Technology industry stocks plunged earlier this year as the investors rotated away from expensive tech stocks to quality cyclical stocks to capitalize on the economic recovery. However, quality tech stocks are again attracting investors’ attention in-part because the Federal Reserve recently stated that it will not raise interest rates until late 2023 given the transitory nature of current inflation. Consequently, the tech-heavy Nasdaq Composite has lately been hitting new highs.
Investors’ renewed interest in tech stocks is evidenced by the Technology Select Sector SPDR ETF’s (XLK) 6.6% returns over the past month versus the SPDR S&P 500 Trust ETF’s (SPY) 3% gains. Furthermore, an ongoing digital transformation, and increasing use of cloud computing, artificial intelligence (AI), and other advanced technologies, should keep driving the technology industry’s growth. According to GoRemotely, the tech industry is expected to hit a $5 trillion market value by year’s end.
Given the industry’s solid growth potential, analysts are optimistic about the performance of Uber Technologies, Inc. (UBER), Verint Systems Inc. (VRNT), and Zix Corporation (ZIXI). We think these stocks are well positioned to withstand any short-term market volatility and deliver solid returns.
Uber Technologies, Inc. (UBER)
UBER develops and operates proprietary technology applications. It connects consumers with independent providers of ride services to deliver ridesharing services and other forms of transportation services. The company operates through four segments: Mobility; Delivery; Freight; and Advanced Technologies Group (ATG) and Other Technology Programs.
In May, UBER announced an exclusive partnership with Gopuff for it to power a new everyday essentials experience on UberEats. Raj Beri, Uber’s Head of Grocery and New Verticals delivery, said “With this partnership, we are able to leapfrog the competition in using Gopuff’s network of micro-fulfillment centers to instantly meet consumer demand for thousands of products—and I’m incredibly excited about the opportunities ahead.”
UBER’s gross bookings increased 24% year-over-year to $19.54 billion for its fiscal first quarter, ended March 31, 2021. Its delivery revenue grew 230% year-over-year to $1.74 billion. Its net loss decreased 96% year-over-year to $108 million. Also, its loss per share came in at $0.06, representing a 96.5% decrease year-over-year.
Analysts expect UBER’s EPS to increase 66.3% and 51.5%, respectively, in its fiscal year 2020 and 2021. It surpassed consensus EPS estimates in three of the trailing four quarters. Its revenue is expected to increase 42.2% year-over-year to $15.84 billion in its fiscal year 2021. The stock’ price has soared nearly 46.1% over the past year to close yesterday’s trading session at $48.41. Wall Street analysts expect the stock to hit $72.36 in the near term, which indicates a 49.5% potential upside.
Verint Systems Inc. (VRNT)
VRNT provides customer engagement solutions worldwide. It offers various applications for use in forecasting and scheduling, which understands the work needed to meet and exceed customer expectations; quality and compliance, which uses automation and analytics for customer interactions for attended and self-service channels; and real-time work that supports in-the-moment workforce activities.
On July 1, 2021, VRNT announced enhancements to Verint Connect, an interactive engagement portal designed to give customers and partners access to needed information about Verint solutions, services and training all in one place. The launch of Verint Marketplace and Developer Portal, as well as Enhanced UI for Verint Connect, could further strengthen collaboration, ideation and support.
VRNT’s revenue increased 8.1% year-over-year to $200.90 million for its fiscal first quarter, ended April 30, 2021. Its operating income came in at $4.44 million compared to a $2.04 million operating loss in the prior year period. Its net income came in at $1.09 million compared to a $3.97 million net loss in the year-ago period. The company’s loss per share decreased 55.5% year-over-year to $0.04.
Analysts expect VRNT’s EPS and revenue to increase 13.9% and 6.3% respectively year-over-year to $2.54 and $918.07 million in its fiscal year 2023. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 28.2% over the past five years to close yesterday’s trading session at $43. Wall Street analysts expect the stock to hit $61.86 in the near term, indicating a 43.9% potential upside.
Zix Corporation (ZIXI)
ZIXI provides solutions for email encryption, data loss prevention, threat protection, unified archiving, and cloud data backup. It offers advanced email threat protection, information archive and email encryption services. The company serves the healthcare, financial services, and insurance industries, as well as government sectors, and sells its services through a direct sales force and tele sales force.
ZIXI announced the expansion of its global partner program in Germany and the United Kingdom on May 26. The company adds solutions and support services to its rapidly growing MSP partner program, which could further enhance partner growth and operating capabilities.
ZIXI’s revenue increased 14.5% year-over-year to $60.0 million for its fiscal first quarter ended March 31. Its adjusted EBITDA grew 18.4% year-over-year to $13.1 million. Its non-GAAP adjusted net income increased 11.1% year-over-year to $8.13 million. Also, its non-GAAP adjusted EPS came in at $0.10, up 23% year-over-year.
For its fiscal year 2022, analysts expect ZIXI’s EPS to increase 19% year-over-year to $0.69. Its revenue is expected to increase 14.1% year-over-year to $249.24 million in its fiscal year 2021. The stock has surged 3.6% over the past nine months to close yesterday’s trading session at $6.89. Wall Street analysts expect the stock to hit $11.25 in the near term, which indicates a potential 63.3% upside.
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UBER shares were trading at $48.12 per share on Tuesday afternoon, down $0.29 (-0.60%). Year-to-date, UBER has declined -5.65%, versus a 17.42% 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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