Technology has always been a driver of change and innovation. Growing demand for 5G networking and the adoption of wireless technology in business organizations are significant growth drivers in the technology industry.
As the industry shows solid potential, fundamentally strong tech stocks Nokia Oyj (NOK), Hewlett Packard Enterprise Company (HPE), and IPG Photonics Corporation (IPGP) might be solid buys.
Accelerated by the COVID-19 pandemic, many organizations have recognized the need for digital adoption in their business activities (e.g., remote work support, software support, and data security).
In order to embrace new technological solutions in a fast, modern, and innovative way, more companies are likely to use external support, which should further expand the global technology market.
Revenue in the IT service market is expected to grow at a CAGR of 6.3%, resulting in a market volume of $561 billion by 2027.
Moreover, the growing demand for high-speed data connectivity for unified Internet of Things (IoT) applications, such as smart home energy management, is estimated to propel the adoption of technological services.
Moreover, the rising focus on building partnerships by 5G system integration providers with telecom operators is estimated to augment the adoption of these services.
The global 5G services are expected to expand at a CAGR of 59.4% until 2030.
In addition, the rising adoption of wireless technology, like Bluetooth, Wi-Fi, and GPS is also expanding the growth scope of the wireless connectivity market. Also, the increasing demand for affordable smart wireless sensors is likely to drive growth.
The global wireless connectivity market is expected to grow at a CAGR of 11.6% to reach $306.85 billion by 2030.
Let’s discuss the stocks mentioned above in detail:
Nokia Oyj (NOK)
Headquartered in Espoo, Finland, NOK provides mobile, fixed, and cloud network solutions worldwide. The company operates in four segments: Network Infrastructure; Mobile Networks; Cloud and Network Services; and Nokia Technologies.
On May 30, 2023, NOK announced new, optimized Core Network software solutions for the field and wide area network needs of public safety and power utilities, expanding the portfolio range available to large, mission-critical enterprises and governments and reflecting NOK’s deeper push into driving continued leadership in private wireless.
On March 7, NOK announced that its Converged Charging software solution had been selected by Hrvatski Telekom to help the Croatian operator modernize online charging and better harness network monetization opportunities that can unlock new revenue streams.
NOK’s trailing-12-month EBITDA margin of 13.95% is 65.2% higher than the 8.44% industry average. Its trailing-12-month net income margin of 16.98% is 618.2% higher than the 2.36% industry average.
NOK pays $0.12 annually as dividends which translates to a yield of 3.29% at the current price. Its 4-year average dividend yield is 1.03%.
NOK’s net sales increased 9.6% year-over-year to €5.86 billion ($6.28 billion) in the fiscal first quarter, which ended March 31, 2023. Its operating profit increased 20.3% year-over-year to €426 million ($456.60 million). Also, its earnings per share increased 366.7% year-over-year to €0.05.
NOK’s revenue is expected to rise 8.1% year-over-year to $6.48 billion for the fiscal second quarter ending June 2023. The company’s EPS for the same quarter is expected to come in at $0.08. Additionally, the stock has topped consensus revenue estimates in each of the trailing four quarters, which is impressive.
The stock has gained 1.5% intra-day to close the last trading session at $4.02.
NOK’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
NOK also has an A grade for Value. It is ranked #13 out of 50 stocks in the Technology - Communication/Networking industry.
To access additional ratings for NOK’s Stability, Sentiment, Growth, Quality, and Momentum, click here.
Hewlett Packard Enterprise Company (HPE)
HPE provides solutions that allow customers to capture, analyze, and act upon data seamlessly in the Americas, Europe, the Middle East, Africa, the Asia Pacific, and Japan. It operates in six segments: Compute; HPC & AI; Storage; Intelligent Edge; Financial Services; and Corporate Investments and Other.
On May 19, 2023, HPE announced that it was selected by the Tokyo Institute of Technology, Global Scientific Information and Computing Center to build its next-generation supercomputer, TSUBAME4.0, to accelerate AI-driven scientific discovery in medicine, materials science, climate research, and turbulence in urban environments.
On May 16, 2023, HPE introduced the next step in the HPE Ezmeral Software platform, designed to help organizations leverage data globally and deploy analytics at scale through a predictable, software-as-a-service (SaaS) solution for hybrid multi-cloud environments.
Its trailing-12-month net income margin of 2.92% is 23.4% higher than the 2.36% industry average. Its trailing-12-month EBIT margin of 8.24% is 89.4% higher than the 4.35% industry average.
HPE pays a $0.48 per share dividend annually, translating to a 3.13% yield on the current price. The company has a four-year average dividend yield of 3.54%.
During the fiscal first quarter ended January 31, 2023, HPE’s net revenue increased 11.2% year-over-year to $7.81 billion. Non-GAAP gross profit increased 13.3% year-over-year to $2.66 billion, while its net earnings per share came in at $0.38.
HPE’s revenue is expected to increase 8.8% year-over-year to $7.30 billion for the fiscal second quarter ending April 2023. Its EPS is expected to grow 10% year-over-year to $0.48 for the same quarter. Also, it has surpassed EPS estimates in three of the trailing four quarters.
Shares of HPE have gained 11.5% over the past nine months to close the last trading session at $15.34.
HPE’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has an A grade for Growth and a B in Value. It is ranked #12 in the same industry.
Beyond what is stated above, we’ve also rated the stock for Sentiment, Quality, Stability, and Momentum. Get all HPE ratings here.
IPG Photonics Corporation (IPGP)
IPGP develops, manufactures, and sells various high-performance fiber lasers, fiber amplifiers, and diode lasers used in multiple applications, primarily in materials processing worldwide.
Its trailing-12-month EBITDA margin of 21.47% is 154.3% higher than the 8.44% industry average. Its trailing-12-month net income margin of 7.14% is 202.1% higher than the 2.36% industry average.
IPGP’s net sales came in at $347.17 million in the fiscal first quarter that ended March 31, 2023. Net income came in at $60.14 million or $1.26 per share. Total operating expenses decreased 9.1% year-over-year to $71.51 million. Also, net cash provided by operating activities increased 127% year-over-year to $37.28 million.
Street expects IPGP’s revenue for the fiscal second quarter ending June 2023 to be $347.13 million. Its EPS is expected to increase 15.9% year-over-year to $1.27 for the same quarter.
The stock has gained 25.7% over the past six months to close the last trading session at $114.61.
IPGP’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.
IPGP has a B grade for Quality and Momentum. It is ranked #14 in the same industry.
Click here for the additional POWR Ratings for IPGP (Growth, Value, Stability, and Sentiment).
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NOK shares rose $0.06 (+1.49%) in premarket trading Tuesday. Year-to-date, NOK has declined -11.34%, versus a 10.90% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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