The tech market's growth is driven by increasing digitalization, demand for cloud-based solutions, a focus on data security and privacy, adoption of AI and machine learning, evolving regulations, business globalization, and the need for cost-effective, efficient software solutions.
Amid such conducive trends, investors could consider buying fundamentally sound tech stocks, Atlassian Corporation (TEAM), Teradata Corporation (TDC), and Sprinklr, Inc. (CXM).
The growing popularity of cloud-based software and rising concern to automate business processes are continuously increasing the demand for IT services worldwide. Similarly, the emerging big data technology and the rising number of connected devices across enterprises are also increasing the demand for IT service management and information security management platforms.
Additionally, the information technology market is expected to grow at a CAGR of 8.3% by 2028. Forecasted growth hinges on globalized IT services, digital transformation, cybersecurity innovations, smart city development, and evolving e-commerce.
Moreover, the global IT services market is anticipated to reach around $1.85 billion by 2031, growing at a CAGR of 9.5% from 2024 to 2031.
Considering these factors, let’s take a look at the fundamentals of the three tech stock picks.
Atlassian Corporation (TEAM)
Headquartered in Sydney, Australia, TEAM designs, develops, licenses, and maintains various software products worldwide.
In terms of the trailing-12-month gross profit margin, TEAM’s 81.86% is 64.8% higher than the 49.66% industry average. Its 37.29% trailing-12-month levered FCF margin is 29.95% higher than the 198.5% industry average. Likewise, the stock’s 0.94x trailing-12-month asset turnover ratio is 52.4% higher than the 0.61x industry average.
TEAM’s total revenues for the third quarter ended March 31, 2024, increased 29.9% year-over-year to $1.19 billion. The company’s non-GAAP gross profit increased 29.1% from the prior-year quarter to $1.01 billion. Also, the company’s non-GAAP net income rose 68.5% year-over-year to $232.50 million. Non-GAAP net income per share grew 64.8% year-over-year to $0.89.
Street expects TEAM to post a $1.13 billion revenue for the fourth quarter (ending June 2024), representing a 20.4% year-over-year increase. The company’s EPS is expected to increase 6.5% year-over-year to $0.61 for the same quarter. Moreover, it surpassed consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Shares of TEAM have grown 3.4% intraday to close the last trading session at $162.46.
Based on 20 Wall Street analysts offering 12-month price targets for TEAM in the last three months, the average target price is $236.56, indicating a 45.6% change from the last price, with a high forecast of $300 and a low forecast of $200.
TEAM’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. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
TEAM has an A grade for Growth, Sentiment, and Quality. It is ranked #36 among 134 stocks in the Software - Application industry.
Click here to access the additional TEAM ratings (Momentum, Stability, and Value).
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 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.
In terms of the trailing-12-month gross profit margin, TDC’s 60.21% is 21.2% higher than the 49.66% industry average. Its 14.50% trailing-12-month levered FCF margin is 44.5% higher than the 10.03% industry average. Likewise, the stock’s 0.98x trailing-12-month asset turnover ratio is 59.1% higher than the 0.61x industry average.
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 ending June 30, 2024, to increase marginally year-over-year to $0.48. The company’s revenue is expected to be $452.15 million. The company surpassed consensus EPS estimates in each of the trailing four quarters.
TDC’s stock gained 4.5% over the past month to close the last trading session at $34.37.
Based on eight Wall Street analysts offering 12-month price targets for TDC in the last three months, the average target price is $44.63, indicating a 29.9% change from the last price, with a high forecast of $60 and a low forecast of $35.
TDC’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 stock has an A grade for Quality and a B for Value. TDC is ranked #10 out of 79 stocks in the Technology - Services industry.
Beyond what is stated above, we’ve also rated TDC for Sentiment, Growth, Stability, and Momentum. Get all TDC ratings here.
Sprinklr, Inc. (CXM)
CXM provides enterprise cloud software products worldwide. The company operates the Unified Customer Experience Management platform, a software that enables customer-facing teams to collaborate across internal silos, communicate across digital channels, and leverage a complete suite of capabilities to deliver customer experiences.
On June 6, 2024, CXM and Reddit announced an expanded strategic partnership. The partnership spans Reddit’s Data and Advertising APIs, which are now open with Sprinklr as the first official partner.
CXM collaborates with numerous major global brands to unify teams, tools, and data for all customer-facing departments on a single platform. Strong partnerships with social and digital channels enable CXM customers to monitor and analyze brand-related conversations, optimize content for maximum reach and engagement, and customize advertising for optimal effectiveness and ROI.
In terms of the trailing-12-month gross profit margin, CXM’s 60.21% is 21.2% higher than the 49.66% industry average. Its 14.50% trailing-12-month levered FCF margin is 44.5% higher than the 10.03% industry average. Likewise, the stock’s 0.98x trailing-12-month asset turnover ratio is 59.1% higher than the 0.61x industry average.
CXM’s total revenue for the fiscal first quarter that ended April 30, 2024, increased 13% from the year-ago value to $195.96 million. Its non-GAAP gross profit rose 10.1% year-over-year to $144.83 million. Moreover, its non-GAAP net income stood at $25.31 million, up 49.1% over the prior-year quarter. Also, its non-GAAP net income per share grew 50% year-over-year to $0.09.
Analysts expect CXM’s revenue for the quarter ending July 30, 2024, to increase 8.9% year-over-year to $194.38 million. Its EPS is expected to be $0.07 for the same quarter. The company surpassed Street revenue and EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 2.3% intraday, closing the last trading session at $8.73.
Based on 14 Wall Street analysts offering 12-month price targets for CXM in the last three months, the average target price is $11.73, indicating a 34.4% change from the last price, with a high forecast of $17 and a low forecast of $9.
CXM’s POWR Ratings reflect bright prospects. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
CXM has a B grade for Value and Quality. It is ranked #26 out of 134 stocks in the Software - Application industry.
In addition to the POWR Ratings highlighted above, one can access CXM’s ratings for Growth, Momentum, Stability, and Sentiment here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
TEAM shares were trading at $163.94 per share on Monday afternoon, up $1.48 (+0.91%). Year-to-date, TEAM has declined -31.08%, versus a 14.82% 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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