As demand for innovative, efficient, and powerful hardware and software solutions continues to rise, the tech sector is poised for a prosperous future despite facing short-term challenges posed by the high-interest rate environment.
Therefore, it could be worth watching tech stocks Dell Technologies Inc. (DELL), TDK Corporation (TTDKY), and KVH Industries, Inc. (KVHI), which have the right fundamental ingredients to perform well.
Before delving deeper into the fundamentals of these stocks, let's discuss what’s happening in the tech space.
The constant evolution and optimization of tech hardware have improved capabilities and increased adoption across various industries. Advancements and innovations are set to drive significant growth in the sector as a whole.
The global IT hardware market is expected to grow at a CAGR of 6.1% until 2027.
Moreover, the first half of 2023 witnessed a significant surge in the use of cutting-edge AI platforms. The most noteworthy development captivating attention is the explosive interest surrounding generative AI, which has the potential to revolutionize our personal and professional lives.
The global AI market is expected to hit around $1.87 trillion by 2032, exhibiting an impressive CAGR of 39.1%.
Let us take a closer look at the featured stocks:
Dell Technologies Inc. (DELL)
DELL designs, develops, manufactures, markets, sells, and supports various comprehensive and integrated solutions, products, and services in the Americas, Europe, the Middle East, Asia, and internationally. The company operates through two segments, Infrastructure Solutions Group and Client Solutions Group.
DELL’s trailing-12-month asset turnover ratio of 1.13x is 85.4% higher than the 0.61x industry average. Its trailing-12-month cash from operations of $5.61 billion is significantly higher than the industry average of $53.77 million.
On June 30, 2023, DELL announced the pricing terms of the previously announced cash tender offers. The company expects to accept for purchase $999.99 million in aggregate principal amount of the 6.02% Senior Notes due 2026.
Moreover, on June 16, DELL announced a quarterly dividend of $0.37 per common share, payable to the shareholders on August 4. DELL pays an annual dividend of $1.48 per share, which translates to a 2.73% yield at the current price level, higher than the four-year average dividend yield of 0.66%.
During the fiscal first quarter that ended May 5, 2023, DELL’s total net revenue came in at $20.92 billion. Its gross margin came in at $5.02 billion. Its non-GAAP net income and non-GAAP earnings per share amounted to $963 million and $1.31, respectively.
DELL’s EPS and revenue are expected to come in at $1.14 and $20.85 billion in the fiscal second quarter ending July 2023. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 34.7% year-to-date to close the last trading session at $55.64. Over the past nine months, the stock has gained 60.4%.
DELL’s POWR Ratings reflect its promising 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.
The stock has a B grade for Value and Sentiment. It is ranked #8 in the 43-stock Technology – Hardware industry.
Beyond what is stated above, we have also rated DELL for Stability, Growth, Momentum, and Quality. Get all DELL ratings here.
TDK Corporation (TTDKY)
Headquartered in Tokyo, Japan, TTDKY engages in the manufacture and sale of electronic components worldwide. The company operates through the following segments: Passive Components; Sensor Application Products; Magnetic Application Products; Energy Application Products; and Other segments.
TTDKY’s railing-12-month EBITDA and net income margins of 16.69% and 5.24% are 94.9% and 165.4% higher than the respective industry averages of 8.57% and 1.97%.
On May 19, TTDKY announced that its subsidiary TDK Ventures Inc. will launch its third fund, totaling $150 million in new capital. The new fund will target early-stage investments in energy transition, electrification, and decarbonization within the U.S. and Europe. TDK Ventures' total assets under management are now $350 million.
TTDKY’s net sales increased 14.7% year-over-year to ¥2.18 trillion ($15.76 billion) in the fiscal year that ended March 31, 2023. The company’s operating profit increased 1.2% year-over-year to ¥168.83 billion ($1.22 billion). Its gross profit increased 3.7% year-over-year to ¥584.52 billion ($4.23 billion). In addition, its net EPS came in at ¥300.64.
TTDKY’s EPS and revenue for fiscal year 2024 are expected to increase 15% and 300.3% year-over-year to $3.03 and $14.84 billion, respectively.
Over the past year, the stock has gained 33.5% to close the last trading session at $39.46.
TTDKY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Value, Momentum, and Stability. Within the same industry, it is ranked #13.
Click here to see the additional ratings of TTDKY for Growth, Sentiment, and Quality.
KVH Industries, Inc. (KVHI)
KVHI designs, develops, manufactures, and markets mobile connectivity products and services for the marine and land mobile markets in the United States and internationally. Its products include TracVision, TracNet, TracPhone, KVH Link, SPORTSlink, MOVIElink, etc.
KVHI’s trailing-12-month net income margin of 20.64% is 946.3% higher than the industry average of 1.97%. Its trailing-12-month CAPEX/Sales of 8.69% is 274.9% higher than the 2.32% industry average.
On May 9, KVHI introduced the KVH ONE™ OpenNet Program, an exciting initiative for leisure and commercial vessels. This revolutionary program opens up possibilities for leisure and commercial vessels, regardless of size or type.
As a result, vessel owners can leverage their existing non-KVH VSAT antennas to tap into a global network of VSAT coverage and an array of unparalleled benefits KVHI offers.
KVHI’s net sales increased 1.6% year-over-year to $33.69 million for the first quarter that ended March 31, 2023. Its total costs and expenses declined 8.5% from the year-ago value to $34.24 million. Also, its adjusted EBITDA rose 82.3% year-over-year to $3.27 million.
The consensus EPS estimate of $0.10 for the to-be-announced quarter that ended June 2023 reflects a 150% improvement year-over-year. The company has surpassed EPS estimates in three of its trailing four quarters, which is impressive.
Shares of KVHI gained 1.2% intraday to close the last trading session at $8.59.
KVHI’s robust fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has an A grade for Growth. Within the same industry, it is ranked #15.
Click here to access KVHI’s additional ratings for Value, Momentum, Stability, and Quality.
What To Do Next?
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DELL shares rose $0.02 (+0.04%) in premarket trading Friday. Year-to-date, DELL has gained 40.67%, versus a 18.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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