Investors rotated away from expensive tech stocks earlier this year to cyclical stocks to capitalize on the recovering economy. However, investors’ interest in the tech stocks has been returning lately because a recognition has dawned that the COVID-19 pandemic is far from over, with the more contagious viral variants in the offing. Notably, Japan this week declared a state of emergency amid rising COVID-19 cases in the country.
Investors’ renewed interest in tech stocks is evidenced by the Technology Select Sector SPDR Fund’s (XLK) 7% gains over the past month versus the SPDR S&P 500 Trust ETF’s (SPY) 2% returns. In fact, the tech-heavy Nasdaq hit its 14,755.33 all-time high on July 7, 2021. The ongoing digital transformation and increasing focus on 5G and AI-based technological advancements are expected to keep driving the industry’s growth.
So, we think it’s now wise to bet on fundamentally strong tech stocks Rimini Street, Inc. (RMNI), EMCORE Corporation (EMKR), and Immersion Corporation (IMMR). They are currently trading at below $10 but hold immense upside potential.
Rimini Street, Inc. (RMNI)
RMNI is a global provider of enterprise software support products and services, and a leading third-party support provider for Oracle Corporation (ORCL) and SAP SE (SAP) software products. The Las Vegas, Nev.-based company’s services include global tax, legal and regulatory update services, global security services, and risk avoidance services.
For its fiscal first quarter ended March 31, 2021, RMNI’s revenue increased 12.6% year-over-year to $87.90 million. The company’s adjusted EBITDA came in at $10.66 million for the quarter, up 16.4% year-over-year. And its non-GAAP net income increased 9.7% from the same period last year to $8.48 million.
RMNI’s revenue is expected to increase 15.5% year-over-year to $89.88 million for the quarter ended June 30, 2021. The company’s EPS is expected to increase 300% year-over-year to $0.10 for the quarter ending September 30, 2021.
On July 7, 2021, RMNI announced that the County of Fresno in California had switched to the company’s support for its Oracle Database and Fusion Middleware software and PeopleSoft applications. Helping the County of Fresno to reduce IT costs, maintain legislative security and compliance is expected to strengthen RMNI’s consumer base. The stock has gained 102.3% over the past nine months to close yesterday’s trading session at $6.85.
RMNI’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 different factors, each with its own weighting.
The stock has an A grade for Quality, and a B grade for Growth and Momentum. Click here to access RMNI’s ratings for Stability, Sentiment, and Value as well. RMNI is ranked #3 of 59 stocks in the Software-Business industry.
EMCORE Corporation (EMKR)
EMKR, together with its subsidiaries, provides advanced mixed-signal optics products. The company, which is based in Alhambra, Calif., offers cable television (CATV) products, high-power gain chips products, and navigation system and inertial sensing products. It serves several markets, including the data center, aerospace, defense and satellite communications markets.
EMKR’s revenue surged 61% year-over-year to $38.41 million for its fiscal second quarter, ended March 31, 2021. EMKR’s non-GAAP net income came in at $5.87 million for the quarter, up 72.7% from its fiscal first quarter ended December 31, 2020. Furthermore, its non-GAAP EPS increased 54.5% sequentially to $0.17.
Analysts expect EMKR’s EPS and revenue to increase 633.3% and 41.3%, respectively, year-over-year to $0.64 and $155.58 million in its fiscal year 2021. It surpassed the Street’s EPS estimates in each of the trailing four quarters.
EMKR introduced its new SDI170 Quartz MEMS Tactical Grade Inertial Measurement Unit in April to replace legacy Ring Laser Gyro products. The company’s director of sales & marketing for navigation products, David Hoyh, said, “The introduction of the SDI170 IMU marks a significant milestone in the industry and for EMCORE. Now customers everywhere in the world have sourcing options for this widely used tactical performance package.” EMKR stock has rallied 196.4% over the past year to close yesterday’s trading session at $8.92.
EMKR’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. It has an A grade for Sentiment, and a B grade for Growth. In addition to these ratings, one can see EMKR’s ratings for Stability, Value, Quality, and Momentum here. EMKR is ranked #33 of 99 stocks in the B-rated Semiconductor & Wireless Chip industry.
Immersion Corporation (IMMR)
IMMR in San Jose, Calif., is a licensing company that is focused on the creation, design, development and licensing of haptic technologies that allow people to use their sense of touch when operating digital devices. It offers its products to several markets, including the mobile communications, wearables, consumer electronics, console and PC gaming, automotive, and medical markets.
IMMR’s total revenues for the first quarter, ended March 31, 2021, came in at $7.16 million, representing a 14.4% year-over-year rise. The company’s non-GAAP net income came in at $2.80 million compared to a $2.60 million loss in the prior-year quarter. Its non-GAAP EPS for the quarter was $0.10 compared to a $0.08 loss per share in the year-ago period.
The company’s EPS and revenue are expected to increase 40% and 44.3%, respectively, year-over-year to $0.21 and $10.75 million for the quarter ending September 30, 2021. It surpassed the consensus EPS estimates in three of the trailing four quarters.
On June 17, 2021, IMMR announced that it had renewed its license agreement with ASUS for the use of TouchSense software and haptics in ASUS ROG Phones. The stock has gained 41.6% over the past year to close yesterday’s trading session at $8.38.
It’s no surprise that IMMR has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Quality, and a B grade for Value and Growth. Click here to see the additional POWR Ratings for IMMR (Momentum, Stability, and Sentiment). IMMR is ranked #15 of 132 stocks in the Software-Application industry.
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RMNI shares were trading at $7.48 per share on Friday morning, up $0.63 (+9.20%). Year-to-date, RMNI has gained 68.85%, versus a 17.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More...
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