4 Tech Stocks Bucking the Downtrend with More Room to Run
The major market indexes have been experiencing high volatility since the beginning of the year, and tech stocks have been worst affected. However, tech stocks VMware (VMW), Hewlett Packard Enterprise...
The major market indexes have been experiencing high volatility since the beginning of the year, and tech stocks have been worst affected. However, tech stocks VMware (VMW), Hewlett Packard Enterprise (HPE), Check Point Software Technologies (CHKP), and Concentrix (CNXC) have managed to buck the recent downtrend and have delivered positive returns year-to-date. So, let's discuss these names.
Volatility has wreaked havoc on the major stock market indexes since the beginning of the year on concerns over the Fed's impending interest rate hikes and U.S.-Ukraine-Russia tensions. Technology stocks have experienced a significant sell-off since the beginning of the year, with the tech-heavy Nasdaq Composite declining 16.6% year-to-date.
However, the increased adoption of cloud, hybrid business structures, and service-based IT by businesses to make their operations efficient should keep supporting the tech sector. According to Gartner, worldwide IT spending, which includes data center systems, enterprise software, devices, IT services, and communications services, will reach $4.5 trillion in 2022, increasing at 5.1% per annum.
Tech stocks VMware, Inc. (VMW), Hewlett Packard Enterprise Company (HPE), Check Point Software Technologies Ltd. (CHKP), and Concentrix Corporation (CNXC) have not been significantly affected by the price swings. And the tech sector's growth prospects should drive the prices of these fundamentally sound stocks higher.
VMware, Inc. (VMW)
VMW in Palo Alto, Calif., is a software provider in hybrid and multi-cloud, modern applications, networking, security, and digital workspaces. It has strategic alliances with Amazon Web Services to build and deliver an integrated hybrid solution. In addition, it sells its products through distributors, resellers, system vendors, and systems integrators.
On Jan. 20, 2022, VMW announced that it had formed an agreement with BT, in which BT will offer its customers VMware Secure Access Service Edge (SASE) as a global managed service. VP and General Manager for VMW's SASE business, Craig Connors, said, "SASE has emerged as the blueprint for modern networking and security, and we are pleased BT has selected VMware SASE to simplify their customers' multi-cloud journey."
VMW's revenue increased 11.3% year-over-year to $3.1 billion for the third quarter, ended Oct. 29, 2021. The company's subscription and SaaS revenue increased 21.3% year-over-year to $820 million. Also, its non-GAAP net income increased 2.9% year-over-year to $725 million.
Analysts expect VMW's EPS for its fiscal year 2023 to increase 1.2% year-over-year to $7.29. Its revenue for fiscal 2022 is expected to increase 9.2% year-over-year to $12.84 billion. It surpassed the Street's EPS estimates in three of the trailing four quarters. And the stock has gained 1.9% in price year-to-date to close the last trading session at $118.08.
VMW's strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates 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.
It has a B grade for Value, Sentiment, and Quality. It is ranked #3 out of 58 stocks in the Software – Business industry. Click here to see the other ratings of VMW for Growth, Momentum, and Stability.
Hewlett Packard Enterprise Company (HPE)
Palo Alto, Calif.-based HPE is an edge-to-cloud platform-as-a-service company. The company's segment includes Compute; High-Performance Computing & Mission-Critical Solutions (HPC & MCS); Storage; Intelligent Edge; Financial Services (FS); Corporate Investments; and Other.
On Jan. 27, 2022, HPE announced that India's largest steel producer, SAIL, had selected the HPE GreenLake edge-to-cloud platform for its central marketing organization to accelerate digital transformation and reduce its environmental footprint. HPE India's MD Som Satsangi said, "Customers are increasingly turning to HPE GreenLake and our extensive system integrator capabilities to design and implement a modernized, end-to-end solution that can support their digital transformation and easily scale to meet future requirements."
For its fiscal fourth quarter, ended Oct. 31, 2021, HPE's net revenues increased 2% year-over-year to $7.35 billion. The company's non-GAAP earnings from operations increased 16.4% year-over-year to $717 million. In addition, its non-GAAP net earnings increased 28.1% year-over-year to $688 million.
