Generative AI's ubiquitous integration, the evolution of cloud computing, and consistent innovations should catalyze the technology industry’s growth. Therefore, we delve into the fundamentals of LiveRamp Holdings, Inc. (RAMP), Juniper Networks, Inc. (JNPR), and PAR Technology Corporation (PAR) to assess their prospects.
Based on the factors discussed while assessing the stocks, I believe RAMP is a solid investment to capitalize on the industry's tailwinds. However, investors should wait for a more opportune time to enter JNPR, and PAR is best avoided now.
Before delving into the fundamentals of the featured stocks, let's examine the key factors driving the tech industry’s prospects.
The widespread adoption of generative AI is revolutionizing sectors with enhanced collaboration and personalized digital experiences. While generative AI hasn't profoundly affected IT spending, broader investments in AI are propelling overall growth in IT expenditures.
Gartner (IT) foresees a sweeping transformation by generative AI, projecting its extensive influence over 70% of design and development processes for new web and mobile applications by 2026. Simultaneously, its latest forecast predicts an 8% year-over-year surge in global IT spending, reaching $5.1 trillion in 2024.
Moreover, organizations adopting generative AI services gravitate toward the public cloud to eliminate extensive infrastructure requirements. Global end-user spending on public cloud services is poised for a substantial 20.4% surge year-over-year to reach $678.8 billion in 2024.
Furthermore, the escalating tide of technological innovations, encompassing the Internet of Things (IoT), 5G networks, blockchain, spatial computing, homomorphic encryption, metaverse, 3D printing, additive manufacturing, as well as robotics and automation, is poised to drive substantial industry expansion, significantly expanding its horizons.
The information technology market is expected to grow at a CAGR of 7.9% to reach $12 trillion in 2027, as projected by Report Linker.
Now, let's assess which tech stock is poised for growth, which is advisable to hold, and which stock faces challenges despite the industry tailwinds.
Stock to Buy:
LiveRamp Holdings, Inc. (RAMP)
RAMP innovates a data collaboration platform, LiveRamp, empowering organizations to amalgamate customer and prospect data for a comprehensive customer profile, safeguarding consumer privacy. The platform facilitates diverse people-based marketing solutions, ensuring a singular customer perspective while respecting privacy constraints.
The stock's trailing-12-month gross profit margin of 72.05% is 48% higher than the industry average of 48.67%. Its trailing-12-month levered FCF Margin of 23.86% is 193.9% higher than the 8.12% industry average. Also, RAMP’s trailing-12-month cash from operations of $107.89 million compares to the $71.10 million industry average.
For the fiscal 2024 second quarter that ended September 30, 2023, RAMP’s revenues increased 8.7% year-over-year to $159.87 million. Its adjusted EBITDA rose 77.7% from the year-ago value to $32.38 million.
In addition, non-GAAP net earnings and non-GAAP earnings per share from continuing operations grew 96% and 95.5% from the prior year’s period to $29.13 million and $0.43, respectively.
The consensus revenue estimate of $165.37 million for the fiscal 2024 third quarter ending December 2023 reflects a 4.3% year-over-year improvement. Likewise, the consensus EPS estimate of $0.35 for the ongoing quarter exhibits a 25.3% rise from the prior year's period. Moreover, the company surpassed the consensus EPS estimates in all of the four trailing quarters.
Shares of RAMP have gained 34.8% over the past six months and 54% over the past year to close the last trading session at $32.91.
RAMP’s strong fundamentals are apparent in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
RAMP has a B grade for Growth, Value, Sentiment and Quality. It has topped the 75-stock Technology - Services industry.
In addition to the POWR Ratings I've just highlighted, you can see RAMP’s Momentum and Stability ratings here.
Stock to Hold:
Juniper Networks, Inc. (JNPR)
JNPR innovates and markets network products and services. The company’s array includes ACX series routers for high-bandwidth service deployment, MX series Ethernet routers as a versatile edge platform, PTX series packet transport routers, SDN controllers for wide-area networks, and session smart routers.
JNPR’s trailing-12-month gross profit margin of 57.04% is 17.2% higher than the industry average of 48.67%. The stock's trailing-12-month EBITDA margin of 14.59% is 60.9% higher than the 9.07% industry average. However, its trailing 12-month asset turnover ratio of 0.61x is marginally lower than the 0.62x industry average.
For the fiscal third quarter that ended September 30, 2023, JNPR’s net revenues decreased 1.2% year-over-year to $1.40 billion. However, its non-GAAP operating income marginally rose from the year-ago value to $244.80 billion.
In addition, non-GAAP net income rose 1.6% from the prior year’s period to $193.90 billion, whereas non-GAAP net income per share came in at $0.60, up 3.4% year-over-year.
Analysts expect JNPR’s revenue to decrease 2.9% year-over-year to $1.41 billion for the fiscal fourth quarter ending December 2023. The company's EPS for the ongoing quarter is expected to decline 2.2% from the prior year's period to $0.64. The stock has gained 3.6% over the past month to close the last trading session at $27.49.
JNPR’s prospects are reflected in its POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system.
JNPR has a B grade for Value and Quality. It is ranked #9 out of 46 stocks within the Technology - Communication/Networking industry.
Click here to access the additional JNPR ratings (Growth, Momentum, Stability and Sentiment).
Stock to Sell:
PAR Technology Corporation (PAR)
PAR delivers technology solutions worldwide. Within its Restaurant/Retail segment, the company offers advanced technology platforms tailored to these industries. Whereas, the company's Government segment provides technical expertise and develops sophisticated systems and software solutions for esteemed entities.
The stock's trailing-12-month gross profit margin of 24.17% is 50.4% lower than the industry average of 48.67%. In addition, its trailing-12-month EBITDA margin and net income margin of negative 15.29% and negative 15.92% compare to the industry averages of 9.07% and 1.77%, respectively.
PAR’s operating expenses rose 4.5% year-over-year to $41.37 million for the fiscal third quarter that ended September 30, 2023. Its operating loss stood at $13.19 million. Also, the company registered a net loss and net loss per share of $15.52 million and $0.56, respectively.
In addition, as of September 30, 2023, the company’s cash and cash equivalents amounted to $43.14 million, compared to $70.33 million as of December 31, 2022. Its current assets came in at $188.76 million, down from $223.95 million as of December 31, 2022.
Analysts expect PAR to report a loss per share of $0.26 for the current fiscal quarter ending December 2023. Moreover, the company’s loss per share for the fiscal 2024 first quarter ending March 2024 is expected to come in at $0.24. Over the past three months, the stock has plunged 7.3%, closing the last trading session at $38.00.
PAR’s bleak outlook is apparent in its POWR Ratings. The stock has an overall rating of F, translating to a Strong Sell in our proprietary rating system.
PAR has an F grade for Quality and a D for Value and Sentiment. It has ranked #71 out of 75 stocks in the Technology – Services industry.
Click here to access additional PAR ratings for Growth, Momentum, and Stability.
What To Do Next?
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JNPR shares were unchanged in premarket trading Wednesday. Year-to-date, JNPR has declined -12.07%, versus a 20.28% 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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