The tech-hardware industry fuels our digital world by crafting essential physical components. Amid growing demand, investors could consider buying potential tech stocks Quantum Corporation (QMCO), Seiko Epson Corporation (SEKEY), and TransAct Technologies Incorporated (TACT) for November profits.
The tech hardware industry is constantly evolving, with new trends supplanting old ones. Global tech firms heavily invest in research and development to stay ahead and create innovative products, making the industry among the world's largest and most profitable.
The IT hardware market, including computer hardware production and sales, is driven by the growing IT industry's need for advanced hardware solutions supporting digital transformation, cloud computing, and emerging technologies. The market is expected to reach a revenue of $121.32 billion this year.
The IT Hardware Market is projected to increase at a CAGR of 7.9% to reach $177.11 billion by 2028.
In addition, the global revenue in the IT services market is projected to see substantial growth from 2023 to 2028, with a total increase of $529.50 billion, representing a 42.7% rise. This continuous growth trend is expected to result in an estimated figure of $1.8 trillion in revenue by 2028, marking a new peak after eight consecutive years of expansion.
Furthermore, growing digitization investments in various sectors increase demand for hardware, including servers and data centers. Additionally, the adoption of emerging technologies like AI, machine learning, and IoT boosts hardware demand due to their complex processing and data storage needs.
Considering these conducive trends, let’s look at the fundamentals of the three best Technology-Hardware stocks, starting with number 3.
Stock #3: Quantum Corporation (QMCO)
QMCO is a global provider of storage and data management solutions for various industries. The company offers products for high-performance data applications, video surveillance, data archiving, and more. Its services include support, software subscriptions, and the company partners with companies like Tiger Surveillance for comprehensive solutions.
QMCO’s trailing-12-month CAPEX / Sales of 2.91% is 20.1% higher than the industry average of 2.42%. Its 1.89x trailing-12-month asset turnover ratio is 205.1% higher than the 0.62x industry average.
On October 11, 2023, QMCO introduced DXi Edge-Core-Cloud Bundles, a comprehensive data protection and ransomware recovery solution. These bundles leverage the efficiency of Quantum's DXi-Series Backup Appliances and are available in four capacity sizes ranging from 400 TB to 228 petabytes, providing a cost-effective way to safeguard data across various enterprise locations, offering up to 70 times the efficiency of other backup solutions.
On September 13, the company launched pre-configured bundles for their ActiveScale Cold Storage, a cost-effective solution for archiving data, reducing cold storage expenses by up to 60%. These bundles simplify data retention and are available in sizes from 10 to 100 petabytes.
ActiveScale is suitable for various sectors, offering scalable and durable storage for unstructured data, data analytics, AI workloads, and long-term data retention. This initiative streamlines the purchase and deployment process for organizations seeking efficient data management.
In the fiscal first quarter ended June 30, 2023, QMCO generated total revenue of $91.79 million. The company's non-GAAP gross profit grew 2.1% year-over-year to $ 35.18 million. Also, its total non-GAAP operating costs declined 2.3% year-over-year at $35.45 million. Moreover, its adjusted EBITDA grew 122.8% year-over-year to $0.77 million.
The company expects revenues of about $80 million (with a potential range of plus or minus $3 million), a non-GAAP gross margin of approximately 42%, and an adjusted EBITDA of approximately $2 million for the second fiscal quarter of 2024.
Analysts expect QMCO’s revenue to grow 4.6% year-over-year to $370.05 million for the fiscal year ending March 2025. The company has surpassed the revenue estimates in each of the trailing three quarters, which is impressive.
Shares of QMCO increased marginally intraday to close the last trading session at $0.46.
QMCO’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, equating 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.
QMCO has a B grade for Value. Within the B-rated Technology-Hardware industry, it is ranked #12 out of 41 stocks.
Click here for QMCO’s additional Growth, Momentum, Stability, Sentiment, and Quality ratings.
