The technology industry's long-term prospects glisten with promise. However, as a bearish tide looms over the broader stock market, a window of opportunity has opened up to load up on robust tech stocks Concentrix Corporation (CNXC), Box, Inc. (BOX), and LiveRamp Holdings, Inc. (RAMP) that are trading at a discount but are primed for lasting gains.
Let us discuss this in detail.
Technology reigns supreme in our modern world, making the tech industry an unrivaled powerhouse. Its vast magnitude has established it as a dominant sector in the global economy, and its rapid expansion and ever-changing nature have made it a central player in shaping business standards and regulations.
Companies have been fervently investing in technology and its management services. For instance, the shift toward cloud-based software. This transition has enabled cost reduction, scalability, accelerated innovation, enhanced collaboration, flexibility, and efficient adaptation to changing demands.
Gartner forecasts global IT spending to grow 5.5% this year. Meanwhile, according to ReportLinker, the global IT Services Market size is expected to grow at an 8.4% CAGR reaching $2.01 trillion by 2028.
The industry's long-term prospects shine with promise. Despite current headwinds and the industry being “crowded,” tech stocks have seen a notable increase in investor allocation, rising 14 percentage points in the past month to reach 16% overweight, the highest level since December 2021.
The prevailing bearish sentiment can paradoxically fuel further stock market growth as skeptics are swayed by rising prices and start investing, driving prices even higher. In light of this, let's explore solid undervalued tech stocks with long-term potentials, such as CNXC, BOX, and RAMP, which are primed to soar.
Concentrix Corporation (CNXC)
CNXC is a leading provider of Customer Experience (CX) solutions and technology. It optimizes CX processes and provides innovative tech, automation, analytics, and business transformation. In addition, the company’s integrated solutions support customer lifecycle, including CX/UX strategy, design, and actionable insights.
On March 29, CNXC announced that it would combine with Webhelp in a deal worth approximately $4.80 billion, including net debt. Webhelp, a renowned market leader, specializes in CX, sales, marketing, and payment services and has a robust presence in Europe, Latin America, and Africa for client engagement and delivery.
The alliance would enhance CNXC's position in the $550 billion+ CX market. It would also diversify its client base, adding 1,000+ clients, including Fortune Global 500 and new economy clients. Moreover, Webhelp would enable CNXC's sales presence in 12 countries.
In terms of forward non-GAAP P/E, CNXC is trading at 7.72x, 52.7% lower than the industry average of 16.34x. The stock’s forward EV/EBITDA of 6.53x is 37.1% lower than the industry average of 10.39x. In addition, the stock’s forward Price/Sales of 0.70x compare with the 1.28x industry average.
During the fiscal first quarter that ended February 28, CNXC’s revenue increased 6.5% year-over-year to $1.64 billion. Its non-GAAP operating income rose 7.8% year-over-year to $217.60 million.
Additionally, the company’s adjusted EBITDA grew 7.5% from the year-ago value to $255.80 million. As of February 28, 2023, the company’s cash and cash equivalents stood at $178.39 million, compared to $145.38 million as of November 30, 2022.
The consensus revenue estimate of $6.77 billion for the fiscal year ending November 2023 reflects a 7.1% year-over-year improvement. Likewise, the EPS revenue estimate of $11.79 for the current year indicates a marginal rise year-over-year. The stock has gained 2.1% over the past five days to close the last trading session at $88.00.
CNXC’s robust fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
CNXC has a B grade for Growth. It is ranked #14 in the 80-stock Technology - Services industry.
In addition to the POWR Ratings I’ve just highlighted, you can see CNXC’s ratings for Growth, Momentum, Sentiment, Stability, and Quality here.
Box, Inc. (BOX)
BOX provides a cloud content management platform for secure access and sharing of content. Its Software-as-a-Service enables collaboration, automates processes, develops custom apps, and ensures data protection and compliance with legal and industry standards.
On May 2, BOX unveiled Box AI, an innovative suite of capabilities that integrates advanced AI models directly into the Box Content Cloud. This integration ensures that Box's enterprise-grade standards for security, compliance, and privacy extend to this groundbreaking technology.
