4 Tech Stocks With Huge Earning Potential Right Now
The Fed’s aggressive methods of reining in persistent inflation have led to a massive sell-off in technology. The onslaught of rising interest rates has prompted investors to dump tech stocks this year, as evidenced by the more than 30% drop in the Nasdaq Composite year-to-date.
However, the development and adoption of new technologies are boosting the prospects of the technology sector. The global digital transformation market is expected to grow at a CAGR of 21.1% to reach $1.55 trillion by 2027.
Moreover, the growing demand for gadgets is also expected to sustain the demand from the technology industry. According to Statista, the number of mobile devices is expected to reach 18.22 billion by 2025an increase of 4.20 billion over 2020 levels.
Against this backdrop, the fundamentally strong technology stocks of Microsoft Corporation (MSFT), Gartner, Inc. (THIS), GoDaddy Inc. (GDDY) and Extreme Networks, Inc. (OUTSIDE), which seem poised to generate solid returns, could be ideal buys now.
Microsoft Corporation (MSFT)
Tech giant MSFT is a pioneer in software. The Company operates in three segments: Productivity and Business Processes; More personal computing; and Smart Cloud.
MSFT and Cisco Systems, Inc. (CSCO) recently announced plans to add MSFT’s Teams messaging app to its meeting devices natively on CSCO Room and Desk devices. Teams Room software should soon be available on CSCO devices.
In September, MSFT declared a quarterly report dividend of $0.68 per share, reflecting an increase of six cents or 10% over the prior quarter’s dividend. This amount is payable to shareholders on December 8 and demonstrates the company’s strong cash-generating capacity.
For the fiscal fourth quarter that ended June 30, MSFT’s EPS increased 2.8% from its value a year ago at $2.23. Its total revenue increased 12.4% year-over-year to $51.87 billion. Operating profit increased 7.5% from the prior year period to $20.53 billion, while net profit improved 1.7% year-on-year to $16.74 billion.
The consensus EPS estimate of $2.31 for the quarter ended September 2022 indicates a 1.8% year-over-year improvement. Revenue is expected to rise 9.9% year-over-year to $49.79 billion for the same quarter. Additionally, MSFT has exceeded consensus EPS estimates in three of the past four quarters, which is impressive.
The stock has gained 5.7% over the past five days and slightly intraday to close its last trading session at $238.50.
MSFT POWR Rankings reflect promising prospects. The company has an overall rating of B, which translates to Buy in our proprietary rating system. POWR ratings rate stocks on 118 different factors, each with its own weighting.
MSFT is also rated B in stability and quality. Within the Software – Enterprise industry, it is ranked #10 out of 52 stocks.
Click here for additional POWR ratings for Growth, Momentum, Sentiment and Value for MSFT.
Gartner, Inc. (THIS)
IT operates as a global research and consulting firm. The Company operates through its three major segments: Research; Conferences; and Council.
During the fiscal second quarter that ended June 30, IT’s non-GAAP adjusted net income increased 19.1% year-on-year to $231 million. The company’s non-GAAP EPS rose 27.2% year over year to $2.85. Total revenue increased 17.9% from the prior year period to $1.38 billion.
The consensus revenue estimate of $1.30 billion for the third quarter (ending September 2022) indicates a 12.2% year-over-year increase. Analysts expect EPS and IT revenue to grow 1.3% and 7.2% year-over-year to $9.24 billion and $5.77 billion dollars for fiscal year 2023. IT has an impressive surprise earnings track record, as it has exceeded consensus EPS estimates for the past four quarters.
Gene Hall, Managing Director of IT, said, “We are raising our guidance again and remain well positioned for sustained double-digit growth over the long term. And we continue to buy back shares, which will increase our earnings per share this year and beyond. As of Aug. 2, the company updated its 2022 guidance for total revenue and adjusted EPS of at least $5.35 billion and $8.85, respectively.
The stock has gained 21.5% over the past three months to close its last trading session at $290.05.
IT’s POWR ratings reflect a positive outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
Computing is also rated A in quality and B in sentiment. In category A Outsourcing – Technical Services industry, it is ranked #3 out of 10 stocks.
To see additional POWR ratings for value, stability, growth, and momentum for IT, Click here.
GoDaddy Inc. (GDDY)
GDDY engages in the design and development of cloud-based technology products. The Company provides a domain name registration product that engages customers in the initial stage of establishing a digital identity.
On September 28, GDDY announced that its Venture Forward research initiative had launched the Microbusiness Data Hub, which provides unprecedented free access to information on more than 20 million microbusinesses. This new offer could benefit the company.
GDDY’s total revenue for the fiscal second quarter that ended June 2022 increased 9% year-over-year to $1.02 billion. Net income increased 93% year over year to $90.50 million. Its operating profit rose 41.6% from the year-ago quarter to $124.60 million. Its Normalized EBITDA (NEBITDA) increased 30.3% from its value a year ago to $258.40 million.
For the third quarter that ended September 30, the company has targeted total revenue of between $1.03 billion and $1.05 billion, representing 8% year-over-year growth. halfway through.
For the fiscal year ending December 2022, analysts expect GDDY’s revenue to be $4.11 billion, indicating 7.8% year-over-year growth. Street expects EPS to rise 5.1% year over year to $3.09.
The stock has gained 10% over the past year and 7.7% over the past three months to close its last trading session at $75.99.
GDDY’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. GDDY is also rated B for Sentiment. In the Software – Business sector, it is ranked #7.
In addition to the above, to view POWR ratings for Growth, Momentum, Quality, Stability, and Value for GDDY, Click here.
Extreme Networks, Inc. (OUTSIDE)
EXTR is a networking software solutions company that designs, develops and manufactures wired and wireless network infrastructure equipment and network management software.
On October 6, EXTR announced that it had selected Verizon Business, a subsidiary of Verizon Communications Inc. (VZ) division, to deploy a wireless connectivity service at Liverpool FC’s Anfield stadium to improve the stadium experience. The rollout, which is expected to begin later this year, should benefit the company.
In August, EXTR introduced the Extreme AP5050, a Wi-Fi 6E outdoor access point (AP) optimized for deployment in outdoor locations. This should strengthen the revenue stream of the business.
For the fiscal quarter that ended June 30, EXTR’s total net revenue increased slightly year-over-year to $278.20 million. Its total free cash flow improved 14.6% from the same period last year to $59.82 million.
The company expects non-GAAP net income of between $19.90 million and $26.50 million and non-GAAP net income per share of between $0.15 and $0.20 for the first quarter of fiscal year 2023.
For the fiscal quarter ending December 2022, analysts expect EXTR revenue to be $300.95 million, indicating 7.1% year-over-year growth . EPS for the same period is expected to rise 10.9% from the prior year period to $0.23. Additionally, EXTR has exceeded consensus EPS estimates for the past four quarters.
The stock has gained 38.6% over the past three months and 10% over the past month to close its last trading session at $14.40.
EXTR’s POWR ratings reflect a promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. EXTR is also rated A for quality and a B for value and growth. In the Technology – Communication/Networking industry, it is ranked #2 out of 50 stocks.
In addition to the POWR ratings above, Click here to see additional ratings for Sentiment, Momentum, and Stability for EXTR.
MSFT shares were trading at $236.48 per share on Wednesday afternoon, down $2.02 (-0.85%). Year-to-date, MSFT is down -29.23%, compared to a -21.52% rise in the benchmark S&P 500 over the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. After…