Despite macroeconomic challenges, the technology hardware industry is expected to see robust growth due to technology penetration, increased investment in digitalization, and adoption of new technologies.
However, not all tech stocks are worth considering right now. Technology giant Apple, Inc. (AAPL), I think it would be wise to wait for a better entry point due to the deteriorating financial situation and high valuation. Instead, Lenovo Group Limited (LNVGY), Pitney Bowes Co., Ltd. (PBI), Sharp Corporation (Shikai) could be a solid buy now to take advantage of favorable trends in the industry.
Before we dive deeper into the fundamentals of these stocks, let’s discuss why the tech hardware industry is well-positioned for growth and why now might not be the right time to buy AAPL.
As businesses deploy technology to engage customers, innovate, and streamline operations, they need smart technology hardware. Advanced hardware complements software to ensure smooth operations and drive growth through rapid digital transformation and adoption of emerging technologies.
Companies investing in advanced hardware and equipment can lead to increased productivity and efficiency. Gartner predicts that global IT spending will reach $4.69 trillion in 2023. 3.5% increase compared to previous year. Spending on devices in 2023 is expected to decline 10% year over year, but is expected to reach $722.47 billion next year, an increase of 4.8% year over year.
Internet of Things (IoT) technologies are actively contributing to the digital transformation of businesses, resulting in a significant increase in the demand for interconnected hardware such as sensors, processors, and wireless solutions. According to Mordor Intelligence, the market for IoT devices is expected to grow rapidly. CAGR 23.3%reaching $336.64 billion by 2028.
Tech giant AAPL exceeded consensus EPS and revenue estimates in its last reported quarter. However, sales for the fourth quarter (ending September 30, 2023) decreased by 1% year-on-year, to a total of $89.5 billion.
However, AAPL beat analysts’ expectations, posting service revenue of $22.31 billion, up 16% year over year. iPhone sales set a record for the September quarter, and services sales hit an all-time high. AAPL stock has also increased 45.8% since the beginning of the year, closing at $189.37.
Meanwhile, product revenue decreased 5.3% year-on-year to $67.18 billion. Mac and iPad sales decreased 33.8% and 10.2% from the previous year to $7.61 billion and $6.44 billion, respectively. Additionally, AAPL’s wearables, home and accessories sales decreased 3.4% year over year to $9.32 billion.
Despite beating headline expectations in the last reported quarter, AAPL cautioned investors not to expect revenue growth in the December quarter.
Although the company’s business is relatively weak, its stock is trading at a premium. In terms of future EV/EBITDA, AAPL’s 22.06x is 51.9% higher than the industry average of 14.52x. Similarly, the company’s future EV/Sales ratio of 7.32x is 175.5% higher than the industry average of 2.66x. Furthermore, the non-GAAP forward P/E ratio is 28.88x, which is 29.6% higher than the industry average of 22.29x.
Additionally, while iPhone sales were strong in the last reported quarter, a slowdown in the smartphone market could impact revenue in the short term.
With this background in mind, let’s analyze the fundamentals of three great solutions. Technology – Hardware Stocks, let’s start with the third option.
Stock #3: Lenovo Group Limited (LNVGY)
Headquartered in Quarry Bay, Hong Kong, LNVGY is an investment holding company that develops, manufactures and markets technology products and services. The company operates through the following segments: Intelligent Devices Group, Infrastructure Solutions Group, and Solutions and Services Group.
In terms of return on common stock over the past 12 months, LNVGY’s 20.56% is significantly higher than the industry average of 0.99%. Similarly, his trailing 12-month return on assets of 2.57% is significantly higher than his industry average of 0.15%. Additionally, the stock’s 12-month trailing price is 1.41x. asset turnover rate 127.8% higher than the industry average of 0.62x.
LNVGY’s group revenue for the second quarter ended September 30, 2023 was $14.41 billion. Similarly, the company’s net income and earnings per share attributable to shareholders were $249 million and $1.99, respectively. The gross profit margin increased by 0.7 points from the same period last year to 17.5%.