This move positions BOX favorably in the current surge of AI adoption. By integrating advanced AI models into the Box Content Cloud, BOX can capitalize on the growing demand for AI technology, enabling it to deliver enhanced solutions while maintaining its strong financial standing.
In terms of forward non-GAAP P/E, BOX is trading at 18.72x, 5.7% lower than the industry average of 19.84x. Also, its forward non-GAAP PEG and forward Price/Cash Flow of 0.94x and 12.11x compare with the industry averages of 1.64x and 18.77x, respectively.
For the fourth quarter of the fiscal year 2023 that ended January 31, BOX’s non-GAAP gross profit grew 14.9% year-over-year to $201.26 million. Its non-GAAP operating income came in at $66.56 million, up 37.3% year-over-year.
In addition, non-GAAP net income attributable to common stockholders increased 52.7% from the prior year’s period to $56.29 million, while non-GAAP EPS rose 54.2% year-over-year to $0.37.
Analysts expect BOX’s revenue to increase 6.5% year-over-year to $1.06 billion for the fiscal year ending January 2024. The company’s EPS for the ongoing year is expected to grow 20.3% from the prior year to $1.44. Moreover, BOX surpassed the consensus EPS estimates in three of four trailing quarters.
Shares of BOX marginally plummeted over the past five days to close the last trading session at $26.71.
BOX’s positive outlook is apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system.
BOX has an A grade for Growth and Quality and a B for Value. It has ranked #8 within the Technology – Services industry.
Click here to access additional BOX ratings for Momentum, Stability, and Sentiment.
LiveRamp Holdings, Inc. (RAMP)
RAMP is a global technology company that offers an enterprise data connectivity platform. It helps organizations leverage customer data, enabling them to connect, control, and activate data for improved customer experiences. RAMP also allows access to and utilization of data across customer interaction applications.
On March 1, RAMP partnered with Adobe Real-Time Customer Data Platform (CDP), part of Adobe Experience Cloud, to integrate RAMP's people-based identifier RampID. The collaboration enables marketers to activate customer data on RampID through the RAMP app on Adobe Exchange, connecting with DSPs, SSPs, CTV destinations, and premium publishers.
RAMP's partnership with Adobe streamlines the utilization of RampID, simplifying the process for marketers to leverage it with just a few clicks. This also enables direct-to-destination activation, providing immediate scalability and empowering RAMP to offer marketers a seamless and efficient data activation solution.
In terms of forward non-GAAP PEG, RAMP is trading at 0.60x, 63.3% lower than the 1.64x industry average. Also, the stock’s forward EV/Sales of 1.99x is 24.4% lower than the industry average of 2.64x, and its forward Price/Book of 1.70x compares with the 3.56x industry average.
During the third quarter of the fiscal year 2023, which ended December 31, 2022, RAMP’s revenues increased 12.8% year-over-year to $158.62 million. Its gross profit grew 13% from the year-ago value to $115.33 million. Its adjusted EBITDA came in at $26.66 million, up 68.8% year-over-year.
Moreover, non-GAAP net earnings from continuing operations rose 86.8% from the prior year’s quarter to $18.54 million, while non-GAAP earnings per share from continuing operations stood at $0.28, a 100% year-over-year rise.
The consensus revenue estimate of $598.34 million for the fiscal year that ended March 2023 reflects a 13.2% year-over-year improvement. Likewise, the consensus revenue estimate of $0.73 for the same year indicates a 52.9% rise year-over-year. Also, the company surpassed the consensus revenue estimates in all four trailing quarters, which is impressive.
Furthermore, the consensus revenue and EPS estimate of $622.84 million and $1.07 for the ongoing fiscal year ending March 2024 reflect a 4.1% and 45.8% year-over-year improvement, respectively. Over the past six months, the stock has gained 13.1% to close the last trading session at $24.88.
RAMP’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
RAMP has a B grade for Growth, Value, and Sentiment. It has ranked #10 within the same industry.
Click here to access additional RAMP ratings (Quality, Stability, and Momentum).
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CNXC shares were trading at $88.35 per share on Wednesday afternoon, up $0.35 (+0.40%). Year-to-date, CNXC has declined -33.33%, versus a 8.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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