The tech hardware industry is booming due to the increasing adoption of sustainable hardware practices, integration of AI, and the use of modular and upgradeable systems in the field of computer hardware. Thus, investors could consider buying fundamentally sound tech hardware stocks, Murata Manufacturing Co., Ltd. (MRAAY), Logitech International S.A. (LOGI), and Lantronix, Inc. (LTRX) this week.
The growth of the IT industry fuels the demand for sophisticated hardware solutions, encompassing servers, storage devices, computer systems, and peripherals. As businesses embrace digital transformation strategies, they need strong and scalable hardware infrastructure to manage increasing data volumes, maintain seamless connectivity, and support their software applications.
Therefore, the IT hardware market is expected to reach $191.03 billion by 2029, growing at a CAGR of 7.9%.
Besides, as per the GSMA prediction, 5G networks will likely reach 1.2 billion connections or one-third of the world’s population by 2025. The widespread adoption of 5G network services worldwide should increase the demand for electronic components. The global electronics components market is projected to reach $368.40 billion by 2032, expanding at a CAGR of 6.8%.
Additionally, the important components of artificial intelligence hardware are networking, storage, and computers. AI hardware is widely adopted in various industries, such as telecom, banking, and IT, and the growth in these industries is expected to drive the market for AI hardware in the coming years.
Hence, the global AI in hardware market is projected to surpass around $473.53 billion by 2033, growing at a CAGR of 24.3%.
Furthermore, Investors’ interest in tech stocks is evident from the iShares Expanded Tech Sector ETF’s (IGM) 44% returns over the past year.
Considering these conducive trends, let’s examine the fundamentals of the three best Technology - Hardware stocks, starting with the third choice.
Stock #3: Murata Manufacturing Co., Ltd. (MRAAY)
Headquartered in Nagaokakyo, Japan, MRAAY designs, manufactures, and sells ceramic-based passive electronic components and solutions in Japan and internationally. It operates through Components; Devices and Modules; and Others segments.
On May 14, 2024, MRAAY unveiled a significant advancement in the realm of electronic components with the launch of its innovative L Cancel Transformer (LCT).
This remarkable product is the first of its kind and can neutralize the equivalent series inductance of a capacitor, optimizing its noise-reducing capabilities. Utilizing MRAAY’s exclusive ceramic multilayer technology, this breakthrough solution allows engineers to reduce system noise while decreasing costs and component count.
On April 2, MRAAY unveiled its groundbreaking Type 2GT module, a multi-band, low-power radio (LoRa®) module, which marks a significant leap forward in the development of IoT devices requiring versatile wireless connectivity.
This highly integrated module offers a comprehensive solution that caters to the complex demands of global certification standards, facilitating seamless deployment in diverse regions and industries.
In terms of the trailing-12-month EBIT margin, MRAAY’s 16.16% is 244.7% higher than the 4.69% industry average. Likewise, its 11.03% trailing-12-month net income margin is 308% higher than the industry average of 2.70%.
MRAAY’s revenues for the fiscal year that ended March 31, 2024, came in at ¥1.64 trillion ($10.42 billion). Its operating profit for the period came in at ¥215.45 billion ($1.37 billion). The company’s profit for the period came in at ¥180.34 billion ($1.15 billion) and ¥95.72 per share.
Additionally, its net cash provided by operating activities for the year ended March 31, 2024, increased 76.4% year-over-year to ¥489.64 billion ($3.11 billion).
Analysts expect MRAAY’s revenue for the second quarter (ending September 2024) to increase marginally year-over-year to $2.95 billion.
MRAAY’s stock has soared 1.4% over the past month to close the last trading session at $9.27.
MRAAY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a 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 Quality. MRAAY is ranked #13 in the among 37 stocks in the Technology - Hardware industry.
Beyond what is stated above, we’ve also rated MRAAY for Value, Growth, Momentum, Stability, and Sentiment. Get all MRAAY ratings here.
Stock #2: Logitech International S.A. (LOGI)
Headquartered in Lausanne, Switzerland, LOGI and its subsidiaries design, manufacture, and market products that connect people to working, creating, gaming, and streaming worldwide. The company’s offerings include pointing devices, corded and cordless keyboards, PC webcams, and other accessories for mobile devices.
