With the ever-evolving tech industry, marked by escalating investments in AI and automation, pivotal cloud computing trends, and a resurgence in device spending, let us analyze robust tech stocks Cognizant Technology Solutions Corporation (CTSH), Panasonic Holdings Corporation (PCRFY), and M-tron Industries, Inc. (MPTI), which are poised for solid gains.
Gartner forecasts a robust 8% growth in worldwide IT spending, reaching $5.10 trillion in 2024, driven by increased investment in AI and automation. In a closer look, cloud spending fuels double-digit growth in software and IT services segments, with a 20.4% increase in global spending on public cloud services this year.
Besides, device spending is projected to rebound by 4.8% this year, after challenges from inflation in 2022 and 2023. The overall IT market shows positive growth, reflecting the ongoing technological advancements shaping the industry.
Moreover, the rise of the tech sector heavily rides on the widespread adoption of advanced technologies, including Artificial Intelligence (AI), the Internet of Things (IoT), Augmented and Virtual Reality (AR&VR), 5G, and machine learning. The use of these high-end technologies considerably propels the growth narrative in the tech sector.
Additionally, given the rising inflation, the outsourcing sector is flourishing due to its cost-effectiveness, enabling businesses to allocate resources to core activities strategically. The allure is further enhanced by the prospect of accessing a diverse global talent pool and maintaining round-the-clock operations, making it a dynamic and efficient business strategy.
Statista projects that the global IT outsourcing market will reach $512.50 billion in 2024, with a projected surge to $777.70 billion by 2028, reflecting a notable CAGR of 11%.
Given the industry tailwinds, it's time to examine the fundamentals of the top three stocks to watch in the tech industry.
Cognizant Technology Solutions Corporation (CTSH)
CTSH provides consulting, technology, and outsourcing services internationally. It operates through four segments: Financial Services; Health Sciences; Products and Resources; and Communications, Media and Technology.
CTSH’s trailing-12-month EBIT margin of 14.99% is 221.5% higher than the 4.66% industry average. Its trailing-12-month asset turnover ratio of 1.10x is 76.7% higher than the 0.62x industry average.
On February 1st, 2024, CTSH introduced Cognizant Flowsource™️, a generative AI-enabled platform designed to revolutionize enterprise software engineering. This platform integrates all stages of the software development lifecycle, utilizing digital assets and tools to empower cross-functional engineering teams to deliver high-quality code faster, with enhanced control and transparency.
On January 4, CTSH announced that it had been chosen by Fortrea, a leading global provider of clinical development and patient access solutions, as its strategic technology transformation provider.
Through this collaboration, CTSH will assist Fortrea in advancing its mission and providing solutions to pharmaceutical, biotechnology, and medical device customers, all while maintaining a robust and secure digital infrastructure.
It pays $1.16 annually as dividends, which translates to a yield of 1.50%. It has consistently raised its dividend payouts for the past four years.
During the fiscal third quarter, which ended on September 30, 2023, CTSH’s revenues increased marginally year-over-year to $4.90 billion. Its adjusted income from operations came in at $758 million. The company’s net income and EPS amounted to $525 million and $1.04, respectively.
In addition, its total assets stood at $18.08 billion, up 1.3% compared to $17.85 billion as of December 31, 2022.
Street predicts CTSH’s EPS and revenue to rise 4.4% and 2.3% year-over-year to $4,40 and $19.35 billion, respectively, in the fiscal year 2024. Moreover, the company topped its EPS and revenue estimates in three of the trailing four quarters, which is Impressive.
Over the past nine months, the stock has gained 30.4% to close the last trading session at $77.88. It soared 20.8% over the past three months.
CTSH’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating 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.
It has a B grade for Stability and Quality. In the A-rated nine-stock Outsourcing – Tech Services industry, it is ranked #2.
Click here to see CTSH’s ratings for Growth, Value, Momentum, and Sentiment.
