2024 will be another outstanding year for the tech industry. Organizations worldwide continue to recognize the vital role of technology and IT services in transforming their operations, boosting resilience, and driving employee productivity. Enterprises are increasingly adopting emerging technologies, such as AI, ML, IoT, blockchain, big data analytics, and more.
Given the industry’s bright outlook, investors could consider investing in fundamentally sound tech stocks Dropbox, Inc. (DBX), TTM Technologies, Inc. (TTMI), Lantronix, Inc. (LTRX), and AstroNova, Inc. (ALOT) with solid growth attributes.
Amid rapid technological evolution, global IT spending is expected to increase by 6.8% as compared to 2023 to surpass $5 trillion in 2024, according to Gartner. IT services are anticipated to become the largest segment of IT spending for the first time. Spending on IT services is expected to grow 8.7%, totaling $1.5 trillion this year.
The significant upsurge in spending on IT services is attributable to enhanced enterprise investments in organizational efficiency and optimization projects. Other tech segments like Software and Devices are also likely to grow at impressive rates of 12.7% and 4.6% as compared to 2023.
According to Statista, the revenue in the IT services market is expected to grow at a CAGR of 6.2% during the forecast period (2024-2028), resulting in a volume of $628.80 billion by 2028.
Besides, the global electronics components market is projected to reach $368.40 billion by 2032, expanding at a CAGR of 6.8%. As per the GSMA prediction, 5G networks will likely reach 1.2 billion connections or one-third of the world's population by 2025. This broad integration of 5G network services across the globe will drive the demand for electronic components.
Along with the rollout of 5G networks, factors like increasing demand for consumer electronics, growth of high-speed data communication, advancements in IoT, and increasing industrial automation are driving the market’s demand.
In recent years, with the significant growth in the IT industry, the IT hardware market is also blooming. With its essential role across various sectors, including business, healthcare, education, finance, entertainment, and government, the industry keeps evolving constantly. The IT hardware market size is estimated to reach $191.03 billion by 2029, growing at a CAGR of 7.9%.
Moreover, investors’ interest in tech stocks is evident from the Vanguard Information Tech ETF’s (VGT) 41.9% returns over the past year.
Given the backdrop, investors could buy fundamentally strong tech stocks DBX, TTMI, LTRX, and ALOT for substantial returns.
Let’s discuss the fundamentals of these stocks in detail:
Dropbox, Inc. (DBX)
DBX offers a content collaboration platform globally. Its platform enables individuals, families, teams, and organizations to collaborate, sign up for free and upgrade to a paid subscription plan. The company serves customers in professional services, technology, media, education, industrial, consumer and retail, and financial services industries.
On February 9, 2024, DBX and McLaren Racing announced a multi-year partnership with the McLaren Formula 1 Team for the 2024 season and beyond. The partnership marks DBX’s first entry into the sport, helping the McLaren team collaborate, share files and content, and save time.
On November 17, 2023, DBX and NVIDIA Corporation (NVDA) collaborated to supercharge knowledge work and improve productivity for millions of DBX customers through the power of AI. Through the collaboration, DBX utilizes NVIDIA’s AI foundry to build custom models and improve AI-powered knowledge work with its dash universal search tool and Dropbox AI.
The strategic collaboration will expand DBX’s extensive AI functionality with new uses for personalized generative AI to enhance search accuracy, offer better organization, and simplify workflows for its customers across their cloud content.
DBX’s revenue and EBITDA have grown at respective CAGRs of 9.3% and 25.4% over the past three years. The company’s EBIT has increased 46.8% over the same timeframe, while its normalized net income and total assets have improved at CAGRs of 45.2% and 7.7%, respectively.
In the fourth quarter that ended December 31, 2023, DBX’s revenue increased 6% year-over-year to $635 million. Its non-GAAP gross profit grew 6.3% from the year-ago value to $522.40 million. Its non-GAAP net income came in at $170.80 million, or $0.50 per share, up 21% and 25% year-over-year, respectively. Its free cash flow rose 4.7% year-over-year to $190.30 million.
