The technology sector appears set for expansion, supported by anticipated interest rate reductions, declining inflation, and a rise in consumer expenditure. Furthermore, the noteworthy 36.9% return of the tech-dominated NASDAQ Composite in the last year enhances the sector’s attractiveness for investors.
Navigating the Dynamic Landscape
The tech sector experiences ongoing transformation propelled by emerging trends and advancements, establishing itself as a field marked by rapid expansion. Companies providing tech services, dedicated to introducing innovations that improve efficiency and stimulate growth, foresee an increase in both private and government expenditures.
Furthermore, companies giving precedence to digital initiatives, utilizing advanced technologies for enhanced efficiency and cost-cutting, and progressively embracing cloud technologies and business intelligence, are fueling the expansion of the IT market. The IT Services market in the United States is projected to witness a Compound Annual Growth Rate (CAGR) of 6.5% until 2028.
Tech Market Dynamics
Moreover, the anticipated global value of the computer hardware market, set to reach $909.80 billion by 2027, is witnessing substantial growth driven by technological advancements and increasing demand for computing devices across various industries. Additionally, the embrace of cloud computing, the upsurge in the Internet of Things (IoT), and the need for high-performance computing, accelerated by progress in Artificial Intelligence (AI) and Machine Learning (ML), are propelling the sector forward. According to a report from Precedence Research, the global AI in hardware market is projected to exceed approximately $248.09 billion by 2030, expanding at a CAGR of 24.5%.
Furthermore, the rise of technologies such as 5G and IoT highlights the imperative for advanced networking architecture, fostering growth in the networking industry. Moreover, heightened investments in network security solutions, prompted by the escalating threat of cybersecurity, contribute to the networking industry’s growth. The global enterprise networking market is anticipated to experience a CAGR of over 6% from 2022 to 2027.
Spot stocks with potential for a 2x increase
1) Zoom Video Communications, Inc.
ZM operates as a video communication platform provider, offering a unified communications and collaboration platform that revolutionizes interpersonal interactions. This platform seamlessly connects individuals through secure and smooth meetings, phone calls, chat, content sharing, and more. ZM boasts a substantial institutional ownership of 66.1%, reflecting strong confidence from institutional investors, with their combined holdings valued at $11.66 billion. Notably, 307 institutions recently increased their positions, and the stock is part of the portfolios of 134 institutions, accumulating a total of 170,257,115 institutional shares.
On December 6, 2023, ZM introduced enhancements to its AI-powered customer experience (CX) suite, coupled with the upcoming availability of new pricing plans. In the fiscal third quarter, concluding on October 31, 2023, ZM experienced a 3.2% year-over-year revenue growth, reaching $1.14 billion. The non-GAAP income from operations saw a substantial 154.7% increase compared to the same quarter in the previous year, totaling $461.68 million. ZM’s non-GAAP net income also rose by 24.2% year-over-year to $401.24 million, with non-GAAP EPS at $0.45, indicating an impressive 181.3% year-over-year increase.
Analysts anticipate a 13.2% year-over-year rise in ZM’s EPS to $4.95 for the fiscal year ending January 2024, accompanied by a 2.7% year-over-year growth in revenue to $4.51 billion. Notably, ZM has consistently surpassed consensus EPS and revenue estimates in the last four quarters.
In the past three months, the stock has gained 5.7%, closing the latest trading session at $68.50. ZM’s promising outlook is reflected in its POWR Ratings, where it holds an overall rating of B, indicating a Buy in our proprietary rating system. The POWR Ratings consider 118 different factors, each weighted optimally to provide a comprehensive assessment.
2) Daktronics, Inc.
DAKT engages in the design, manufacturing, and marketing of electronic display systems and related products for various applications such as sporting, commercial, and transportation, both in the United States and internationally. Its operations are segmented into Commercial, Live Events, High School Park and Recreation, Transportation, and International.DAKT demonstrates significant institutional ownership at 49.01%, reflecting a total holding value of $183 million. Recent notable activity includes 73 holders increasing their positions, resulting in a total of 22,633,566 institutional shares across 21 holdings.
On December 15, 2023, DAKT announced a collaboration with the Detroit Tigers to install the second-largest main video display in Major League Baseball at Comerica Park, replacing the existing outfield display. The new display, featuring over 15,000 square feet of digital canvas with 14.10 million pixels, is set to measure approximately 67 feet high by 185 feet wide. This initiative aims to enhance the fan experience at Comerica Park ahead of the 2024 baseball season.For the fiscal second quarter concluding on October 28, 2023, DAKT reported a 6.4% year-over-year growth in net sales and a remarkable 71% increase in gross profit, reaching $199.37 million and $54.20 million, respectively. The company also generated an adjusted net income of $12.82 million, marking a notable improvement from the prior-year quarter’s loss of $12.98 million.
Anticipated for the current fiscal quarter ending January 2024, DAKT’s EPS and revenue are projected to rise by 158.6% and 8% year-over-year, reaching $0.17 and $199.80 million, respectively.
3) Boxlight Corporation
BOXL specializes in the development, sale, and servicing of interactive classroom technology products and solutions catering to the K-12 education market worldwide. The company’s offerings include interactive and non-interactive projectors, flat panel displays, touch projectors, touchboards, MimioTeach for transforming any interactive whiteboard, accessory document cameras, teacher pads for remote control, and assessment systems. BOXL demonstrates an institutional ownership of 7.73%, with a total value of $1 million. Recent institutional activity indicates that 11 holders increased their positions, while 7 maintained their positions, resulting in a cumulative holding of 742,872 shares.
On January 4, 2024, BOXL introduced MimioPro G, an interactive flat panel certified by Google EDLA. This product provides seamless access to Google accounts and tools, including the Google Play Store and Google Workspace for Education. Featuring 50 touch points, micro antibacterial glass, and integrated NFC, MimioPro G streamlines workflows, presenting itself as a valuable enhancement for classrooms. BOXL stands out as the exclusive education technology provider offering this distinctive combination, showcasing a dedicated commitment to innovative solutions.
For the fiscal third quarter concluding on September 30, 2023, BOXL reported net revenues of $49.67 million, with a gross profit of $18.01 million. The company’s adjusted EBITDA reached $4.93 million during this period.As of September 30, the long-term debt stood at $43.36 million, a slight decrease from $43.78 million as of December 31, 2022. Market expectations indicate a 2.7% year-over-year increase in BOXL’s revenue to $2.72 for the fiscal year 2024. Additionally, the company’s EPS is anticipated to rise by 55.9% year-over-year for the same year. BOXL has exceeded consensus EPS estimates in three of the past four quarters.
