In today's tech-driven landscape, robust growth is on the horizon for the tech hardware industry thanks to increased enterprise reliance and rising demand for computer accessories and digital cameras. So, while quality tech stocks Canon Inc. (CAJPY) and Daktronics, Inc. (DAKT), rated an A (Strong Buy) in our proprietary rating system, could be ideal investments, I think GoPro, Inc. (GPRO) might be best added to watchlist now.
The computer hardware market is experiencing growth due to increased enterprise use for daily operations, rising adoption of process automation across sectors, and expanding personal computer usage for activities like gaming.
Projections indicate that the computer hardware market will achieve a CAGR of 6.6%, reaching $909.80 billion by 2027.
The Organization for Economic Co-operation and Development also predicts that the number of households with computers will rise to 1.26 billion by 2025, offering significant growth potential for PC accessories.
This surge in computer adoption aligns with the expanding trend of digitization, driven by evolving lifestyles and technological innovations, boosting the tech accessories market.
The PC Accessories Market size is estimated at $24.60 billion in 2023 and is expected to reach $43.61 billion by 2028, growing at a CAGR of 12.1%.
Furthermore, the recent advancements in technology and the growing number of digital photography platforms and social media platforms have created new opportunities for the digital camera market. Also, the growing use of mirrorless cameras has increased innovations to make the devices more user-friendly.
As a result, the Digital Camera market is likely to be $5.14 billion this year and is projected to reach $6.51 billion by 2028, growing at a CAGR of 4.9%.
Let us discuss the stocks mentioned above in detail:
Stocks to Buy:
Canon Inc. (CAJPY)
Headquartered in Tokyo, Japan, CAJPY manufactures and sells office multifunction devices (MFDs), laser and inkjet printers, cameras, medical equipment, and lithography equipment worldwide. The company operates through Printing Business Unit; Imaging Business Unit; Medical Business Unit; Industrial Business Unit; and other segments.
CAJPY’s trailing-12-month EBIT and EBITDA margins of 9.04% and 14.51% are 100.3% and 58.5% higher than the 4.51% and 9.51% industry averages.
On August 10, CAJPY announced the acquisition of its own shares, totaling 13,433,500 common stock shares, at a cost of YEN49,999,724,800 ($338 million). The acquisition was carried out between June 16, 2023, and August 9, 2023, on the Tokyo Stock Exchange.
The company pays an annual dividend of $0.96, which translates to a dividend yield of 3.88%. Its four-year average dividend yield is 3.82%.
CAJPY’s net sales for the second quarter ended June 30, 2023, increased 2.2% year-over-year to ¥1.02 trillion ($69 billion). Its operating profit came in at ¥92.27 billion ($623.75 million). The company’s net income attributable to CAJPY increased 10.8% year-over-year to ¥65.40 billion ($442.11 million).
In addition, its EPS came in at ¥64.75, representing an increase of 13.9% year-over-year.
Analysts expect CAJPY’s revenue to increase 5.3% year-over-year to $7.17 billion for the quarter ending September 30, 2023.
The stock gained 13.2% year-to-date to close the last trading session at $24.54.
CAJPY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a B grade for Value, Stability, and Quality. Within the 42-stock Technology - Hardware industry, it is ranked #6.
Beyond what we stated above, we also have given CAJPY grades for Growth, Momentum, and Sentiment. Get all the CAJPY ratings here.
Daktronics, Inc. (DAKT)
DAKT designs, manufactures, markets, and sells electronic display systems and related products for sporting, commercial, and transportation appliances globally. The company operates through Commercial; Live Events; High School Park and Recreation; Transportation; and International segments.
DAKT’s trailing-12-month EBIT and net income margins of 8.80% and 3.84% are higher than the industry averages of 4.51% and 2.03%.
On August 4, DAKT announced that it extended its partnership with the Kraft Group, New England Patriots, and New England Revolution with 14 new LED displays added to the venue in 2023, including the largest outdoor videoboard in a sports venue in the country. The installation took place over the course of this spring and summer at Gillette Stadium in Foxborough, Massachusetts.
During the fiscal first quarter that ended July 29, 2023, DAKT’s net sales rose 35.3% year-over-year to $232.53 million. Its gross profit increased 175.8% year-over-year to $71.15 million. Also, the company reported a net income of $19.20 million and $0.42 per share, compared to a net loss of $5.33 million and $0.12 in the year-ago quarter.
DAKT’s shares gained 217.4% year-to-date and 10.6% over the past month to close the last trading session at $8.95.
It’s no surprise that DAKT has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and Sentiment and a B for Growth and Quality. Within the same industry, it is ranked #2.
In addition to the POWR Ratings stated above, one can access DAKT’s ratings for Momentum, Stability, and Quality here.
Stock to Watch:
GoPro, Inc. (GPRO)
GPRO develops and sells cameras, mountable and wearable accessories, and subscription services and software internationally.
On September 6, GPRO announced its new HERO12 Black camera, raising the bar yet again for the small, rugged, ultra-versatile cameras the company is famous for.
While GPRO’s trailing-12-month asset turnover ratio of 1.01x is higher than the 1x industry average, its trailing-12-month levered FCF margin of 0.51% is 90% lower than the industry average of 5.09%.
GPRO’s revenue for the second quarter ended June 30, 2023, declined 3.9% year-over-year to $241.02 million. The company’s non-GAAP operating loss came in at $12.09 million, compared to a non-GAAP operating income of $14.99 million in the year-ago period.
Its non-GAAP net loss came in at $11.29 million, compared to a non-GAAP net income of $12.79 million in the year-ago quarter. Also, its non-GAAP loss per share came in at $0.07, compared to a non-GAAP EPS of $0.08 in the prior-year quarter.
Street expects GPRO’s revenue to decline 7.8% year-over-year to $281.48 million in the current quarter ending September 2023. But its revenue in the next quarter ending December is expected to rise 5.6% from the previous-year quarter to $338.83 million.
Over the past month, the stock has declined 10.9% to close the last trading session at $3.36.
GPRO’s mixed outlook is reflected in its POWR Ratings. The stock has an overall C rating, which translates to a Neutral in our proprietary system.
It has a B grade for Value and a D for Growth. Within the same industry, it is ranked #30.
Click here to see the other ratings of GPRO for Momentum, Stability, Quality, and Sentiment.
What To Do Next?
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CAJPY shares were trading at $24.65 per share on Friday morning, up $0.11 (+0.45%). Year-to-date, CAJPY has gained 15.44%, versus a 14.60% 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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