For its fiscal year 2023, HPE's EPS is expected to increase 7.9% year-over-year to $2.19. Its revenue for fiscal 2022 is expected to increase 3% year-over-year to $28.61 billion. It surpassed consensus EPS estimates in each of the trailing four quarters. The stock has gained 5.4% in price year-to-date to close the last trading session at $16.62.
It's no surprise that HPE has an overall B rating, which translates to a Buy in our POWR Ratings system.
It has a B grade for Value. Within the Technology – Communication/Networking industry, it is ranked #7 of 56 stocks. To see the additional ratings of HPE for Growth, Momentum, Stability, Sentiment, and Quality, click here.
Check Point Software Technologies Ltd. (CHKP)
Headquartered in Tel Aviv, Israel, and San Carlos, Calif., CHKP develops, markets, and supports a range of products and services for information technology security. The company offers enterprises a platform to deploy independent, modular, and interoperable security applications, such as firewall, virtual private network, intrusion prevention system, anti-Bot, data loss prevention, policy management, event analysis, or multi-domain management.
On Aug. 30, 2021, CHKP announced the acquisition of Avanan, a cloud email security company. Its technology will be integrated into the Check Point Infinity consolidated architecture to deliver the world's most secure email security offering. CHKP's Chief Product Officer, Dr. Dorit Dor, said, "By integrating Avanan into Check Point Infinity, organizations will be able to modernize legacy solutions with email security-as-a-service and protect cloud email and collaboration suites from the most sophisticated attacks."
CHKP's revenue increased 6.2% year-over-year to $599 million for the fourth quarter, ended Dec. 31, 2021. The company's security subscription revenues came in at $204.10 million, representing a 13.7% increase year-over-year. Also, its non-GAAP EPS came in at $2.25, up 3.6% year-over-year.
Analysts expect CHKP's EPS for its fiscal year 2023 to increase 10.1% year-over-year to $7.97. Its revenue for the quarter ending June 30, 2022, is expected to increase 6.1% year-over-year to $555.97 million. It surpassed the Street's EPS estimates in each of the trailing four quarters. And the stock has gained 11.9% in price year-to-date to close the last trading session at $130.46.
CHKP's POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has an A grade for Quality. It is ranked #5 of 28 stocks in the Software – Security industry. Click here to see the additional ratings of CHKP for Growth, Value, Momentum, Stability, and Sentiment.
Concentrix Corporation (CNXC)
CNXC is a global provider of technology-infused Customer Experience (CX) solutions. The Fremont, Calif.-based company provides end-to-end capabilities, including CX process optimization, technology innovation, front-and-back-office automation, analytics, and business transformation services.
On Dec. 28, 2021, CNXC announced the acquisition of PK, a CX digital design and engineering firm. The addition helps CNXC's strategy of investing in digital transformation to deliver exceptional customer experiences and enable it to scale digital capabilities faster while building excellence in crucial high growth areas of CX design and development, AI, Intelligent Automation, and customer loyalty.
For the fiscal fourth quarter, ended Nov. 30, 2021, CNXC's revenues increased 12.7% year-over-year to $1.46 billion. The company's non-GAAP operating income increased 16% year-over-year to $203.40 million. Its non-GAAP net income increased 47.9% year-over-year to $158 million. In addition, its adjusted EBITDA came in at 12.8% year-over-year to $238.20 million.
For the quarter ending May 31, 2022, CNXC's EPS is expected to increase 19.4% year-over-year to $2.83. Its revenue for its fiscal year 2022 is expected to increase 16.7% year-over-year to $6.52 billion. It surpassed consensus EPS estimates in each of the trailing four quarters. The stock has gained 7% in price year-to-date to close the last trading session at $191.09.
CNXC's strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to a Buy in our proprietary rating system.
It has an A grade for Sentiment and a B grade for Value and Stability. Within the Technology – Services industry, it is ranked #10 out of 81 stocks. To see the other ratings of CNXC for Growth, Momentum, and Quality, click here.
VMW shares were trading at $115.82 per share on Thursday morning, down $2.26 (-1.91%). Year-to-date, VMW has declined -0.05%, versus a -12.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master's degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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