The tech sector is set for strong growth due to increased spending on AI, cloud computing, and cybersecurity. Analysts expect growth in 2024 from greater tech adoption in businesses, education, and healthcare, and the shift to hybrid work environments. Moreover, government support for innovation also boosts the tech industry's prospects.
Against this backdrop, investors might consider investing in fundamentally robust tech stocks such as Viavi Solutions Inc. (VIAV), Pitney Bowes Inc. (PBI), and Sabre Corporation (SABR). Priced under $10, these stocks are primed for explosive growth.
Rising demand for faster connectivity, improved workspace standards, and digitization across sectors boosts industry prospects. Technology enhances operations, resilience, and productivity. Notably, Gartner forecasts a 9.7% increase in IT services spending, reaching $1.52 trillion this year.
The U.S. government's $504 million investment in Tech Hubs this year will boost the tech industry by funding critical projects, creating jobs, and enhancing U.S. competitiveness. This supports the rising demand for high-quality hardware to meet complex processing needs, driving growth in hardware sales. The IT hardware market is projected to grow at a 7.9% CAGR, reaching $191.03 billion by 2029.
On top of it, the global optical transport network equipment market is expected to grow by $5.54 billion from 2024 to 2028, with a CAGR of 3.91%. This growth is fueled by increasing demands for high-speed data transmission, driven by trends like cloud computing and 5G, and enhanced efficiency and capacity through technologies like WDM and SDN.
Considering these conducive trends, let’s assess the fundamentals of the abovementioned tech stocks.
Viavi Solutions Inc. (VIAV)
VIAV provides network test, monitoring, and assurance solutions for communications service providers, hyperscalers, network equipment manufacturers, original equipment manufacturers, and government and avionics customers in the Americas, the Asia-Pacific, Europe, the Middle East, and Africa.
In terms of the trailing-12-month gross profit margin, VIAV’s 58.59% is 19.2% higher than the 49.15% industry average. Likewise, its 9.89% trailing-12-month levered FCF margin is marginally higher than the 9.81% industry average. Also, its 2.28% trailing-12-month Capex / Sales is 1.1% higher than the 2.26% industry average.
During the third quarter that ended March 30, 2024, VIAV reported net revenue of $246 million. Its non-GAAP net income and non-GAAP EPS came in at $13.20 million and $0.06 for the quarter, respectively. In addition, the company’s total liabilities and stockholders' equity amounted to $1.74 billion, compared to $1.85 billion as of March 30, 2024.
Street expects VIAV’s EPS and revenue for the quarter ending September 30, 2024, to increase 1.6% and 1.9% year-over-year to $0.09 and $252.70 million, respectively. Over the past month, the stock has gained marginally to close the last trading session at $7.58.
VIAV’s POWR Ratings reflect strong prospects. It has an overall rating of B, translating to a Buy in our proprietary system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #10 out of 42 stocks in the Technology - Communication/Networking industry. It has a B grade for Growth, Value, and Quality. Click here to see VIAV’s ratings for Momentum, Stability, and Sentiment.
Pitney Bowes Inc. (PBI)
PBI is a shipping and mailing company that provides technology, logistics, and financial services to small and medium-sized businesses, large enterprises, retailers, and government clients internationally. It operates through Global E-commerce, Presort Services, and Sending Technology Solutions (SendTech Solutions) segments.
On June 3, 2024, PBI announced the opening of a new 45,000-square-foot Presort Services operating center in Maryland Heights, MO, serving the St. Louis market. The facility processes up to 1.2 million mail pieces daily, enhancing efficiency and service capabilities.
On April 22, 2024, PBI announced the launch of SendPro MailCenter in Canada, an advanced all-in-one mailing and shipping system designed to enhance productivity and savings for high-volume mailers. The system features a 15” color touchscreen, streamlined workflows, and multi-carrier shipping capabilities, including integration with Canada Post, UPS, FedEx, and Purolator.
PBI’s revenue grew at a CAGR of 1% over the past three years.
In terms of the trailing-12-month gross profit margin, PBI’s 31.45% is 1.1% higher than the 31.11% industry average.
PBI’s total revenue for the fiscal first quarter that ended March 31, 2024, came in at $830.51 million. Similarly, its adjusted net income before tax stood at $12.04 million, compared to an adjusted net loss before tax of $3.86 million in the year-ago quarter. Also, the company’s adjusted EBIT and EBITDA increased 70.8% and 33.4% from the year-ago quarter to $56.41 million and $97.29 million, respectively.
For the quarter ending September 30, 2024, PBI’s revenue is expected to increase marginally year-over-year to $787.60 million. Its EPS for the quarter ending December 31, 2024, is expected to increase 21.4% year-over-year to $0.09. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 83.8% to close the last trading session at $6.71.
PBI’s robust fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Growth. Within the B-rated Technology - Hardware industry, it is ranked #16 out of 39 stocks. To access the additional POWR Ratings of PBI for Value, Momentum, Stability, Sentiment, and Quality, click here.
Sabre Corporation (SABR)
SABR and its subsidiaries operate as a software and technology company for the travel industry internationally. It operates through two segments: Travel Solutions and Hospitality Solutions.
On June 24, 2024, SABR’s Hospitality announced the launch of SynXis Retailing, a comprehensive retailing solution that includes standalone offers and automated fulfillment, enhancing revenue opportunities and guest satisfaction for hoteliers.
This new platform enables the sale of experiences and services beyond room reservations, with automated fulfillment powered by Nuvola.
On June 20, 2024, SABR and Spotnana announced an expanded partnership to integrate SABR's New Distribution Capability (NDC) content into Spotnana's Travel-as-a-Service platform, enhancing booking options and personalization for corporate travelers. This integration simplifies the booking process and offers a wider range of travel choices for travel management companies (TMCs).
SABR’s revenue grew at a CAGR of 43.3% over the past three years.
In terms of the trailing-12-month Capex / Sales, SABR’s 3.29% is 8.6% higher than the 3.03% industry average. Similarly, its 59.61% trailing-12-month gross profit margin is 61.7% higher than the industry average of 36.86%. Its 7.83% trailing-12-month EBIT margin is 1.1% higher than the industry average of 7.74%.
SABR’s revenues for the first quarter ended March 31, 2024, increased 5.4% year-over-year to $782.89 million. The company’s adjusted operating income increased 325.5% year-over-year to $117.77 million. Its adjusted EBITDA grew 145.1% from the year-ago value to $142.31 million.
Additionally, SABR’s total current assets as of March 31, 2024, stood at $1.23 billion, compared to $1.16 billion as of December 31, 2023.
Analysts expect SABR’s revenue for the quarter ended June 30, 2024, to increase 2.5% year-over-year to $755.95 million. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past three months, the stock has gained 17.7% to close the last trading session at $3.12.
SABR’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It is ranked #21 out of 79 stocks in the Technology - Services industry. It has a B grade for Growth, Value, and Momentum. To see SABR’s Stability, Sentiment, and Quality ratings, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
VIAV shares were trading at $7.75 per share on Monday afternoon, up $0.17 (+2.24%). Year-to-date, VIAV has declined -23.04%, versus a 19.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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