Panasonic Holdings Corporation (PCRFY)
Headquartered in Kadoma, Japan, PCRFY is a global electronics company known for developing and selling a wide range of products, from household appliances to automotive technologies. Its operations span lifestyle, automotive, connect, industry, and energy segments.
PCRFY’s trailing-12-month net income margin and ROTA of 5.29% and 4.89% are 13.7% and 21% higher than the respective industry averages of 4.66% and 4.04%, respectively.
On January 9, PCRFY announced a collaboration with Amazon.com, Inc. (AMZN) to integrate Fire TV into its smart TVs starting in 2024, aiming to deliver a personalized and seamless viewing experience. The collaboration focuses on improving image and sound quality and ensuring connectivity across devices, with new products prioritizing an enhanced experiential value for smart TVs.
On the same day, PCRFY’s Panasonic Automotive Systems Company of America, introduced Neuron™, a High-Performance Compute (HPC) system designed to meet the evolving software-defined vehicle advancements.
Neuron™ enables software and hardware upgrades, reducing redundant components and supporting various vehicle platforms. The design aims to maximize performance, safety, and innovation throughout the vehicle's ownership, offering OEMs a future-proof platform for evolving mobility needs.
The company distributes an annual dividend of $0.24, which yields 2.52% on the current market price, higher than the four-year average of 2.44Z%.
In the second quarter that ended September 30, 2023, PCRFY generated net sales of ¥2.09 trillion ($14.12 billion). The company’s gross profit and net profit grew 8.2% and 44.2% year-over-year to ¥606.71 billion ($4.10 billion) and ¥91.47 billion ($617.91 million), respectively. Moreover, its EPS attributable to PCRFY stockholders rose 49.7% from the previous-year quarter to ¥37.45.
PCRFY’s revenue and EPS are expected to grow significantly and 44.9% year-over-year to $56.94 billion and $1.22, respectively, for the fiscal year ending March 2024. The company surpassed the revenue and EPS estimates in three of the trailing four quarters.
Over the past three months, the stock has soared 8% to close the last trading session at $9.44.
PCRFY’s POWR Ratings reflect its bright outlook. The stock 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 in Momentum and Stability. Within the A-rated Technology – Hardware industry, it is ranked #6 out of 36 stocks.
In addition to the POWR Ratings stated above, one can access PCRFY’s ratings for Growth, Sentiment, and Quality here.
M-tron Industries, Inc. (MPTI)
MPTI designs, manufactures, and markets frequency and spectrum control products. Its portfolio is divided into two product groupings: Frequency Control and Spectrum Control.
MPTI’s trailing-12-month net income margin of 9.23% is 340.7% higher than the industry average of 2.09%. Its trailing-12-month ROCE and ROTA of 19.64% and 16.55% are significantly higher than the industry averages of 1.85% and 0.64%, respectively.
In the fiscal third quarter that ended September 30, 2023, MPTI’s revenues and operating income increased 29.4% and 222.7% year-over-year to $10.89 million and $2.03 million, respectively.
Its net income and net income per share stood at $1.59 million and $0.57, up 215.3% and 200% from the prior-year quarter, respectively. Moreover, its adjusted EBITDA and adjusted EBITDA per share stood at $2.34 million and $0.85, up 166.7% and 157.6% from the year-ago quarter, respectively.
Analysts expect MPTI’s revenue and EPS for the fiscal fourth quarter of 2023 (ended December 2023) to increase 29.1% and 345.5% year-over-year to $11.20 million and $0.43, respectively. The company surpassed consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has gained 187.5% over the past six months to close the last trading session at 32.95. Over the past year, it has gained 226.1%.
MPTI’s solid prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system.
MPTI has an A grade for Quality and a B for Growth. It is ranked #5 within the 42-stock Technology – Electronics industry.
To access MPTI’s additional POWR Ratings Value, Momentum, and Stability, click here.
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CTSH shares were trading at $77.60 per share on Friday morning, down $0.28 (-0.36%). Year-to-date, CTSH has gained 2.74%, versus a 3.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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