The Fed's aggressive interest rate hikes since last year put pressure on tech stocks. However, inflation easing and the likelihood of a pause in interest rate hikes have helped tech stocks recover sharply this year. With rate cuts likely next year, tech stocks should benefit.
To that end, it could be wise to buy fundamentally strong tech stocks Nidec Corporation (NJDCY), Panasonic Holdings Corporation (PCRFY), and AstroNova, Inc. (ALOT).
Before delving further into the fundamentals of the stocks, let's discuss why the tech hardware industry is well-positioned for growth.
Last year, the demand for hardware took a hit due to high inflation and supply chain disruptions. However, the tech hardware industry is well-positioned to grow due to the ever-rising adoption of newer technologies like virtual reality (VR), augmented reality (AR, artificial intelligence (AI), and Internet of Things (IoT), in businesses and digital devices.
Moreover, the demand for specialized hardware is expected to get a boost from quantum computing, edge computing, and data centers. The global IT hardware market is expected to grow at a CAGR of 6.1% until 2027.
Now, let’s take a closer look at the fundamentals of these stocks.
Nidec Corporation (NJDCY)
Headquartered in Kyoto, Japan, NJDCY develops, manufactures, and sells motors, electronics and optical components, and other related products in Japan and internationally.
On August 2, 2023, NJDCY announced the acquisition of Automatic Feed Company, Lasercoil Technologies LLC, and Automatic Leasing Company (collectively the ‘Target’), making them consolidated subsidiaries of NJDCY. The acquisition allows NJDCY to expand its products and services, particularly in the press machine business.
NJDCY’s revenue grew at a CAGR of 14.5% over the past three years. Its EBITDA grew at a CAGR of 7.1% over the past three years. Moreover, its total assets grew at a CAGR of 14.1% over the past three years.
For the fiscal first quarter ended June 30, 2023, NJDCY’s net sales rose 4.8% year-over-year to ¥566.06 billion ($3.93 billion). Its operating profit increased 34.7% year-over-year to ¥60.15 billion ($417.15 million). The company’s profit attributable to owners of the parent rose 55% year-over-year to ¥64.04 billion ($444.13 million). Also, EPS came in at ¥111.45, representing an increase of 55.9% year-over-year.
Street expects NJDCY’s revenue for the quarter ending September 30, 2023, to increase 1% year-over-year to $4 billion. Its EPS for fiscal 2024 is expected to increase 200.4% year-over-year to $0.61. Over the past three months, the stock has gained 8.1% to close the last trading session at $13.78.
NJDCY’s POWR Ratings are consistent with its solid prospects. It has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #9 out of 42 stocks in the Technology - Hardware. It has an A grade for Stability and a B for Sentiment and Quality. Click here to see NJDCY’s ratings for Growth, Value, and Momentum.
Panasonic Holdings Corporation (PCRFY)
Headquartered in Kadoma, Japan, PCRFY researches, develops, manufactures, sells, and services various electrical and electronic products worldwide. It operates through five segments: Lifestyle, Automotive, Connect, Industry, and Energy.
On July 25, 2023, PCRFY announced that they signed a purchase agreement with Nexeon for high-capacity silicon anode material to enhance the performance of lithium-ion batteries for EVs.
This is part of PCRFY's strategy to increase volumetric energy density by 5% in 2025 and 25% by 2030, with a strong partnership with Nexeon.
PCRFY’s revenue grew at a CAGR of 6.5% over the past three years. Its EBITDA grew at a CAGR of 7.3% over the past three years. Moreover, its EPS grew at a CAGR of 35.9% over the past three years.
PCRFY’s sales for the first quarter ended June 30, 2023, rose 2.8% year-over-year to ¥2.03 trillion ($14.08 billion). The company’s operating profit rose 41.9% year-over-year to ¥90.37 billion ($626.73 million). Its net profit attributable to PCRFY rose 310.5% year-over-year to ¥200.93 billion ($1.39 billion). Also, its EPS came in at ¥86.06, representing an increase of 310.4% year-over-year.
Analysts expect PCRFY’s EPS and revenue for the quarter ending September 30, 2023, to increase 39% and 3.8% year-over-year to $0.24 and $14.59 billion, respectively. It surpassed the Street EPS estimates in three of the four trailing quarters. The stock has gained 36.4% year-to-date to close the last trading session at $11.39.
PCRFY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and a B for Stability and Sentiment. Within the same industry, it is ranked first. Beyond the grades mentioned, we have also rated PCRFY for Growth, Momentum, and Quality. Get all ratings here.
AstroNova, Inc. (ALOT)
ALOT designs, develops, manufactures, and distributes specialty printers, and data acquisition and analysis systems in the United States, Europe, Asia, Canada, Central and South America, and internationally. The company operates in two segments, Product Identification (PI) and Test & Measurement (T&M).
On August 1, 2023, ALOT announced the implementation of a realignment of its Product Identification (PI) segment. The realignment is designed to streamline the cost structure and enhance the operational efficiencies of the segment to capitalize on the synergies of its Astro Machine, Inc. subsidiary, which was acquired last August.
ALOT’s President and CEO Greg Woods said, “Leveraging our continuous improvement process and the synergies that we continue to realize with last year’s acquisition of Astro Machine, we have identified opportunities to streamline the selling process and better utilize our manufacturing footprint.”
“Creating a leaner, more efficient PI segment focuses resources on delivering the best solutions for customers and the highest return opportunities for AstroNova,” he added.
ALOT’s revenue grew at a CAGR of 4.7% over the past three years. Its EBITDA grew at a CAGR of 16.5% over the past three years. Moreover, its EPS grew at a CAGR of 81.2% during the same time period.
ALOT’s total revenue for the first quarter ended April 29, 2023, rose 14.2% year-over-year to $35.42 billion. The company’s gross profit increased 15.4% year-over-year to $12.39 million. Its net income increased 99.5% year-over-year to $848 thousand. Additionally, its EPS came in at $0.11, representing an increase of 83.3% year-over-year.
Over the past year, the stock has gained 21.5% to close the last trading session at $14.35.
It’s no surprise that ALOT has an overall rating of B, equating to a Buy in our proprietary rating system.
It has a B grade for Growth, Value, Stability, and Sentiment. It is ranked #6 in the Technology - Hardware industry. To see ALOT’s ratings for Momentum and Quality, click here.
What To Do Next?
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NJDCY shares were trading at $13.76 per share on Friday afternoon, down $0.02 (-0.11%). Year-to-date, NJDCY has gained 8.08%, versus a 17.35% 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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