While macroeconomic concerns could hinder near-term growth, the tech industry’s long-term prospects remain bright, thanks to government spending and advancements.
According to Gartner, IT spending this year is forecasted to increase 4.3% year-over-year to $4.70 trillion. The rising need for digital transformation and technology adoption across businesses boosts spending. According to Gartner, the primary drivers of this increase will be investments in cloud computing, artificial intelligence, and cybersecurity.
Moreover, the global wireless connectivity market is predicted to increase at a CAGR of 15.1% until 2030, reaching $219.86 billion. This expansion can be attributed to the rising global adoption of smartphones and other connected devices.
Also, high-speed internet connectivity demand and improvements in wireless technologies such as 5G are expected to expand the market even further in the coming years.
Investors’ interest in tech stocks is evident from the iShares U.S. Technology ETF’s (IYW) 31.2% returns over the past six months.
With these favorable trends in mind, let’s delve into the fundamentals of the three best Technology - Communication/Networking stocks, beginning with number 3.
Stock #3: IPG Photonics Corporation (IPGP)
IPGP develops, manufactures, and sells various high-performance fiber lasers, fiber amplifiers, and diode lasers used in multiple applications, primarily in materials processing worldwide.
IPGP’s forward EV/EBITDA of 10.46x is 27.3% lower than the industry average of 14.39x. Its forward Price/Book of 1.90x is 49.2% lower than the industry average of 3.75x.
IPGP’s trailing-12-month EBITDA margin of 20.50% is 124% higher than the 9.15% industry average. Its trailing-12-month EBIT margin of 14.75% is 226.8% higher than the 4.51% industry average.
IPGP’s operating income for the second quarter ended June 30, 2023, increased marginally year-over-year to $13.51 million. Its net income came in at $62.30 million, up 9% year-over-year. Also, its EPS came in at $1.31, up 19% year-over-year.
The consensus revenue estimate of $1.48 billion for the year ending December 2024 represents a 10.5% increase year-over-year. Its EPS is expected to grow 20.5% year-over-year to $5.82 for the same period. IPGP’s shares have gained 12.2% over the past year to close the last trading session at $99.62.
IPGP’s POWR Ratings reflect this promising outlook. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
IPGP has a B grade for Momentum and Quality. Within the Technology - Communication/Networking industry, it is ranked #15 out of 50 stocks. Click here for the additional POWR Ratings for Growth, Value, Stability, and Sentiment for IPGP.
Stock #2: Juniper Networks, Inc. (JNPR)
JNPR designs, develops, and sells network products and services worldwide. The company offers routing products, such as ACX series universal access routers; MX series Ethernet routers; PTX series packet transport routers; wide-area network SDN controllers; and session smart routers.
JNPR’s forward non-GAAP P/E multiple of 12.79 is 42.6% lower than the industry average of 22.29. Its forward EV/EBIT multiple of 10.36% is 43.8% lower than the industry average of 18.44.
JNPR’s trailing-12-month net income margin of 7.27% is 258.5% higher than the 2.03% industry average. Its trailing-12-month ROCE of 9.57% is significantly higher than the 0.62% industry average.
JNPR’s total net revenues for the second quarter ended June 30, 2023, increased 12.6% year-over-year to $1.43 billion. Its non-GAAP operating income rose 36.9% over the prior-year quarter to $242.10 million. The company’s non-GAAP net income increased 38.6% year-over-year to $189 million. Also, its non-GAAP EPS came in at $0.58, representing an increase of 38.1% year-over-year.
Street expects JNPR’s revenue to increase 5.6% year-over-year to $5.60 billion for the year ending December 2023. Its EPS is expected to grow 14% year-over-year to $2.22 for the same period. It surpassed EPS estimates in three of four trailing quarters. Shares of JNPR have gained 2.6% over the past month to close the last trading session at $28.41.
JNPR is ranked #10 in the same industry. It has a B grade for Quality. To see additional JNPR’s ratings for Growth, Value, Stability, Sentiment and Momentum, click here.
Stock #1: Motorola Solutions, Inc. (MSI)
MSI offers public safety and enterprise security solutions, including land mobile radio communications (LMR), video security, access control, and command center software backed by managed services. Its segments include Products and Systems Integration and Software and Services.
MSI’s trailing-12-month EBIT margin of 24.27% is 437.7% higher than the 4.51% industry average. Its trailing-12-month net income margin of 15.71% is 675.3 higher than the 2.03% industry average.
During the second quarter, MSI’s sales increased 12.3% year-over-year to $2.40 billion. Its gross margin grew 20.1% from the year-ago value to $1.19 billion. Also, the company’s non-GAAP operating earnings and non-GAAP EPS rose 29% and 28% year-over-year to $641 million and $2.65, respectively.
Analysts expect MSI’s revenue to increase 8.7% year-over-year to $9.90 billion for the year ending December 2023. Its EPS is expected to grow 10.8% year-over-year to $11.48 for the same period. It has surpassed EPS estimates in all four trailing quarters. Over the past year the stock has gained 13.5% to close the last trading session at $279.20.
MSI has a B grade for Growth and Sentiment and Quality. It is ranked #9 in the same industry.
Beyond what is stated above, we’ve also rated MSI for Momentum, Stability and Value. Get all MSI ratings here.
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IPGP shares were trading at $99.65 per share on Thursday afternoon, up $0.03 (+0.03%). Year-to-date, IPGP has gained 5.26%, versus a 18.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.3 Quality Tech Stocks to Track in September StockNews.com