The technology industry thrives, driven by the growing demand for software solutions across multiple sectors. Thus, investors could consider buying fundamentally sound tech stocks such as HP Inc. (HPQ), Box, Inc. (BOX), and Teradata Corporation (TDC), which are currently trading under $40.
The swift expansion of the IT industry has been a major catalyst for the IT hardware market. It plays a vital role in numerous sectors, such as business, healthcare, education, finance, entertainment, and government. As the industry grows and evolves, the demand for IT hardware rises accordingly.
Therefore, the IT hardware market is expected to reach $191.03 billion by 2029, growing at a CAGR of 7.9%.
Moreover, the increasing popularity of cloud-based software and the rising need to automate business processes drive the global demand for IT services. Cloud-based IT services have rapidly grown among SMEs since 2022 and are projected to capture over 80% of the market share by 2025.
The global IT services market is expected to reach $1.85 trillion by 2031, growing at a CAGR of 9.5% by 2031.
Considering these factors, let’s take a look at the fundamentals of the three tech stock picks.
HP Inc. (HPQ)
HPQ, the titan of personal computing and digital access, revolutionizes the global landscape. With its three dynamic segments, Personal Systems; Printing; and Corporate Investments, the company engineers solutions that redefine how people work, create, and connect.
On July 15, 2024, HPQ introduced two new innovations: the world’s highest-performance AI PC and the first integration of a trust framework into an AI model development platform. Both announcements expand HPQ’s efforts to make AI real for companies and people with new and transformative AI experiences across the company’s PCs, software, and partner ecosystem.
HPQ’s forward EV/Sales of 0.84x is 72.8% lower than the industry average of 3.07x. Its forward Price/Sales multiple of 0.68 is 78% lower than the industry average of 3.07.
In the fiscal first quarter that ended April 30, 2024, HPQ reported a total net revenue of $12.80 billion. The company’s non-GAAP net earnings and non-GAAP earnings from operations grew 3.4% and 1.8% year-over-year to $812 million and $1.13 billion, respectively. Its non-GAAP net EPS increased 3.8% from the prior year’s quarter to $0.82.
For the quarter ending July 30, 2024, HPQ’s revenue is expected to increase 1.3% year-over-year to $13.37 billion. Its EPS for the quarter ending October 2024 is expected to increase 5.9% year-over-year to $0.95. It surpassed the consensus EPS estimates in three of the trailing four quarters.
Over the past month, the stock has gained 7% to close the last trading session at $38.
HPQ’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
HPQ has a B grade for Value and Growth. It is ranked #13 among 39 stocks in the B-rated Technology - Hardware industry.
Click here to access the additional HPQ ratings (Momentum, Stability, Sentiment, and Growth).
Box, Inc. (BOX)
BOX provides a cloud content management platform that enables organizations of various sizes to manage and share their content from anywhere on any device. It serves financial services, health care, government, and legal services industries internationally.
On June 27, 2024, BOX announced powerful enhancements to BOX AI, including unlimited queries for Enterprise Plus customers, integration with GPT-4o, and support for more file types. New features will improve content management and workflow efficiency using advanced AI capabilities.
On April 9, 2024, BOX announced that Bulletproof, a global brand agency, chose it as its cloud platform for managing content and production. Bulletproof will use BOX to replace on-premise servers, securely collaborate with clients and partners, and improve workflow efficiency by accessing files and resources from anywhere.
BOX’s forward EV/EBITDA of 13.10x is 14.9% lower than the industry average of 15.38x. Its forward EV/EBIT multiple of 14.48 is 30.8% lower than the industry average of 20.93.
BOX’s revenues for the first quarter ended April 30, 2024, increased 5.1% year-over-year to $264.66 million. Its non-GAAP gross profit increased 8.1% year-over-year to $212.18 million. The company’s non-GAAP operating income increased 22.7% year-over-year to $70.40 million.
Additionally, its non-GAAP attributable net income increased 22.9% year-over-year to $58.40 million. Its non-GAAP attributable net income per share increased 21.9% year-over-year to $0.39. Also, the company’s non-GAAP free cash flow came in at $123.24 million, representing an increase of 13.9% year-over-year.
BOX expects its revenue for the quarter ending July 31, 2024, to be between $268 million and $270 million, showing a 3% increase year-over-year. Also, its non-GAAP diluted net income per share is expected to be between $0.40 and $0.41.
Analysts expect BOX’s EPS and revenue for the quarter ending July 31, 2024, to increase 12.4% and 3% year-over-year to $0.40 and $269.20 million, respectively. It surpassed the EPS estimates in three of the trailing four quarters.
Over the past six months, the stock has gained 5.5% to close the last trading session at $26.77.
BOX’s robust fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Growth and Quality and a B for Value. BOX is ranked #3 out of 78 stocks in the Technology - Services industry.
Beyond what is stated above, we’ve also rated BOX for Stability, Sentiment, and Momentum. Get all BOX ratings here.
Teradata Corporation (TDC)
TDC provides a connected multi-cloud data platform called Teradata Vantage, enabling enterprises to leverage their data across the organization. It integrates diverse data sources to simplify ecosystems and facilitate the transition to the cloud. Additionally, TDC offers business consulting, support, and maintenance services.
On July 26, 2024, TDC announced the new integration of the DataRobot AI Platform with Teradata VantageCloud and ClearScape Analytics. This integration is aimed at helping enterprises maximize their AI potential by providing greater optionality and flexibility for building and scaling safe and effective AI models.
On May 21, 2024, at Microsoft Build, TDC announced that Teradata AI Unlimited, the company’s on-demand AI/ML workload, was available in private preview on Microsoft Fabric.
This integration of TDC with Microsoft Fabric enhances user freedom by providing seamless, on-demand access to ClearScape Analytics, enabling the exploration, discovery, and development of new AI innovations and use cases.
TDC’s forward EV/EBITDA of 8.07x is 48% lower than the industry average of 15.51x. Its forward EV/Sales multiple of 2 is 36.6% lower than the industry average of 3.15.
During the first quarter of 2024, TDC’s total revenue stood at $465 million. Its non-GAAP gross profit came in at $289 million and non-GAAP operating income at $89 million. Moreover, its non-GAAP net income was reported at $57 million and $0.57 per share.
Street expects TDC’s EPS for the quarter ended June 30, 2024, to increase marginally year-over-year to $0.48. The company’s revenue is expected to be $450.44 million. The company surpassed consensus revenue and EPS estimates in each of the trailing four quarters.
Over the past month, the stock gained 4.4%, closing the last trading session at $34.90.
TDC’s POWR Ratings reflect bright prospects. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
The stock has an A grade for Value and Quality. TDC is ranked #8 in the Technology - Services industry.
In addition to the POWR Ratings highlighted above, one can access TDC’s ratings (Growth, Momentum, Stability, and Sentiment) here.
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HPQ shares were trading at $38.29 per share on Wednesday afternoon, up $0.29 (+0.76%). Year-to-date, HPQ has gained 29.38%, versus a 18.18% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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