The technology sector is anticipated to remain resilient, driven by escalating investments in cutting-edge technologies such as the Internet of Things (IoT) and Artificial Intelligence (AI) designed to simplify work and amplify plant efficiency and productivity.
Given this backdrop, let us analyze the position and prospects of tech hardware stocks Dell Technologies Inc. (DELL), Canon Inc. (CAJPY), and Iteris, Inc. (ITI) now.
Before delving further into the fundamentals of these stocks, it is important to establish why the technology hardware sector is primed for expansion.
Although the macroeconomic backdrop is not expected to be benign for the tech sector over the next couple of years, technology is expected to contribute more to the U.S. economy in 2027 than it did last year.
Hardware constitutes the physical, tangible component of a digital device, fundamental in executing tasks through interactions with other components. The COVID-19 pandemic instigated an unprecedented transformation across various life aspects - from professional avenues to personal communication methods.
The period saw a heightened acceptance of contactless technologies across the globe. Meanwhile, tech companies seized this seismic shift in lifestyle patterns and capitalized on the synergy between hardware and software advancements to create innovative solutions.
The adoption of standout technologies, such as Machine Learning (ML), IoT, and AI, have boosted the demand for specialized hardware, such as the Graphical Processing Units (GPU), that have been redeployed to handle ML chores. The global GPU market is anticipated to reach $40.09 billion in 2028, with a CAGR of 10.3%.
Furthermore, the global IT hardware market is expected to grow at a CAGR of 6.1% between 2022 and 2027. The anticipated robust demand for specialized and high-quality hardware can be attributed to the intensifying reliance on digital devices.
Given this backdrop, tech hardware stocks DELL, CAJPY, and ITI could be wise portfolio additions in July.
Dell Technologies Inc. (DELL)
DELL designs, develops, manufactures, markets, sells, and supports various comprehensive and integrated solutions, products, and services in the Americas, Europe, the Middle East, Asia, and internationally. The company operates through two segments, Infrastructure Solutions Group and Client Solutions Group.
On June 30, DELL announced the pricing terms of the previously announced cash tender offers. The company expects to accept for purchase $999.99 million in aggregate principal amount of the 6.02% Senior Notes due 2026.
On June 16, DELL announced a quarterly dividend of $0.37 per common share, payable to the shareholders on August 4. DELL pays a $1.48 per share dividend annually. This translates to a 2.86% yield at the current price level, higher than the four-year average dividend yield of 0.65%.
On May 23, 2023, DELL introduced Dell NativeEdge, an edge operations software platform designed to help businesses simplify and optimize secure edge deployments. Customers can streamline edge operations across thousands of devices and locations from the edge to core data centers and multiple clouds.
DELL’s trailing-12-month asset turnover ratio of 1.13x is 85.6% higher than the 0.61x industry average. Its trailing-12-month cash from operations of $5.61 billion is significantly higher than the industry average of $49.79 million.
During the fiscal first quarter that ended May 5, 2023, DELL’s total net revenue came in at $20.92 billion. Its gross margin came in at $5.02 billion. Its non-GAAP net income and non-GAAP earnings per share amounted to $963 million and $1.31, respectively.
For the same quarter, DELL’s cash, cash equivalents, and restricted cash stood at $7.93 billion, up 8.9% year-over-year.
DELL’s EPS is expected to be $1.14 for the fiscal second quarter ending July 2023. The company’s revenue for the same quarter is expected to be $20.85 billion. Also, it surpassed EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 33.7% over three months to close the last trading session at $53.80. Over the past month, the stock has gained 14.8%.
DELL’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Value and Sentiment. It is ranked #10 out of 42 in the Technology – Hardware industry.
Beyond what is stated above, we have also rated DELL for Stability, Growth, Momentum, and Quality. Get all DELL ratings here.
Canon Inc. (CAJPY)
Headquartered in Tokyo, Japan, CAJPY manufactures and sells office multifunction devices, plain paper copying machines, laser and inkjet printers, cameras, diagnostic equipment, and lithography equipment. The company operates through four segments: Printing Business Unit; Imaging Business Unit; Medical Business Unit; and Industrial and Others Business Unit.