LNVGY’s revenue for the quarter ending March 31, 2024 is expected to be $13.27 billion, up 5% from the year-ago period. EPS for the year ending March 31, 2025 is expected to be $2.36, up 53.9% from the prior year. Shares have increased 51% since the beginning of the year, closing at $24.44.
LNVGY’s positive outlook is power rating. The overall rating is B, which is equivalent to a “buy” according to our own rating system. POWR Ratings evaluates stocks by 118 different factors, each with its own weighting.
An A grade for value and a B grade for momentum. Within B rating Technology – Hardware It ranks 18th out of 37 stocks in the industry. To check LNVGY’s growth, stability, sentiment, and quality ratings, go to click here.
Stock #2: Pitney Bowes Co., Ltd. (PBI)
PBI is a shipping and mailing company that provides technology, logistics and financial services to small and medium-sized businesses, large corporations, retailers and government customers in the United States, Canada and internationally. The company operates through the following segments: Global E-Commerce, Presort Services, and Send Technology Solutions (SendTech Solutions).
On November 8, 2023, PBI announced enhancements to its domestic parcel network and services through an automated e-commerce hub, regional delivery expansion, and new robotic solutions. These efforts are aimed at increasing efficiency, on-time delivery and consumer return processing for e-commerce brands and retailers, resulting in a 38% year-over-year increase in domestic parcel volume in the third quarter. To do.
In terms of gross profit margin over the past 12 months, PBI’s 31.02% is 2.2% higher than the industry average of 30.35%. Similarly, its 12-month CapEx/Sales of 3.18% is 6.8% higher than the industry average of 2.97%.
PBI’s total revenue for the third quarter ended September 30, 2023 was $783.75 million. Net cash provided by operating activities was $25.31 million, compared to a negative net cash provided by operating activities of $36.47 million in the prior year period. Furthermore, adjusted EBITDA was $83.73 million, an increase of 8.3% year over year.
PBI’s EPS for the quarter ending March 31, 2024 is expected to increase 600% year over year to $0.05. Over the past month, PBI has risen 35% to close at $4.13.
It’s no surprise that PBI has an overall rating of B. This equates to a “buy” rating in our proprietary rating system.
Growth potential and value are rated B. It ranks 14th in the industry. In total, we evaluate PBI at eight different levels. In addition to the above, we also assigned PBI grades for Momentum, Stability, Sentiment, and Quality.Get all PBI ratings here.
1st share: Sharp Corporation (Shikai)
Headquartered in Sakai, Japan, SHCAY manufactures and sells communications equipment, electrical and electronic applications, and electronic components in Japan, China, and overseas. We operate in five segments: smart life, 8K ecosystem, ICT, display devices, and electronic devices.
In terms of asset turnover over the past 12 months, SHCAY’s 1.20x is 20.8% higher than the industry average of 0.99x.
SHCAY’s net sales for the six months ended September 30, 2023 were 1.16 trillion yen ($7.88 billion). The company’s comprehensive income attributable to owners of the parent company increased 37.9% year-on-year to 63.92 billion yen ($434 million). Additionally, the company’s total assets as of September 30, 2023 were 1.85 trillion yen ($12.56 billion), and 1.77 trillion yen ($12.02 billion) for the fiscal year ending March 31, 2023. ) increased from
Analysts expect SHCAY’s revenue for the fiscal year ending March 31, 2024 to be $16.76 billion, an increase of 306% year over year. Shares have increased 7.6% over the past six months, closing at $1.51.
SHCAY’s POWR Rating reflects a solid outlook. The overall rating is B, which is equivalent to a “buy” according to our own rating system.
Technology – Ranked #13 in the Hardware industry. The value grade is A and the growth grade is B. click here See SHCAY’s momentum, stability, sentiment and quality ratings.
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LNVGY stock was trading Thursday afternoon at $24.59 per share, up $0.15 (+0.61%). Year-to-date, LNVGY has increased his 58.38%. In comparison, the benchmark S&P 500 index rose 19.95% during the same period.
About the author: Abhishek Bhuyan
Abhishek began his professional journey as a financial journalist because of his keen interest in determining the fundamental factors that influence the future performance of financial products. more…
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