Despite economic challenges, the tech hardware industry is thriving thanks to widespread tech adoption, increased digitization investments, and the incorporation of emerging technologies.
Therefore, it could be wise to add fundamentally strong tech stocks: Logitech International S.A. (LOGI), Panasonic Holdings Corporation (PCRFY), and Daktronics, Inc. (DAKT) to one’s portfolio this November. Before diving deeper into the fundamentals of these stocks, let’s discuss why the tech hardware industry is well-positioned to grow.
The tech hardware industry is booming, riding the waves of enterprise tech adoption, automation trends, gaming enthusiasts' PC setups, and the digital revolution.
The industry evolves for customer engagement, innovation, and efficiency. Advanced hardware complements software for smooth operations, enhancing productivity. The global IT spending in 2024 is projected at $5.10 trillion, with device spending increasing by 4.8% year-over-year to $722.47 billion.
Furthermore, fast-paced electronics innovations, including the Internet of Things (IoT), AR & VR, and 5G, drive demand for advanced hardware. The electrical and electronics market is projected to grow at a 7.5% CAGR, reaching $4.99 trillion by 2027.
Also, the global computer accessories market is expected to grow by $4.62 billion during 2023-2027, with a 5.9% CAGR during the forecast period.
Considering these conducive trends, let’s analyze the fundamental aspects of the three Technology - Hardware picks, beginning with the third choice.
Stock #3: Logitech International S.A. (LOGI)
Headquartered in Lausanne, Switzerland, LOGI and its subsidiaries, design, manufacture, and market products that connect people to working, creating, gaming, and streaming worldwide. The company's offerings include pointing devices, corded and cordless keyboards, PC webcams, as well as other accessories for mobile devices.
On October 16, 2023, LOGI introduced Zone Wireless 2, a high-end business headset with AI for noise-free calls. The product, priced at $299, is available worldwide. This should add to the company’s revenue stream.
On October 12, 2023, LOGI announced the Logitech G Adaptive Gaming Kit for the PS5's Access controller, available in January 2024. This kit, priced at $79.99, provides extra buttons and triggers for gamers with accessibility needs. It's designed for customization, includes durable gaming components, and can be purchased on LogitechG.com and in select retail stores.
Ujesh Desai, General Manager, Logitech G at LOGI, said, “We're proud to partner with Sony to deliver our Adaptive Gaming Kit to PlayStation fans. This new kit will bring even more customization options for gamers with disabilities who are eagerly anticipating the release of the Access controller for PS5.”
In terms of the trailing-12-month net income margin, LOGI’s 8.95% is 323.8% higher than the 2.11% industry average. Likewise, its 11.32% trailing-12-month EBIT margin is 130.5% higher than the industry average of 4.91%. Furthermore, the stock’s 13.70% trailing-12-month Return on Total Capital is 442.5% higher than the industry average of 2.53%.
LOGI’s net sales for the second quarter, which ended September 30, 2023, came in at $1.06 billion. Its non-GAAP gross profit increased marginally year-over-year to $444.07 million. Its non-GAAP operating income rose 17.1% from the year-ago value to $183.22 million.
Moreover, the company’s non-GAAP net income and earnings per share came in at $173.42 billion and $1.09, representing increases of 25.9% and 29.8% year-over-year, respectively.
Street expects LOGI’s EPS for the quarter ending December 31, 2023, to increase 0.7% year-over-year to $1.15. Its revenue for the quarter ending June 30, 2024, is expected to increase 0.6% year-over-year to $980.20 million. It surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained 53.7% year-to-date to close the last trading session at $78.71.
LOGI’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a 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 Sentiment and a B for Sentiment. Within the B-rated Technology - Hardware industry, it is ranked #13 out of 38 stocks. To see LOGI’s Growth, Value, Momentum, and Stability ratings, click here.
Stock #2: 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.
In terms of the trailing-12-month Return on Total Assets, PCRFY’s 4.89% is 27.1% higher than the 3.85% industry average. Its 5.29% trailing-12-month net income margin is 25.1% higher than the industry average of 4.23%. Likewise, its 4.82% trailing-12-month Capex/Sales is 47.8% higher than the industry average of 3.26%.
PCRFY’s net sales for the six months ended September 30, 2023, rose 1.4% year-over-year to ¥4.12 trillion ($27.51 billion). The company’s operating profit rose 28.8% year-over-year to ¥192.84 billion ($1.29 billion).
Its net profit attributable to PCRFY rose 168.7% from the prior-year period to ¥288.38 billion ($1.93 billion). Also, its EPS came in at ¥123.51, representing an increase of 168.7% year-over-year.
For the quarter ending December 31, 2023, PCRFY’s EPS is expected to increase 50.7% year-over-year to $0.28. Its revenue for the fiscal year ending March 31, 2024, is expected to increase significantly year-over-year to $55.70 billion. The stock has gained 10.5% year-to-date to close the last trading session at $9.23.
PCRFY’s positive outlook is reflected in its POWR Ratings. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Value and a B for Stability. It is ranked #5 in the Technology - Hardware industry. To see PCRFY’s Growth, Momentum, Sentiment, and Quality ratings, click here.
Stock #1: 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 August 4, 2023, DAKT announced the installation of 14 new LED displays at Gillette Stadium, which includes the largest outdoor videoboard in any sports venue in the country.
These new additions have expanded the digital landscape at the stadium by 29,500 square feet. In total, there are now 47 DAKT LED displays, providing a massive 48,500 square feet of digital canvas within Gillette Stadium.
In terms of the trailing-12-month Return on Common Equity, DAKT’s 15.36% is significantly higher than the 1.01% industry average. Its 8.80% trailing-12-month EBIT margin is 79.2% higher than the industry average of 4.91%. Likewise, its 1.66x trailing-12-month asset turnover ratio is 168.7% higher than the industry average of 0.62x.
DAKT’s net sales for the first quarter that ended July 29, 2023, increased 35.3% year-over-year to $232.53 million. Its gross profit increased 175.8% year-over-year to $71.15 million.
In addition, its net income came in at $19.20 million, compared to a net loss of $5.33 million in the year-ago quarter. Also, its net income per share came in at $0.42, compared to a net loss per share of $0.12 in the year-ago quarter.
The stock DAKT has gained 241.1% year-to-date to close the last trading session at $9.62.
It’s no surprise that DAKT has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Growth and Value and a B for Sentiment and Quality. Within the Technology - Hardware industry, it is ranked first. Beyond what we stated above, we also have given DAKT grades for Momentum and Stability. Get all DAKT ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
PCRFY shares were trading at $9.24 per share on Tuesday afternoon, up $0.01 (+0.14%). Year-to-date, PCRFY has gained 12.50%, versus a 15.35% 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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