On June 29, CAJPY announced that the company had reached two major production milestones, a cumulative total of 110 million1 EOS Series interchangeable-lens cameras in March and 160 million2 RF/EF series interchangeable lenses in May. This indicates the company’s exceptional production strength.
On June 15, CAJPY announced its decision to acquire its own shares to improve capital efficiency and ensure a flexible capital strategy. A total of 16 million shares of common stocks would be acquired from June 16, 2023, to August 21, 2023, with the total cost of acquisition being ¥50 billion ($345.83 million).
CAJPY’s trailing-12-month net income margin of 6.17% is 260.3% higher than the 1.71% industry average. Likewise, its trailing-12-month ROCE of 8.32% is significantly higher than the industry average of 0.09%. Also, its cash from operations of $2.42 billion is significantly higher than the industry average of $49.79 million.
CAJPY pays an annual dividend of $0.90, which translates to a dividend yield of 3.44%. Its four-year average yield is 3.76%. The company’s dividend payouts have grown at a CAGR of 6.2% over the past three years.
CAJPY’s net sales for the first quarter (ended March 31, 2023) increased 10.4% year-over-year to ¥971.13 billion ($6.72 billion). Its operating profit rose 10.9% over the prior-year quarter to ¥84.48 billion ($584.31 million).
The company’s net income attributable to CAJPY increased 22.7% year-over-year to ¥56.41 billion ($390.16 million). In addition, its EPS came in at ¥55.53, representing an increase of 26.3% year-over-year.
Analysts expect CAJPY’s revenue for the fiscal third quarter ending September 2023 to increase 7% year-over-year to $7.28 billion. Moreover, for the fiscal year ending December 2023, its revenue is expected to increase 122.3% year-over-year to $29.64 billion.
The stock has gained 20.8% year-to-date to close the last trading session at $26.19. Over the past three months, the stock has gained 18%.
CAJPY’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, equating to Buy in our proprietary rating system.
It has an A grade for Quality and a B for Value. It is ranked #6 within the same industry.
Click here to see the other ratings of CAJPY for Growth, Momentum, Stability, and Sentiment.
Iteris, Inc. (ITI)
ITI provides intelligent transportation systems technology solutions worldwide. The company offers smart mobility infrastructure solutions, including traveler information systems, transportation performance measurement software, traffic analytics software, transportation operations software, transportation-related data sets, and advanced sensing devices, among other services.
ITI’s revenue grew at a CAGR of 13.3% over the past three years and at a CAGR of 8.5% over the past five years. In addition, its total assets grew at CAGRs of 3.1% and 12.2% during the same periods.
ITI’s trailing-12-month asset turnover ratio of 1.32x is 118.2% higher than the 0.61x industry average.
ITI’s forward non-GAAP P/E of 14.15x is 38.6% lower than the industry average of 23.04x. Moreover, its forward EV/Sales and EV/EBITDA multiples of 0.90 and 11.17 are 69.1% and 22.5% lower than the industry averages of 2.93 and 14.41, respectively.
ITI’s total revenues for the fiscal fourth quarter (ended March 31, 2023) increased 24% year-over-year to $42.44 million, while its gross profit increased 21.8% year-over-year to $13.49 million. ITI’s adjusted EBITDA of $1.41 million for the same quarter compared to adjusted EBITDA of negative $1.06 million in the prior-year quarter.
Analysts expect ITI’s revenue for the fiscal year ended March 2024 to increase 9.6% year-over-year to $170.99 million. Its EPS is expected to come in at $0.27 for the same period. It surpassed consensus revenue in three of the trailing four quarters.
Over the past year, the stock has gained 39.9% to close the last trading session at $3.82. The stock has gained 22.8% year-to-date.
It’s no surprise that ITI has an overall rating of B, which equates to Buy in the POWR Ratings system.
It has a B grade for Growth. The stock is ranked #9 within the same industry.
To see the additional POWR Ratings of ITI for Value, Momentum, Stability, Sentiment, and Quality, click here.
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DELL shares were trading at $54.28 per share on Friday afternoon, up $0.48 (+0.89%). Year-to-date, DELL has gained 37.23%, versus a 16.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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