Despite contending with considerable macroeconomic challenges, the technology sector has demonstrated a steady recovery. The tech sphere is brimming with opportunities stemming from swift technological assimilation across diversified sectors.
Upon careful analysis, high-volume tech stocks HP Inc. (HPQ) and Dell Technologies Inc. (DELL) appear solid candidates to buy. On the other hand, I believe Apple Inc. (AAPL) should be kept on one's watchlist for now.
But before we delve into the fundamentals of the stocks listed above, let’s understand the tech sector's potential.
Technological strides persist in facilitating our lives and making formerly costly or ostensibly unattainable services readily accessible within our homes. It is currently poised for growth stimulated by the swift digital shift enveloping various sectors, including healthcare, automotive, and real estate.
The extensive incorporation of an array of cutting-edge technologies by individuals and businesses, such as Artificial Intelligence (AI), the Internet of Things (IoT), Augmented and Virtual Reality (AR&VR), 5G, and machine learning, is substantially contributing to the expansion of the industry.
AI hardware is swiftly gaining popularity in diverse industries. The widespread use of robotics and AI across various sectors is anticipated to stimulate the demand for the corresponding hardware. Consequently, the global AI in hardware market is projected to exceed $89.22 billion by 2030, marking a CAGR of 26.96%.
The global hardware market is projected to reach $164.21 billion by 2027, growing at a CAGR of 7.9%.
Investors’ interest in tech stocks is evident from the Technology Select Sector SPDR Fund’s (XLK) 41.2% returns year-to-date, which outpaced the broader S&P 500’s 17.6% gain.
The volume of shares traded signifies the quantity of shares exchanged during a specific period. This measure can help in apprehending investor sentiment and liquidity. However, it is advisable to couple it with additional indicators for a more rounded understanding of market activities.
With this foundation, let's look at the fundamentals of the three high-volume Technology – Hardware stocks, beginning with number 3.
Stock #3: Apple Inc. (AAPL)
AAPL designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories and sells various related services. Its product offerings include iPhone, Mac, AirPods Max, iPad, Apple TV, Apple Watch, HomePod, and accessories.
AAPL has been diligently focused on R&D for a long time, seeking methods to streamline production and reduce costs. The company is currently experimenting with 3D printing technology to develop the steel casing of the upcoming Apple Watch 9. This revolutionary process, under development for many years, represents a potential leap in manufacturing efficiency. It could significantly reduce metal usage in production, is cost-effective, and offers certain environmental benefits.
On June 21, AAPL launched the visionOS software development kit to enable its developer community to bring more smoothness to its app user experience. This new feature would allow users to interact with digital content in their physical space using natural and intuitive inputs.
This innovation should enable users to utilize the kit’s powerful and unique capabilities to improve their productivity, design, and gaming experience.
AAPL pays an annual dividend of $0.96 per share, translating to a dividend yield of 0.51%. Its four-year average yield is 0.71%. The company’s dividend payouts have grown at CAGRs of 5.7% and 6.7% over the past three and five years, respectively. Also, it has a record of nine years of consecutive dividend growth.
AAPL’s trailing-12-month cash from operations of $113.07 billion is significantly higher than the industry average of $60.08 million. Also, the stock’s trailing-12-month ROCE and ROTC of 160.09% and 40.39% are significantly higher than the industry averages of 1.01% and 2.47%, respectively.
In the fiscal third quarter that ended July 1, 2023, AAPL’s total net sales stood at $81.80 billion, down 1.4% year-over-year, while gross margin grew 1.5% from the prior-year quarter to $36.41 billion. Its operating income stood at $23 billion.
During the same quarter, the company’s net income and earnings per share increased 2.3% and 5% from the year-ago quarter to $19.88 billion and $1.26, respectively. In addition, as of July 1, 2023, its total current liabilities stood at $124.96 billion, compared to $153.98 billion as of September 24, 2022.
Street expects AAPL’s revenue to decrease marginally year-over-year in the fiscal fourth quarter (ending September 2023) to $89.29 billion. Its EPS for the quarter is expected to rise 7.6% year-over-year to $1.39. Moreover, it surpassed the EPS estimates in three of the trailing four quarters.
AAPL’s shares have gained 27.5% over the past six months to close the last trading session at $187.87. The stock gained 44.6% year-to-date. Moreover, AAPL currently has a trading volume of 60,579,365, while the average volume is 56,223,866.
AAPL’s fundamentals are reflected in its POWR Ratings. The stock has an overall C rating, equating to Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. The stock has a C grade for Momentum, Stability, and Sentiment.
Among the 42 stocks in the Technology – Hardware industry, it is ranked #21.
To see additional POWR Ratings for Growth, Value, and Quality for AAPL, click here.
Stock #2: Dell Technologies Inc. (DELL)
DELL designs, develops, manufactures, markets, sells, and supports several comprehensive and integrated solutions, products, and services in the Americas, Europe, the Middle East, Asia, and internationally. The company operates through two segments: Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG).
