Even though investors rotated out of expensive tech stocks earlier this year and into cyclical stocks to capitalize on the economic recovery, the broader tech market has nonetheless been making an impressive comeback, as evidenced by the new highs hit lately by the tech-heavy Nasdaq Composite. The composite hit its $14,535.97, 52-week high on June 29. Among other sectors, several computer hardware stocks have been gaining because the demand for computer hardware is increasing as companies rearrange their operations to continue working with a remote workforce, even if only partly.
In the digital era, the use of internet of things (IoT), artificial intelligence (AI), and cloud-based products and services is expected to keep increasing, which will foster a growing need for computer hardware. According to The Business Research Company, the global computer hardware market is expected to grow at a 9.4% CAGR to hit $944.09 billion in 2021.
So, we think it could be wise to bet on the shares of established computer hardware companies Dell Technologies Inc. (DELL), Western Digital Corporation (WDC), and NetApp, Inc. (NTAP). These companies have the potential to capitalize on the industry’s growth.
Dell Technologies Inc. (DELL)
Round Rock, Tex.-based DELL is one of the world’s leading technology companies. It designs, develops, manufactures, markets, sells, and supports information technology solutions, products, and services worldwide. It operates through two segments: Client Solutions and Enterprise Solutions Group (ESG). DELL announced its planned spin-off of its 81% equity ownership interest in VMware (VMW) on April 14, 2021.
In May, DELL expanded its collaboration with global digital infrastructure company Equinix, Inc. (EQIX). It has broadened the availability of its APEX via EQIX’s International Business Exchange data centers. This is expected to help the company to deliver secure, on-demand hybrid cloud solutions.
The company’s non-GAAP net revenue increased 12% year-over-year to $24.50 billion for its fiscal first quarter, ended April 30, 2021. Its non-GAAP operating income grew 26% year-over-year to $2.71 billion, while its non-GAAP net income increased 59% year-over-year to $1.82 billion. Its non-GAAP EPS increased 59% year-over-year to $2.13.
For its fiscal year 2022, analysts expect DELL’s EPS and revenue to increase 7.5% year-over-year to $8.60 and $101.44 billion, respectively. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 81.4% 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 a B grade for Value and Sentiment. Within the B-rated Technology - Hardware industry, DELL is ranked #6 of 45 stocks. To see DELL’s ratings for Growth, Momentum, Stability, and Quality as well, click here.
Western Digital Corporation (WDC)
WDC develops, manufactures, and sells data storage devices and solutions. It offers client devices that include hard disk drives (HDDs) and solid-state drives (SSDs) for computing devices. It also provides data center devices and solutions that include enterprise helium hard drives and enterprise SSDs. WDC is based in San Jose, Calif.
Last month, the company introduced its second-generation UFS 3.1 storage solution for 5G smartphones. The new Western Digital iNAND MC EU551 delivers the high-performance storage consumers require for their phones to access emerging applications, such as ultra-high-resolution cameras, AR/VR, gaming and 8K video. So, WDC could see increasing demand for this solution in the coming months.
WDC’s client-devices revenue increased 10% year-over-year to $2.01 billion for its fiscal third quarter, ended April 2, 2021. Its operating income grew 107% year-over-year to $317 million. Its non-GAAP net income increased 24% year-over-year to $318 million. The company’s non-GAAP EPS increased 20% year-over-year to $1.02.
Analysts expect WDC’s EPS to increase 207.7% year-over-year to $2 for the quarter ending September 30, 2021. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Its annual revenue is expected to be $20.16 billion in its fiscal year 2022, which represents a 21.9% year-over-year rise. The stock has soared 94.7% over the past nine months to close yesterday’s trading session at $71.17.
WDC’s POWR Ratings reflect its solid prospects. It has a B grade for Growth and Sentiment. To see the additional POWR Ratings for WDC (Value, Stability, Quality, and Momentum), click here. It is ranked #31 in the Technology - Hardware industry.
NetApp, Inc. (NTAP)
NTAP provides software, systems, and cloud services to manage and share data on-premises, and on private and public clouds worldwide. It provides cloud storage services. In addition, the Sunnyvale, Calif., company offers application-aware data management service under the NetApp Astra name, and payment solutions and storage-as-a-service under the NetApp Keystone name.
On June 22, NTAP completed the acquisition of Data Mechanics. Anthony Lye, senior vice president and general manager of NTAP’s Public Cloud Services business unit, said "Adding Data Mechanics to our existing solutions will make it simpler and more cost-effective for organizations across all industries to fully leverage Apache Spark and Kubernetes to advance their data and cloud initiatives."
NTAP’s net revenue increased 11% year-over-year to $1.56 billion for its fiscal fourth quarter, ended April 30, 2021. Its income from operations increased 64.2% year-over-year to $455 million. Its net income increased 70.4% year-over-year to $334 million, and its EPS grew 65.9% year-over-year to $1.46.
The company’s EPS is expected to increase 30.1% year-over-year to $0.95 for the quarter ending July 31, 2021. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Its annual revenue is expected to be $6.13 billion in its fiscal year 2022, which represents a 6.8% year-over-year rise. The stock has rallied 86.6% over the past nine months to close yesterday’s trading session at $81.82.
It’s no surprise that NTAP has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Quality.
Click here to see NTAP’s ratings for Growth, Momentum, Stability, Value, and Sentiment as well. NTAP is ranked #2 of 3 stocks in the A-rated Technology - Storage industry.
DELL shares were trading at $98.48 per share on Thursday afternoon, down $1.19 (-1.19%). Year-to-date, DELL has gained 34.37%, versus a 15.63% 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.
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