On May 30, 2024, LOGI announced a new lineup of Logi for Mac products aimed at enhancing Mac users' experience while enabling more sustainable lifestyles without compromise.
Adding in the latest MX series and ergonomic innovations, the lineup includes MX Keys S for Mac, MX Keys S Combo for Mac, MX Anywhere 3S for Mac, MX Keys Mini for Mac, and Ergo Series Wave Keys for Mac, a new ergo keyboard.
Also, on May 21, LOGI announced MeetUp 2, an AI-powered USB conference camera designed for bring-your-own device (BYOD) and PC-based setups in huddle and small meeting rooms. This next-generation camera is the modern evolution of the iconic Logitech MeetUp, the bestselling conference camera in Logitech history that has sold more than one million units.
In terms of the trailing-12-month EBIT margin, LOGI’s 13.90% is 196.5% higher than the 4.69% industry average. Likewise, its 20.10% trailing-12-month levered FCF margin is 100.2% higher than the industry average of 10.04%. Furthermore, the stock’s 1.20x trailing-12-month asset turnover ratio is 96.1% higher than the industry average of 0.61x.
LOGI’s net sales for the fourth quarter, which ended March 31, 2024, increased 5.4% year-over-year to $1.26 billion. The company’s non-GAAP operating income rose 92.7% year-over-year to $158.61 million. For the same quarter, its non-GAAP net income increased 91.7% year-over-year to $154.43 million, and its non-GAAP net income per share grew 98% over the previous year’s quarter to $0.99.
Street expects LOGI to post revenue for the first quarter (ending June 2024) of $1.04 billion, representing an increase of 6.4% year-over-year. The company’s EPS is expected to increase 38.5% year-over-year to $0.90 for the same quarter. Moreover, it surpassed consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Shares of LOGI have gained 19.9% over the past month to close the last trading session at $95.21.
LOGI’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
LOGI has an A grade for Quality and a B for Growth and Momentum. It is ranked #10 in the same industry.
Click here to access the additional LOGI ratings (Value, Stability, and Sentiment).
Stock #1: Lantronix, Inc. (LTRX)
LTRX offers solutions for video surveillance, infotainment systems, and intelligent substations infrastructure internationally. The company’s IoT products include IoT System Solutions, Embedded IoT Modules, and Software and Engineering Services. It also offers telematics devices, which provide power-efficient products.
On May 30, 2024, LTRX announced that it would do live demos of its AI-driven out-of-band management solutions at booth 4875 at Cisco Live held June 2–6, 2024, in Las Vegas.
Its innovative solutions for out-of-band environments utilize rules-based AI to recover and mitigate network infrastructure automatically, including reliable and secure access to remote gear during an outage. The solution automates many routine tasks that can unnecessarily consume a network admin’s day.
On April 16, 2024, LTRX launched its new FOX4 and Bolero 43 edge compute tracker telematic gateways. Designed for assets and fleet management, both products come pre-configured with LTRX’s Percepxion™ IoT edge software platform, which provides secure, comprehensive IoT device provisioning and management.
LTRX’s trailing-12-month levered FCF margin of 11.22% is 11.8% higher than the industry average of 10.04%. Its trailing-12-month asset turnover ratio of 0.98x is 60% higher than the industry average of 0.61x.
During the fiscal third quarter ended on March 31, 2024, LTRX’s net revenue increased 24.9% year-over-year to $41.18 million. Its gross profit rose 12.7% from the year-ago value to $16.50 million. In addition, the company’s non-GAAP net income amounted to $4.23 million and $0.11, representing increases of 97.7% and 83.3% year-over-year, respectively.
Street expects LTRX’s EPS and revenue for the fourth quarter (ending June 2024) to expand 158.3% and 41% year-over-year to $0.16 and $49.26 million, respectively. In addition, the company surpassed the consensus revenue estimates in three of the trailing four quarters.
Shares of LTRX have surged 9% over the past month to close the last trading session at $3.77.
LTRX’s POWR Ratings reflect bright prospects. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
LTRX has an A grade for Sentiment and Growth and a B for Quality and Value. It is ranked #2 in the same industry.
In addition to the POWR Ratings highlighted above, one can access LTRX’s ratings for Stability here.
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MRAAY shares were trading at $9.33 per share on Thursday afternoon, up $0.06 (+0.65%). Year-to-date, MRAAY has declined -11.61%, versus a 10.70% 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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