Increased digitalization across several industries is expected to continue to drive technology spending around the world, as companies prioritize innovation, efficiency, and resilience in the digital age. Additionally, the development and proliferation of emerging technologies such as AI, cloud computing, and IoT are expected to drive growth in the technology sector.
Despite positive industry trends, tech stocks Zebra Technologies Corporation (ZBRA), Riot Platforms, Inc. (RIOT), and IonQ, Inc. (IONQ) are currently underperforming given their weak fundamentals. Better to avoid it.
In recent years, rapid digital transformation has increased focus and investment in technology across multiple sectors, including healthcare, communications, automotive, manufacturing, and more. Businesses are undertaking digitalization efforts to modernize operations, improve customer experience, and remain competitive in the digital age.
According to a recent forecast from Gartner, global IT spending is expected to reach $5 trillion in 2024, an increase of 6.8% year over year. Additionally, spending on IT services is expected to reach $1.5 trillion this year, an 8.7% increase from last year.
Corporate spending on software and IT services, particularly artificial intelligence, cloud computing, and cybersecurity technology, could enable the most growth in the technology sector. The IT services market is expected to reach a total value of $1.81 trillion by 2029, growing at a CAGR of 8.4% from 2024 to 2029.
Businesses are also increasing their investments in technology hardware to support their digital transformation efforts, including upgrading infrastructure, deploying cloud services, and strengthening cybersecurity. Deploying AI and machine learning technologies requires powerful computing hardware, increasing the demand for high-performance servers, GPUs, and specialized chips.
Additionally, emerging technologies such as virtual reality (VR), augmented reality (AR), and the Internet of Things (IoT) are driving demand for specialized hardware, sensors, and connectivity solutions. The IT hardware market is estimated to reach $191.03 billion by 2029, expanding at a CAGR of 7.7% during the forecast period (2024-2029).
Despite these encouraging trends, investors should avoid buying ZBRA, RIOT, and IONQ, which are fundamentally weak tech stocks.
Let’s discuss the fundamentals of these stocks in detail.
Zebra Technologies Co., Ltd. (ZBRA)
ZBRA provides enterprise asset intelligence solutions to the automatic identification and data capture solutions industry worldwide. The company operates in two segments: Asset Intelligence and Tracking and Enterprise Visibility and Mobility. We offer dye sublimation card printers, radio frequency identification (RFID) printers, temperature monitoring labels, and more.
In terms of forward EV/EBITDA, ZBRA is currently trading at 18.23x, 18.4% above the industry average of 15.40x. The company’s future EV/sales ratio of 3.55x is 20.7% higher than the industry average of 2.95x. The company’s forward P/E ratio is 33.20x, which is 19.9% higher than the industry average of 27.70x.
ZBRA’s net sales for the fourth quarter ended December 31, 2022 were $1.01 billion, a decrease of 32.9% from the same period last year. Adjusted EBITDA was $155 million, a decrease of 54.1% year over year. The company’s non-GAAP net income and non-GAAP EPS were $89 million and $1.71, down 63.8% and 64%, respectively, from the prior year period.
Analysts expect ZBRA’s EPS for the first quarter ending March 2024 to be $2.43, down 38.4% year over year. Revenue for the quarter is expected to be $1.14 billion, down 18.5% year over year.
The stock price has fallen 8.3% over the past year, closing at $279.48.
ZBRA’s POWR rating reflects this bleak outlook. The stock has an overall F rating, which equates to a Strong Sell according to our proprietary rating system. POWR ratings are calculated by considering 118 different factors, with each factor weighted to the best degree.
ZBRA has a D rating for Stability, Momentum, and Growth. Ranked #31 of 46 stocks in the Technology – Telecommunications/Networking industry.
In addition to the POWR ratings above, you can find ZBRA’s additional ratings for Value, Quality, and Sentiment here.
