help advertisers reach out to customers on the platform. “Yelp’s high-intent audience can uniquely help brands better develop these important and meaningful connections with the right consumers. With Yelp Audiences, we are able to help advertisers reach our engaged, down-funnel audience in a way no other platform can,” said Tom Foran, YELP’s Senior Vice President and Head of Go-To-Market, National.
YELP’s net revenue increased 52.2% year-over-year to $257.19 million in its second fiscal quarter, ended June 30. Its net income attributable to common stockholders and net income per share came in at $4.21 million and $0.05, respectively, up substantially from their negative year-ago values. Its adjusted EBITDA increased 473.1% year-over-year to $63.79 million.
A $0.04 consensus EPS estimate for the current year (fiscal 2021) indicates a 114.8% increase year over year, and the Street’s $1.03 billion revenue estimate for the current year reflects a 17.6% rise from the prior year. YELP has topped the Street’s EPS estimates in three out of the trailing four quarters.
The stock has gained 77.9% in price over the past year to close yesterday’s trading session at $36.52. However, YELP is currently trading 16.7% below its 52-week high of $43.86.
YELP has an overall B rating. The stock also has a Quality grade of A and a Value grade of B. In the 76-stock Internet industry, it is ranked #2.
In addition to the POWR Rating grades we’ve stated above, one can see YELP ratings for Growth, Momentum, Stability, and Sentiment here.
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QCOM shares were trading at $131.75 per share on Tuesday afternoon, down $1.01 (-0.76%). Year-to-date, QCOM has declined -12.25%, versus a 16.74% 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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