The broader tech market staged a comeback yesterday after falling for three consecutive sessions because investors were reassured after United States’ jobless claims hit a fresh pandemic low. Tech stocks are also expected to continue dominating the market in the foreseeable future given that several companies are expected to continue with remote working structures even in the post-pandemic environment due to its benefits and convenience.
The use of internet of things (IoT), artificial intelligence (AI), and cloud-based products and services is expected to continue increasing, which will drive a growing need for computer hardware. According to Globe Newswire, the global computer hardware market is expected to hit $1,117.8 billion in 2025, growing at a 6% CAGR.
So, we think it could be wise to bet now on established computer hardware companies Dell Technologies Inc. (DELL), HP Inc. (HPQ), Synopsys, Inc. (SNPS), and Canon Inc. (CAJ). They have the potential to capitalize on the industry’s growth.
Dell Technologies Inc. (DELL)
One of the world’s leading technology companies, DELL designs, develops, manufactures, markets, sells, and supports Information technology solutions, products, and services worldwide. It operates through two segments: Client Solutions and its Enterprise Solutions Group (ESG). On April 14, the company announced its plans to spin-off its 81% equity ownership interest in VMware (VMW).
This month, it announced an expanded collaboration with global digital infrastructure company Equinix, Inc. (EQIX) to broaden the availability of its APEX via EQIX’s International Business Exchange data centers. This is expected to help DELL deliver a secure, on-demand hybrid cloud solution. The company is expected to witness increasing demand for its solution as a result.
DELL’s revenue increased 9% year-over-year to $26.10 billion for its fiscal fourth quarter, ended January 29. Its operating income grew 204% year-over-year to $2.20 billion, while its net income increased 223% year-over-year to $1.30 billion. The company’s EPS increased 191% year-over-year to $1.57.
For the about-to-be-reported quarter, ended April 30, analysts expect DELL’s EPS and revenue to increase 17.2% and 12%, respectively, year-over-year to $1.57 and $23.36 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained nearly 135% over the past year to close yesterday’s trading session at $96.40.
DELL’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Growth, and a B grade for Value. Within the B-rated Technology – Hardware industry, DELL is ranked #4 of 48 stocks.
To see DELL’s ratings for Momentum, Sentiment, Stability and Quality, click here.
HP Inc. (HPQ)
HPQ not only provides personal computing and other access devices but also provides imaging and printing products, and other related technologies, solutions, and services internationally. The company operates through three segments: Personal Systems, Printing, and Corporate Investments.
On February 24, HPQ announced an agreement to acquire HyperX, which is the gaming division of Kingston Technology Company. The acquisition supports HPQ’s strategy to drive growth in its Personal Systems business, where its gaming and peripherals segments are expected to witness massive growth in the near-term owing to increasing demand from gamers worldwide.
The company is scheduled to announce its financial results for its fiscal second quarter (ended April 30, 2021) on May 27. Its net revenue increased 7% year-over-year to $15.60 billion for the first quarter, ended January 31. Its operating earnings grew 52.7% year-over-year to $1.30 billion, while its net earnings came in at $1.10 billion, up 58% year-over-year. The company’s EPS increased 80% year-over-year to $0.83.
Analysts expect HP’s EPS and revenue to increase 72.5% and 15.8%, respectively, year-over-year to $0.88 and $14.98 billion for the about-to-be-reporter quarter, ended April 30. It surpassed consensus EPS estimates in each of the trailing four quarters. The stock has gained 130.4% over the past year to close yesterday’s trading session at $32.39.
HPQ’s POWR Ratings reflect its solid prospects. The company has an overall B rating, which translates to Buy in our proprietary ratings system. It has a B grade for Value, Quality and Sentiment also.
To see the additional POWR Ratings for HPQ (Growth, Stability and Momentum), click here. It is ranked #5 in the same industry.
Synopsys, Inc. (SNPS)
SNPS provides electronic design automation software products that are used to design and test integrated circuits (ICs). Its offerings include Fusion Design Platform, which is a digital design implementation solution, Verification Continuum Platform, and FPGA design products that are programmed to perform specific functions.
The company completed the acquisition of MorethanIP on May 4. The acquisition expands its DesignWare Ethernet Controller IP portfolio with the addition of MAC and PCS for 200G/400G and 800G Ethernet. This provides consumers with a complete low-latency, high-performance Ethernet IP solution for networking, AI, and cloud computing SoCs. With the significant expansion of its product portfolio with the acquisition, SNPS is expected to increase its revenue in the near-term.
In March, SNPS launched the industry’s first complete IP solution for PCI Express 6.0 that includes controller, PHY and verification IP, enabling early development of PCIe 6.0 system-on-chip (SoC) designs. This product line is also expected to further boost sales.
The company’s revenue increased 16.3% year-over-year to $970.30 million for its fiscal first quarter, ended January 31. Its revenue from the IP & System Integration segment increased 8.9% year-over-year to $536.20 million. Its non-GAAP net income increased 52.8% year-over-year to $239.47 million and its non-GAAP EPS grew 50.5% year-over-year to $1.52.
Analysts expect SNPS’ EPS to increase 24.6% year-over-year to $1.52 for the about-to-be-reported quarter, ended April 30. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Its revenue is expected to be $988.70 million in the about-to-be-reported quarter, which represents a 18.2% year-over-year rise. The stock soared 47.8% over the past year to close yesterday’s trading session at $230.86.
It’s no surprise that SNPS has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Growth and Quality.
Click here to see SNPS’ ratings for Momentum, Stability, Value and Sentiment. SNPS is ranked #11 in the Technology – Hardware industry.
Canon Inc. (CAJ)
Headquartered in Tokyo, Japan, CAJ manufactures and sells office multifunction devices, plain paper copying machines, laser and inkjet printers, cameras, diagnostic and lithography equipment. The company operates through four segments: Office Business Unit, Imaging System Business Unit, Medical System Business Unit, and Industry and Others Business Unit.
The company developed the new ‘Built-in AEC1 assistance’ technology for digital radiography (DR)2 and CXDI-RF Wireless B1 in March 2021. It’s a new wireless digital radiography device that supports a wide range of imaging techniques, including fluoroscopy and general radiography. The innovative product is expected to drive up the company’s sales.
CAJ’s net revenue increased 10.8% year-over-year to $7.59 billion for its fiscal first quarter, ended March 31, 2021. CAJ’s operating profit grew 79.1% year-over-year to $635.71 million, while its net income increased 68% year-over-year to $400.48 million. The company’s EPS increased 68.7% year-over-year to $0.38.
For the current quarter, ending June 30, analysts expect CAJ’s EPS and revenue to increase 425% and 25.9%, respectively, year-over-year to $0.26 and $7.63 billion. It surpassed consensus EPS estimates in three of the trailing four quarters. The stock surged 28.6% over the past nine months to close yesterday’s trading session at $22.77.
CAJ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
It has a B grade for Value, Growth, Stability, Sentiment and Quality. Click here to access CAJ’s rating for Momentum as well. It is ranked #1 in the Technology – Hardware industry.
DELL shares were trading at $98.45 per share on Friday afternoon, up $2.05 (+2.13%). Year-to-date, DELL has gained 34.33%, versus a 11.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal’s fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More…
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