Stock #2: Seiko Epson Corporation (SEKEY)
Based in Suwa, Japan, SEKEY specializes in the development, manufacturing, and sale of information equipment. The company has three main business segments: Printing Solutions; Visual Communications; and Wearable & Industrial Products. It produces printers, projectors, wearables, and industrial equipment.
SEKEY’s trailing-12-month net income margin of 3.90% is 84.8% higher than the industry average of 2.11%. Its 3.77% trailing-12-month CAEXSales is 55.8% higher than the 2.42% industry average.
On October 24, SEKEY launched the GX-B Series of high-power-density SCARA robots, including the GX10B, at The Assembly Show. The RC700E controller with integrated SafeSense technology powers these robots, providing high performance, flexibility, and safety features.
The controller allows for human-robot interaction without a safety barrier and increases productivity. Key features include ease of use, a low total cost of ownership, and Industry 4.0 readiness with OPC UA connectivity.
On October 12, SEKEY introduced the SureColor P5370, a 17-inch professional photographic printer aimed at professional and production photographers. It has an improved printhead, a wider color gamut with a 10-color ink set, and advanced printing capabilities.
The printer provides a range of roll feeding, auto cutting, and various media sizes, as well as simple operation via a touchscreen. It also has multiple connectivity options, including Wi-Fi, and advanced software for increased productivity.
For the six months ended September 30, 2023, SEKEY generated revenue of ¥638.53 billion ($4.27 billion), up marginally year-over-year. The company earned gross profit and EPS of ¥213.57 billion ($1.43 billion) and ¥82.87, respectively. Additionally, its net cash from operating activities increased 192.9% year-over-year to ¥61.51 billion ($411.69 million).
Street expects SEKEY’s revenue to grow 2.4% year-over-year to $2.29 billion for the first quarter ending June 2024.
The stock has soared 1.8% over the past year to close the last trading session at $7.08. Moreover, the stock rose marginally intraday.
SEKEY’s POWR Ratings reflect this positive outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
SEKEY has an A grade for Value and a B for Stability and Quality. Within the same industry, it is ranked #9.
Click here for SEKEY’s additional Growth, Momentum and Sentiment ratings.
Stock #1: TransAct Technologies Incorporated (TACT)
TACT is a global leader in software-driven technology and printing solutions for high-growth markets. It creates, develops, and sells transactional and specialty printers and terminals for a variety of industries, including food service, point-of-sale, casino, and gaming. The company provides thermal printers, consumables, and software solutions to a wide range of customers worldwide, from OEMs to end-users.
TACT’s trailing-12-month gross profit margin of 50.68% is 2.6% higher than the industry average of 49.41%. Its 7.59% trailing-12-month EBIT margin is 54.5% higher than the 4.91% industry average.
During the second quarter ended June 30, 2023, TACT’s net sales and gross profit amounted to $19.91 million and $10.86 million, up 57.7% and 99.8% year-over-year, respectively. Its adjusted operating income and net income amounted to $2.69 million and $2.16 million, up 190.9% and 190.7% from the previous-year quarter. Moreover, the company's adjusted EBITDA increased 225.2% to $3.18 million.
For the fiscal year 2023, the company expects total net sales to range between $71.50 million and $73.50 million. Additionally, TACT expects the total adjusted EBITDA to be in the range of $8 million to $8.50 million.
TACT’s revenue is expected to increase 24.5% year-over-year to $72.40 million for the fiscal year ending December 2023. Its EPS is expected to amount to $0.32 in the same year. The company has surpassed the revenue estimates in each of the trailing four quarters.
The stock has soared 48.3% over the past year to close the last trading session at $5.93.
TACT’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
TACT has an A grade for Value and Sentiment and a B for Quality. Within the same industry, it is ranked #2.
To see TACT’s additional POWR Ratings for Growth, Momentum and Stability click 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.
SEKEY shares were trading at $7.04 per share on Tuesday morning, down $0.04 (-0.56%). Year-to-date, SEKEY has declined -4.09%, versus a 15.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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