Despite facing a setback owing to several macroeconomic factors last year, the tech industry made a robust recovery propelled by powerful megatrends such as the Internet of Things (IoT), Artificial Intelligence (AI), and 5G connectivity.
In light of such megatrends, it could be an opportune time to load up the shares of four fundamentally sound tech stocks Panasonic Holdings Corporation (PCRFY), Spirent Communications plc (SPMYY), Daktronics, Inc. (DAKT), and TransAct Technologies Incorporated (TACT), which seem well-equipped to capitalize on the industry tailwinds.
The ongoing digital transformation across sectors is driving a surge in investments in data center infrastructure, networking solutions, and cloud architecture, propelling the hardware industry forward. The need for robust and compatible hardware solutions is rising in response to this growing adoption of digital transformation strategies across diverse sectors.
The global hardware market expanded from $111.44 billion in 2022 to $121.34 billion in 2023, exhibiting an impressive CAGR of 8.9%. This upward trajectory is projected to continue as the hardware market is forecasted to reach $164.21 billion in 2027, with a CAGR of 7.9%.
Moreover, ever since the debut of OpenAI’s ChatGPT last year, the AI movement has witnessed significant momentum. AI remains a pivotal focus of this year, with various sectors incorporating AI to enhance efficiency and decision-making.
For instance, AI’s integration into hardware devices and systems, such as Graphics Processing Units (GPUs), AI Central Processing Units (CPUs), Tensor Processing Units (TPUs), and specialized AI processors for hardware services, is anticipated to drive the expansion of the market.
The global AI in hardware market is projected to hit $20.88 billion in 2023, growing at a CAGR of 24.1%, and is poised to reach a value of $48.18 billion by 2027, showcasing a CAGR of 23.3%.
Given the industry’s bright growth prospects, investors could consider buying the shares of PCRFY, SPMYY, DAKT, and TACT.
Let us delve deeper into the fundamentals of these stocks to gain a better perspective.
Panasonic Holdings Corporation (PCRFY)
Headquartered in Kadoma, Japan, PCRFY manufactures and sells various electronic products through five segments: Lifestyle; Automotive; Connect; Industry; and Energy. Its main product offerings include automotive-use batteries, refrigerators, and industrial motors and sensors.
On July 26, PCRFY strategically chose to invest in DayBreak Co., Ltd, which specializes in advanced freezing technology solutions and is dedicated to addressing issues such as labor shortages, food loss, maintaining freshness, and other food-related challenges. By investing in DayBreak, PCRFY aims to revolutionize the frozen food distribution system and bring added value to the industry.
This development underscores PCRFY’s dedication to establishing itself as the leading partner in enhancing people’s lives through technology and innovation, strongly emphasizing solutions that revolve around human well-being.
In the same month, Panasonic Energy Co., Ltd., a subsidiary of PCRFY, entered into an agreement to purchase silicon anode material for automotive batteries from Nexeon Limited, a company based in the U.K. The primary objective of this purchase is to elevate the performance of lithium-ion batteries employed in electric vehicles (EVs).
The silicon anode material developed by Nexeon is set to assume a pivotal role in producing lithium-ion batteries at a newly established facility in De Soto, Kansas, United States, scheduled to commence operations in 2025.
During the fiscal first quarter that ended June 30, 2023, PCRFY’s net sales increased 2.8% year-over-year to ¥2.03 trillion ($14 billion), while its operating profit rose 41.9% from the year-ago value to ¥90.37 billion ($623.30 million). In addition, the company’s net profit improved 292.8% from the prior-year quarter to ¥206.50 billion ($1.42 billion), and EPS stood at ¥86.06, up 310.4% year-over-year.
Analysts expect PCRFY’s revenue and EPS for the second quarter (ending September 30, 2023) to increase 3.8% and 38.9% year-over-year to $14.59 billion and $0.24, respectively. The company has an impressive surprise history, surpassing the consensus revenue and EPS estimates in three of the trailing four quarters.
Over the past three years, its revenue and EBITDA have increased at CAGRs of 6.5% and 7.3%, respectively. Likewise, its EPS has grown at a 35.9% CAGR over the same period.
The stock has gained 36.4% year-to-date to close the last trading session at $11.39.
PCRFY’s POWR Ratings reflect this robust outlook. The company has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Value and a B for Stability and Sentiment. Among the 42 stocks in the Technology - Hardware industry, it is ranked first. To see the other ratings of PCRFY for Growth, Momentum, and Quality, click here.
Spirent Communications plc (SPMYY)
Headquartered in Crawley, the United Kingdom, SPMYY offers automated test and assurance solutions in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. The company operates in Lifecycle Service Assurance and Networks & Security segments.
On June 29, SPMYY revealed that Indonesia’s recently established Telecommunication Equipment Testing Center (BBPPT) has opted for SPMYY’s technology to execute high-speed Ethernet network equipment assessments and electromagnetic compatibility (EMC) evaluations.
The utilization of SPMYY’s TestCenter empowers laboratories to efficiently undertake sophisticated testing functionalities, encompassing extensive scalability, automated processes, and instantaneous reporting for intricate network systems.
On February 28, SPMYY partnered with Microsoft to pre-certify third-party network functions (NFs) on the recently introduced Microsoft Azure Operator Nexus platform. Spirent Landslide possesses the capacity to guarantee the smooth compatibility of NF offerings with the Azure Operator Nexus platform, facilitated by the Azure Operator Nexus Ready program.
