After a remarkable run last year, most tech stocks plunged sharply this year as the economic recovery caused investors to shift their focus to cyclical stocks. Fears over rising inflation and Treasury yields have led investors to rotate away from expensive tech stocks. Tech stocks’ weakness is evident in the Technology Select Sector SPDR Fund’s (XLK) 0.1% gains over the past three months compared to the SPDR S&P 500 ETF Trust’s (SPY) 6.4% returns.
However, the sector still holds solid growth attributes. Because the world continues to depend on technology in myriad ways, companies in this space are well positioned to benefit. The increased use of cloud computing, artificial intelligence (AI), and 5G technology, for example, will drive the sector’s growth in the coming months.
Given this backdrop, we think it is wise to bet on Teradata Corporation (TDC), NetScout Systems, Inc. (NTCT), and Plantronics, Inc. (PLT). They are currently trading at deep discounts considering their immense growth potential.
Teradata Corporation (TDC)
TDC, together with its subsidiaries, operates as a hybrid cloud analytics software provider. Its solutions and services are software, hardware, and related business consulting and support services. It offers primarily Teradata Vantage, an analytics platform. The company serves various industries, including financial services, government, retail, and telecommunications.
On May 4, TDC announced a set of enhancements to Teradata Vantage on Alphabet Inc.’s (GOOGL) Google Cloud that make it easier for its consumers to use the services. This has the potential to increase demand for the company’s services in the near-term.
TDC and Antuit.ai entered a partnership in April 2021 to help retailers and consumer packaged goods (CPG) companies digitally transform their operational decision making and drive revenue growth. TDC’s revenue might grow exponentially in the coming months as the demand for this combined cloud-based solution continues to grow.
The company’s revenue surged 13% year-over-year to $491 million for the first quarter ended March 31, 2021. Its non-GAAP operating Income grew 259% year-over-year to $115 million, while its non-GAAP net income increased 160% year-over-year to $78 million. TDC’s non-GAAP EPS came in at $0.69, up 155.5% year-over-year.
In terms of forward non-GAAP PEG ratio, TDC’s 0.95x is 48.3% lower than the 1.85x industry average. In terms of forward P/S ratio, the stock’s 2.56x is 40.5% lower than the 4.29x industry average.
For the current quarter ending June 30, 2021, analysts expect TDC’s EPS and revenue to increase 95.8% and 4%, respectively, year-over-year to $0.47 and $475.46 million. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 117.4% over the past year to close Friday’s trading session at $44.73.
It’s no surprise that TDC has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock also has an A grade for Growth and Value, and a B grade for Quality. Click here to see TDC’s ratings for Sentiment, Stability and Momentum as well. TDC is ranked #1 of 3 stocks in the B-rated Technology – Storage industry.
NetScout Systems, Inc. (NTCT)
NTCT provides service assurance and cybersecurity solutions to protect digital business services against disruptions. The company’s offerings include nGeniusONE management software, nGeniusPULSE, nGenius Business Analytics solution, ISNG and a suite of test access points. It serves enterprise customers across various industries through a direct sales force, and indirect reseller and distribution channels.
On December 16, 2020, NTCT announced the extension of its Smart Perimeter Protection into Amazon.com, Inc.’s (AMZN) Amazon Web Services (AWS). This could help increase the company’s consumer base.
Also last December, NTCT announced the extension of its long-term partnership with Vodafone Group Plc (VOD). The exclusive, multi-year agreement leverages NTCT’s InfiniStreamNG platform to help provide real-time, end-to-end visibility across VOD’s hybrid environment. This is expected to increase the company’s sales.
NTCT’s income from operations increased 27.8% year-over-year to $16.10 million in the fourth quarter, ended March 31, 2021. Its net income increased 56.2% year-over-year to $11.4 million. The company’s EPS came in at $0.15, up 50% year-over-year.
In terms of forward Price/Cash Flow ratio, NTCT’s 8.91x is 59.5% lower than the 22.02x industry average. The stock’s forward P/S ratio of 2.37x is 44.9% lower than the 4.29x industry average.
Analysts expect NTCT’s EPS and revenue to increase 11% and 4.3%, respectively, year-over-year to $1.92 and $886.48 million in fiscal 2023. It surpassed consensus EPS estimates in each of the trailing four quarters. The stock has gained 21.1% over the past six months to close Friday’s trading session at $27.36.
NTCT’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The stock also has an A grade for Value, and a B grade for Growth and Quality.
Plantronics, Inc. (PLT)
The company announced on May 14, 2021 that it will change its ticker from PLT to POLY at the open of the market on May 24, 2021. It manufactures premium audio and video products and offers headsets, video and audio-conferencing products, desk phones, analytics software and services.
PLT announced the latest addition to its best-selling line of stereo Bluetooth headsets— the Voyager Focus 2—on May 11. This is expected to provide a boost to its revenue in the near-term.
On April 27, 2021, PLT announced Alexa for Business for Zoom Video Communications, Inc.’s (ZM) Zoom Rooms to provide consumers with a hands-free, voice-activated, control experience for new-wave meeting collaboration. As a result, ZM’s consumer base might increase significantly in the coming months.
PLT’s non-GAAP revenues increased 16.9% year-over-year to $478 million in the fourth quarter, ended April 3, 2021. Its adjusted EBITDA for the quarter was $86 million, which represents a 43.3% year-over-year rise. Its non-GAAP operating income increased 58.3% year-over-year to $76 million. The company’s non-GAAP EPS was $1.23, up 310% year-over-year.
In terms of forward price/sales ratio, PLT’s 0.68x is 84.4% lower than the 4.32x industry average. In terms of forward non-GAAP P/E ratio, the stock’s 9.71x is 60.5% lower than the 24.58X industry average.
For the current quarter, ending June 30, analysts expect PLT’s EPS to increase 57.6% year-over-year to $0.52. It surpassed the consensus EPS estimates in each of the trailing four quarters. Its revenue is expected to be $425.58 million in the current quarter, which represents a 19.9% year-over-year rise. The stock surged 134.7% over the past year to close Friday’s trading session at $31.87.
PLT’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. It has an A grade for Value, and a B grade for Growth and Quality.
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TDC shares were trading at $45.90 per share on Monday afternoon, up $1.17 (+2.62%). Year-to-date, TDC has gained 104.27%, versus a 12.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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