A remarkable surge of 58.4% in the NASDAQ Composite over the last year underscores robust growth and exceptional performance in the technology sector, showcasing investor confidence and positive sentiments toward the future of tech companies.
Thus, investors could consider investing in top tech stocks Zoom Video Communications, Inc. (ZM), Hewlett Packard Enterprise Company (HPE), and Logitech International S.A. (LOGI).
The Consumer Technology Association (CTA) forecasts a 2.8% year-over-year growth in U.S. tech industry revenues to $512 billion in 2024, with a focus on megabundles, streaming services, and the role of generative AI in over 230 million smartphones and PCs.
Besides, content providers are expected to emphasize service bundles; consumers spend $14 billion on audio streaming, $48 billion on video streaming, and generative AI to enhance gaming experiences and improve applications in smartphones and PCs.
On top of it, the Biden-Harris administration recently designated 31 Tech Hubs across the United States, fostering innovation, job creation, and economic growth. The program aligns with the CHIPS and Science Act, emphasizing the administration's commitment to technological advancement.
In addition, the virtual networking market is thriving with a focus on virtual technologies, cloud computing, and streamlined network management, spurred by the shift to remote work during the pandemic. The global virtual networking market size is expected to grow at a CAGR of 25.6% by 2030.
Furthermore, the Artificial Intelligence (AI) market is thriving, driven by tech giants' innovations, advanced AI models, and accelerated growth due to the pandemic-induced shift to remote work. The global AI market is projected to expand at a CAGR of 37.3% from 2023 to 2030.
On top of it, the rising adoption of digital transformation and tech trends boosts the demand for advanced hardware. The hardware sector is also driven by the widespread adoption of cloud services, AI, blockchain, the Internet of Things (IoT), and machine learning. The market for IT hardware is expected to grow at a CAGR of 7.9% to reach $191.03 billion by 2029.
Considering these conducive trends, let’s examine the fundamentals of three tech stock picks.
Zoom Video Communications, Inc. (ZM)
ZM provides a unified communications platform, including video meetings, phone services, and virtual event solutions, serving diverse industries globally. Its services range from individual users to enterprise-level applications.
On December 6, 2023, ZM introduced new tiered plans for its AI-powered Contact Center, offering voice, video, chat, and SMS channels, starting at $69 per month. The plans cater to businesses of all sizes, providing features like AI Expert Assist and Workforce Management.
Enhanced features include expanded communication channels, remote control, outbound dialing, and improved privacy measures.
During the third fiscal quarter, which ended October 31, 2023, ZM’s revenue grew 3.2% year-over-year to $1.14 billion. The company's non-GAAP net income and net income per share increased 24.2% and 20.6% from the prior-year quarter to $401.24 million and $1.29, respectively.
As of October 31, 2023, its total liabilities amounted to $1.90 billion, compared to its total liabilities of $1.92 billion as of January 31, 2023.
For the fourth quarter ending January 31, 2024, the company expects its total revenue to be between $1.13 billion and $1.13 billion. For the same quarter, its non-GAAP income from operations and EPS are expected to be in the range of $409 million to $414 million and $1.13 to $1.15, respectively.
Street expects ZM’s revenue and EPS to grow 2.7% and 13.2% year-over-year to $4.51 billion and $4.95, respectively, for the fiscal year ending January 2024. The company surpassed the revenue and EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 16.3% over the past three months to close the last trading session at $68.93. It gained 1.8% intraday.
ZM’s POWR Ratings reflect its sound prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
ZM has a B grade for Growth, Value, and Quality. Within the Technology - Services industry, it is ranked #14 out of 75 stocks.
In addition to the POWR Ratings stated above, one can access ZM’s additional Momentum, Stability, and Sentiment ratings here.
Hewlett Packard Enterprise Company (HPE)
HPE delivers solutions in computing, storage, networking, and services globally through six segments. Its offerings cater to commercial and large enterprises, utilizing various partners and deployment models.
On January 11, 2024, HPE paid a regular cash dividend of $0.13 per common share. The company pays $0.52 annually, which translates to a yield of 3.29% on the prevailing price level. Its four-year average dividend yield is 3.51%. The company has raised its dividend payouts at a CAGR of 3.5% over the past five years.
In the fourth quarter, which ended October 31, 2023, HPE reported net revenue of $7.35 billion. The company's non-GAAP gross profit and earnings from operations stood at $2.56 billion and $710 million, respectively. Additionally, its non-GAAP net earnings per share amounted to $0.52.
For the first quarter ending January 2024, the company expects its revenue to be in the range of $6.90 billion to $7.30 billion. Also, for the same quarter, its non-GAAP EPS is projected to be in the range of $0.42 to $0.50.
HPE’s revenue is expected to grow 1.4% year-over-year to $29.54 billion for the fiscal year ending October 2024. Its EPS for the same fiscal year is expected to be $1.93. The company surpassed the EPS estimates in each of the trailing four quarters.
HPE’s shares have gained 10.3% over the past nine months to close the last trading session at $15.80.
HPE’s POWR Ratings reflect its robust prospects. The stock has an overall B grade, which translates to Buy in our proprietary rating system.
HPE has an A grade for Value and a B for Momentum. Within the Technology - Communication/Networking industry, it is ranked #3 of 46 stocks.
To see HPE’s additional POWR Ratings for Growth, Stability, Sentiment, and Quality, click here.
Logitech International S.A. (LOGI)
LOGI designs and markets a wide range of products globally, including pointing devices, keyboards, webcams, gaming accessories, and audio products. The company serves diverse consumer needs in working, creating, gaming, and streaming.
LOGI announced that all video collaboration devices running on the CollabOS operating system will now be manufactured with next-life plastics, reducing the carbon impact of each product.
The move enhances sustainability, updating products like Rally Bar with next-life plastics to reduce carbon footprint and provide eco-friendly conference room equipment options.
During the third quarter, which ended December 31, 2023, LOGI generated net sales of $1.26 billion. The company's non-GAAP operating income and net income rose 21.6% and 30.3% year-over-year to $248.24 million and $241.49 million, respectively. Moreover, its non-GAAP net income per share grew 34.2% from the previous-year quarter to $1.53.
For the fiscal year 2024, the company expects its sales to be between $4.20 billion and $4.25 billion, and its non-GAAP operating income for the same fiscal year is likely to be in the range of $610 million to $660 million.
Analysts expect LOGI’s revenue to be $949.98 million for the fourth quarter ending March 2024. Its EPS for the same quarter is expected to grow 22.2% year-over-year to $0.61. The company surpassed the revenue and EPS estimates in each of the trailing four quarters.
The stock has gained 41.6% over the past year to close the last trading session at $83.94.
LOGI’s optimistic fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
LOGI has an A grade for Quality and a B for Growth, Momentum, and Sentiment. Within the A-rated Technology - Hardware industry, it is ranked #5 among 36 stocks.
Click here for LOGI’s additional Value and Stability ratings.
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ZM shares were trading at $67.63 per share on Tuesday afternoon, down $1.30 (-1.89%). Year-to-date, ZM has declined -5.95%, versus a 3.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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