Riot Platforms, Inc. (riot)
RIOT, along with its subsidiaries, operates as a Bitcoin mining company in North America. The company operates through Bitcoin mining. Data Center Hosting; Engineering Department. We also provide colocation services for institutional-scale Bitcoin mining companies and critical infrastructure and workforce for institutional-scale miners.
RIOT’s future EV/Sales of 10.34x is 250.9% higher than the industry average of 2.95x. Similarly, the company’s forward price-to-sales multiple of 11.27 is significantly higher than the industry average of 2.92.
Revenue from RIOT’s Data Center Hosting segment for the year ended December 31, 2023 decreased 26% from the prior year to $27.28 million. The company reported an operating loss of $63.05 million in the quarter. Their net losses were $49.47 million and $0.28 per share, respectively.
Street expects RIOT’s fiscal year (ending December 2024) revenue to increase 60.9% year over year to $463.94 million. However, the company is expected to report a loss of $0.62 per share for the current year. Additionally, Riot Platforms has missed consensus revenue and his EPS estimates in three of his four subsequent quarters, which is disappointing.
The stock price has risen modestly since the beginning of the year, closing at $15.73.
It’s no surprise that RIOT has an F overall rating. This equates to a strong sell in the POWR rating system.
RIOT also has an F rating for Quality, Value, and Stability and a D rating for Sentiment. It ranks last among 76 stocks in the Technology – Services industry.
Click here to access additional ratings for RIOT (Momentum and Growth).
Aeon Q Co., Ltd. (ion Q)
IONQ develops general-purpose quantum computing systems. We sell access to quantum computers with several qubit capacities. The company also provides consulting services for the joint development of algorithms for quantum computing systems and contracts related to the development of specialized quantum systems.
IONQ’s trailing 12-month price/sales ratio was 4.53x, which is 246.6% higher than the industry average of 1.31x. Similarly, the company’s trailing twelve month EV/Sales multiple was 4.23, which was 161.2% higher than the industry average of 1.62.
For the fiscal third quarter ended September 30, 2023, IONQ’s operating costs and expenses increased 74.6% year over year to $48.33 million. Operating loss widened to $42.19 million, an increase of 69.4% year-on-year. Additionally, the company’s adjusted EBITDA loss worsened by 67.8% year-on-year to $22.41 million.
Additionally, the company’s net loss widened 86.8% year over year to $44.81 million. Net loss per share attributable to common stockholders was $0.22, an 83.3% decline compared to the same period last year. moreover,
The Street expects IONQ’s loss per share for the fiscal fourth quarter ending December 2023 to widen 88.9% year-over-year to $0.17. Similarly, fiscal year 2024 loss per share is expected to worsen by 14.8% year over year. Down to $0.74. The company also failed to beat consensus EPS estimates in three of his four subsequent quarters.
IONQ stock has fallen 26.3% over the past six months, closing at $10.99.
IONQ’s weak fundamentals are reflected in its POWR rating. The stock has an overall F rating of his, which equates to a Strong Sell according to our proprietary rating system.
This stock has an F rating for Value and Stability. It also has a D rating for sentiment, quality, and growth. IONQ ranks last out of 36 stocks in the Technology – Hardware industry.
Click here for additional POWR ratings for IONQ (Momentum).
What’s next?
Discover 10 widely held stocks that our proprietary model shows has big downside potential. Make sure it’s not one of these. ”death trapThe following stocks are lurking in your portfolio:
10 stocks to sell right now! >
ZBRA stock was trading at $275.69 per share Friday morning, down $3.79, or -1.36%. Year-to-date, ZBRA is up 0.86%, while the benchmark S&P 500 index is up 6.90% during the same period.
About the author: Nidhi Agarwal
Nidhi has a passion for capital markets and asset management, which led her to pursue a career as an investment analyst. She has a bachelor’s degree in finance and marketing and is in the CFA program. Her fundamental approach to stock analysis helps investors identify the best investment opportunities. more…
Additional resources for stocks in this article
Source link