Recently, DELL has partnered with Denvr Dataworks, an emerging provider of high-performance cloud infrastructure, to help organizations to harness the power of generative AI (GenAI). This collaboration merges DELL’s PowerEdge XE9680 server’s security and reliability with Denvr Dataworks' delivery of high-performance cloud computing optimized for AI.
This synergy allows organizations to spend less time configuring their environments and start producing groundbreaking AI results faster. The collaboration would be a solid foundation for customers to accelerate enterprise-wide adoption of GenAI to drive meaningful growth across their businesses.
On August 4, DELL paid the shareholders a quarterly dividend of $0.37 per common share. The company’s annual dividend of $1.48 per share translates to a 2.66% dividend yield at the current price level. Its four-year average dividend yield is 0.75%.
DELL’s trailing-12-month cash from operations of $5.61 billion is significantly higher than the industry average of $60.08 million. Its trailing-12-month asset turnover ratio of 1.13x is 82.6% higher than the industry average of 0.62x.
During the fiscal second quarter that ended August 4, 2023, DELL’s total net revenue stood at $22.93 billion. Its gross margin came in at $5.39 billion. Its non-GAAP operating income grew 1.3% year-over-year to $1.98 billion. Its non-GAAP net income and non-GAAP earnings per share amounted to $1.28 billion and $1.74, up 1.3% and 3.6% year-over-year, respectively.
For the same quarter, DELL’s change in cash from operating activities increased 343.9% year-over-year to $3.21 billion. Its cash, cash equivalents, and restricted cash stood at $8.65 billion, up 42% year-over-year. The company returned $525 million to shareholders in the second quarter through share repurchases and dividends.
DELL’s revenue and EPS for the fiscal year ending January 2024 are expected to come at $90.12 billion and $6.31, respectively. The company surpassed consensus revenue and EPS estimates in each of the trailing four quarters.
The stock gained 46.9% over the past year to close its last trading session at $56.24. Over the past six months, the stock gained 38.4%. Moreover, DELL currently has a trading volume of 5,220,039, while its average volume is 4,138,356. This indicates a significant increase in investors’ interest in the company.
DELL’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
DELL has a B grade for Value and Sentiment. Within the same industry, DELL is ranked #12.
Beyond what we’ve stated above, we have also rated the stock for Growth, Momentum, Stability, and Quality. Get all ratings of DELL here.
Stock #1: HP Inc. (HPQ)
HPQ provides personal computing and other access devices, imaging and printing products, and related technologies, solutions, and services in the United States and internationally. The company operates through three segments: Personal Systems; Printing; and Corporate Investments.
HPQ’s dividend payment of $0.2625 per share in the third quarter resulted in cash usage of $0.3 billion. The company’s annual dividend of $1.05 per share translates to a 3.58% dividend yield at the current price level. Its four-year average dividend yield is 3.15%.
The company’s dividend payouts have grown at CAGRs of 14.6% and 13.5% over the past three and five years, respectively. Also, it has a record of 12 years of consecutive dividend growth.
On May 2, 2023, HPQ announced new automation solutions and expanded materials, software, and services to help customers scale 3D printed parts production. HP has also promoted several of its current Digital Manufacturing Network members to its exclusive group of HP Digital Manufacturing Partners.
HPQ’s trailing-12-month ROTC of 30.51% is significantly higher than the 2.47% industry average. Its trailing-12-month cash from operations of $3.50 billion is significantly higher than the industry average of $60.08 million.
For the fiscal third quarter that ended July 31, 2023, HPQ’s net revenue stood at $13.20 billion, while its non-GAAP operating margin came at 8.8%. The company’s non-GAAP net earnings stood at $859 million, while non-GAAP earnings per share came at $0.86.
Its cash inflow from operating activities rose 147.7% from the year-ago quarter to $976 million. Furthermore, the company’s free cash flow grew 214% year-over-year to $900 million.
HPQ’s revenue and EPS are expected to come at $53.80 billion and $3.32, respectively, for the fiscal year ending October 2023. In addition, analysts expect the company’s revenue and EPS for the fiscal year ending October 2024 to increase 2.7% and 4.8% year-over-year to $55.25 billion and $3.48, respectively.
The stock has gained 10.6% year-to-date to close the last trading session at $29.71. Over the past three months, it gained 2.2%. Moreover, HPQ currently has a trading volume of 9,883,342, while the average volume is 6,706,279.
HPQ’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
HPQ has a B grade for Growth, Value, and Quality. It is ranked #9 in the same industry.
Click here for the additional POWR Ratings for HPQ (Momentum, Stability, and Sentiment).
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
AAPL shares rose $1.24 (+0.66%) in premarket trading Friday. Year-to-date, AAPL has gained 45.74%, versus a 19.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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