Commenting on this, Ross Ortega, VP Azure for Operators at Microsoft, said, “Spirent provides the testing capabilities and experience required, and we see Spirent Landslide as a critical component of our Azure Operator Nexus Ready program, ensuring the smooth deployment of 5G service offerings.”
For the six-month period, which ended on June 30, 2023, SPMYY’s revenue amounted to $223.90 million, while its adjusted operating profit came in at $11.60 million. Moreover, the company’s adjusted profit and EPS stood at $12.60 million and 2.10 cents, respectively.
Additionally, SPMYY’s revenue has grown at a CAGR of 1.9% and 4.1% over the past three and five years. While its levered FCF improved at a CAGR of 1.9% over the past three years.
The stock has gained marginally over the past month to close the last trading session at $8.35.
SPMYY’s strong prospects are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Stability and Quality and a B for Value. Within the same industry, it is ranked #2. Click here to see the other ratings of SPMYY for Growth, Momentum, and Sentiment.
Daktronics, Inc. (DAKT)
DAKT designs, manufactures, markets, and sells electronic display systems and related products for sporting, commercial, and transportation appliances globally. The company operates through Commercial; Live Events; High School Park and Recreation; Transportation; and international segments.
On May 11, DAKT bolstered its financial position by finalizing a new 3-year senior secured credit facility (the New Senior Debt Facility) amounting to $75 million, with JPMorgan Chase maturing May 11, 2026. Additionally, DAKT closed a convertible debt financing agreement (the Junior Capital Financing) worth $25 million with major shareholder Alta Fox Capital Management, LLC.
DAKT’s Board of Directors is of the opinion that the finalization of these transactions equips the company with the necessary working capital and liquidity to sustain the execution of its business plan and advance its growth strategy.
On April 3, DAKT was chosen by the Green Bay Packers to enhance the fan experience through LED video displays. This includes producing and installing two primary video displays, two supplementary video displays, and 60 LED displays along the concourse at Lambeau Field in Green Bay, Wisconsin. The setup, which encompasses roughly 24,500 square feet of LED displays, amounting to 79.5 million pixels, is scheduled for installation during the spring of 2023.
In the fourth quarter that ended April 29, 2023, DAKT’s net sales increased 29.4% year-over-year to $209.86 million, and its gross profit grew 74.2% from the year-ago value to $52.14 million.
The company’s net income and earnings per share amounted to $21.40 million and $0.47, compared to a loss of 1.12 million and $0.02 per share in the previous year’s quarter, respectively. Also, the company’s operating income was $18.26 million versus a loss of $319 thousand in the prior-year quarter.
The consensus revenue estimate of $845.70 million for the fiscal year (ending April 2024) reflects a 12.1% year-over-year improvement. The $0.69 consensus EPS estimate for the ongoing year represents a 360% rise year-over-year. In addition, DAKT’s EPS is projected to improve by 10% per annum over the next five years.
Moreover, its revenue and EBIT have grown at CAGRs of 7.4% and 138.9% over the past three years, respectively. Likewise, its net income and EPS have increased at CAGRs of 140.3% and 146.5% over the same period, respectively.
DAKT’s shares have gained 181.9% year-to-date and 117.2% over the past nine months to close the last trading session at $7.95.
It’s no surprise that DAKT has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It has an A grade for Growth and a B for Value and Sentiment. Within the same industry, it is ranked #3.
Beyond what we stated above, we also have DAKT’s ratings for Momentum, Stability, and Quality. Get all DAKT ratings here.
TransAct Technologies Incorporated (TACT)
TACT designs, develops, and markets transaction-based and specialty printers and terminals worldwide. It offers thermal printers and terminals to generate labels, coupons, and transaction records, such as receipts, tickets, and other documents, as well as printed logging and data plotting.
On May 2, TACT introduced the latest innovation in its lineup, the BOHA! Terminal 2. This advanced food safety and FDA-compliant grab ‘n go labeling solution represents an evolution from the original BOHA! Terminal, and boasts enhanced speed, superior print resolution, extended label widths, increased screen brightness and sensitivity, and heightened flexibility.
TACT’s net sales for the fiscal second quarter (ended June 30, 2023) amounted to $19.91 million, up 57.7% year-over-year, whereas its gross profit increased 99.8% from the prior-year quarter to $10.86 million. Also, its operating income came in at $1.22 million versus an operating loss of $2.95 million in the year-ago quarter.
Its net income came in at $765 thousand and $0.08 per share, compared to the prior-year quarter’s net loss of $2.38 million and $0.24 per share, respectively. TACT’s adjusted EBITDA of $3.18 million improved significantly from the year-ago adjusted EBITDA loss of $2.54 million.
Street expects TACT’s revenue for the fiscal year 2023 (ending December 31, 2023) to increase 24.5% year-over-year to $72.40 million, while its EPS is expected to come in at $0.32. Moreover, the company topped the consensus revenue and EPS estimates in each of the trailing four quarters, which is excellent.
Its revenue has increased at 26.7% and 6.9% CAGRs over the past three and five years, respectively. Also, its total assets and levered FCF improved at CAGRs of 16.9% and 29.2% over the past three years, respectively.
Over the past year, the stock has gained 62.6% to close the last trading session at $7.40.
TACT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Sentiment and a B for Growth, Value, and Momentum. In the same industry, it is ranked #2 out of 42 stocks. Click here to view the other ratings of TACT for Stability and Quality.
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PCRFY shares were trading at $11.06 per share on Monday morning, down $0.33 (-2.90%). Year-to-date, PCRFY has gained 33.67%, versus a 17.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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