Wall Street Predicts These 2 Tech Stocks Under $10 Will Rally By 25% or More Industry's ongoing digital transformation and rising demand for automation across almost every sector are shaping the technology industry's prospects....
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Industry's ongoing digital transformation and rising demand for automation across almost every sector are shaping the technology industry's prospects. Given the industry's solid growth potential, Wall Street analysts predict tech stocks Celestica (CLS) and Lantronix (LTRX)—which are currently trading at less than $10—will rally by more than 25% in the near term. Read on.
The technology industry is evolving rapidly, with the adoption of digital solutions and the growing demand for automation across almost every industry. As a result, artificial intelligence and robotics have been the subject of much buzz over the past few years and are expected to remain notable sectors in the near future.
Companies are investing substantially in tech upgrades to keep pace with a growing digitization trend. "Technology spending is entering a new build budget phase," according to John-David Lovelock, distinguished research vice president at Gartner. In addition, Forrester revised up its U.S. Tech market outlook for 2021. The organization forecasts the U.S. tech market will expand 7.4% in 2021, up from its previous 6% estimate.
Given the industry's solid growth prospects, Wall Street analysts expect tech stocks Celestica Inc. (CLS) and Lantronix, Inc. (LTRX), which are trading at less than$10, to rally by more than 25% soon.
Celestica Inc. (CLS)
CLS in Toronto, Canada, provides hardware platforms and supply chain solutions in North America, Europe, and Asia. It operates through two segments, Advanced Technology Solutions; and Connectivity & Cloud Solutions.
On September 21, CLS agreed to acquire PCI Limited, a fully integrated design, engineering, and manufacturing solutions provider. The acquisition should strengthen CLS' approach to engineering-focused engagements, while also enhancing its financial profile.
On July 29, CLS opened its AbelConn Electronics facility in Maple Grove, USA. "The new Maple Grove facility enables us to extend the same capabilities and expertise in design, manufacturing, and achieving regulatory compliance to our HealthTech, Industrial and Smart Energy customers," said Jack Lawless, President, Advanced Technology Solutions, Celestica.
For its fiscal second quarter, ended June 30, CLS's non-IFRS adjusted gross profit increased 7% year-over-year to $119.40 million. Its non-IFRS adjusted net earnings stood at $37.90 million, up 19.6% from the same period last year. Its non-IFRS adjusted earnings per share grew 20% from its year-ago value to $0.30.
A $1.47 billion consensus revenue estimate for its fiscal fourth quarter (ending December 2021) represents a 6.2% increase year-over-year. The Street expects the company's EPS to rise 23.1% from the current quarter to $0.32 in the next quarter. CLS has an impressive earnings surprise history also; it beat the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 11.7% in price to close yesterday's trading session at $8.05. The $10.06 median price target indicates a potential 25% upside from its last closing price. The 12-month price targets range from a low of $9.25 to a high of $11.00.
CLS has an overall B rating, which translates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
CLS has an A grade for Value, and a grade of B for Sentiment. It is ranked #18 of the 74 stocks in the Technology – Services industry.
Click here to view additional CLS ratings for Growth, Momentum, Quality, and Stability.
Lantronix, Inc. (LTRX)
LTRX provides software as a service (SaaS), engineering services, and hardware for edge computing, the Internet of Things (IoT), and remote environment management (REM) in the Americas, Europe, the Middle East, Africa, and the Asia Pacific Japan. LTRX is headquartered in Irvine, Calif.
On August 19, LTRX introduced a new ultra-compact Open-Q™ 5165RB System on module based on Qualcomm® QRB5165 to power advanced robotics innovations. AI and robotics are rapidly growing segments. Thus, the company's accelerated leading-edge robotics application development should allow it to emerge as a prominent player in the industry.
On August 2, LTRX acquired Transition Networks and Net2Edge, which comprise most of the electronics and software reportable business segment of Communications Systems, Inc. (JCS). LTRX expects the acquisition to bring complementary IoT connectivity products and capabilities, which should enhance its offerings. The company further expects to realize $7 million in annual run-rate synergies over the first 24 months.
LTRX's net revenue increased 18.6% year-over-year to a record $20.64 million in its fiscal fourth quarter, ended June 30. Its gross profit grew 53.7% from its year-ago value to $10.07 million, while its non-GAAP net income improved 43.5% year-over-year to $1.71 million. The company's non-GAAP EPS increased 50% year-over-year to $0.06.
Analysts expect LTRX's revenues to increase 60.3% year-over-year to $114.57 million in the current year. The $0.41 consensus EPS estimate for the current year indicates a 115.8% rise from the last year. Furthermore, its EPS is expected to grow 20% per annum over the next five years.
Shares of LTRX have gained 21.9% in price over the past month and 31.5% year-to-date to close yesterday's trading session at $6.13. The stock's $8.50 median price target indicates a potential 38.7% upside from its last closing price. The 12-month price targets range from a low of $7.00 to a high of $10.00.
It is no surprise that LTRX has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The stock has an A grade for Sentiment, and a B grade for Growth. Among the 46 stocks in the B-rated Technology – Hardware industry, LTRX is ranked #16.
To see additional LTRX ratings for Value, Stability, Quality, and Momentum, click here.
CLS shares were trading at $9.36 per share on Wednesday morning, up $1.31 (+16.27%). Year-to-date, CLS has gained 15.99%, versus a 18.46% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree's keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master's degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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