Street expects DBX’s revenue and EPS to increase 2.9% and 18.3% year-over-year to $628.76 million and $0.50 for the first quarter ending March 2024, respectively. Moreover, DBX topped the consensus revenue and EPS estimates in each of the trailing four quarters.
DBX’s stock gained 21.2% over the past year to close the last trading session at $23.82.
DBX’s bright outlook is reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A for Quality and a B for Growth and Value. DBX has topped among 81 stocks in the Technology - Services industry.
Click here to access additional DBX ratings for Sentiment, Stability, and Momentum.
TTM Technologies, Inc. (TTMI)
TTMI is a manufacturer and seller of mission systems, radio frequency (RF) components and RF microwave/microelectronic assemblies, and printed circuit boards (PCB) worldwide. The company operates through two segments: PCB and RF&S Components.
On November 1, 2023, TTMI selected New York State as the location for a proposed new greenfield high-tech manufacturing facility. It is anticipated that the proposed facility will bring innovative capability for the domestic production of ultra-HDI PCBs in support of national security requirements.
Further, it is expected to be the highest-technology PCB manufacturing facility in North America, offering customers reduced lead times and a significant increase in domestic capacity for ultra-HDI PCBs.
TTMI’s normalized net income has increased at a CAGR of 20.4% over the last three years, and its total assets have improved at a CAGR of 4.7%. Also, the company’s levered free cash flow has grown at a CAGR of 16% over the same period.
For the fourth quarter that ended January 1, 2024, TTMI reported net sales of $569.04 million, and its non-GAAP gross profit was $121.04 million. Its non-GAAP operating income increased 2.5% year-over-year to $61.04 million. Its non-GAAP net income and non-GAAP EPS were $42.97 million and $0.41 for the quarter, respectively.
In addition, the company’s cash and cash equivalents, including restricted cash, came in at $450.21 million as of January 1, 2024, compared to $402.75 million as of January 2, 2023.
Analysts expect TTMI’s revenue for the first quarter (ending March 2024) to increase 1.4% year-over-year to $551.81 million, while its EPS for the same quarter is expected to grow 51.4% year-over-year to $0.27. Further, the company has surpassed the consensus EPS estimates in three of the trailing four quarters.
TTMI’s shares have surged 8.4% over the past six months and 14.5% over the past year to close the last trading session at $14.08.
TTMI’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
The stock has an A grade for Sentiment. It also has a B grade for Momentum and Growth. Within the Technology - Electronics industry, TTMI is ranked #3 out of 41 stocks.
In addition to the POWR Ratings I’ve just highlighted, you can see TTMI’s ratings for Stability, Value, and Quality here.
Lantronix, Inc. (LTRX)
LTRX offers solutions for video surveillance, infotainment systems, and intelligent substations infrastructure internationally. The company's IoT products include IoT System Solutions, Embedded IoT Modules, and Software and Engineering Services. It also offers telematics devices, which provide power-efficient products.
On March 6, 2024, LTRX announced its new Snapdragon™ 8 gen 3 mobile hardware development kit (HDK). A single-board computer (SBC) built on the new HDK offers an expandable, feature-rich starting point for the development of new mobile applications and devices utilizing Qualcomm™ Technologies Inc.’s Snapdragon 8650 System-on-Chip (SoC).
The new HDK gives customers a Qualcomm-based solution delivering powerful AI capabilities with rich graphics at very low power and is an excellent platform for testing and executing a Large-Language Model (LLM).
On February 21, LTRX announced Percepxion™, its new Cloud IoT Edge Solutions platform. The Percepxion platform systematically scales edge deployments from zonal to global and is managed through an intuitive single pane of glass.
Percepxion™ comes pre-configured in LTRX’s gateways, routers, trackers, and switches to accelerate IoT edge device deployments. Its approach to IoT edge solutions accelerates time to revenue by simplifying edge management and maintenance and offers assistance and long-term assurance. This launch should bode well for the company.
Over the past three years, LTRX’s revenue and EBITDA have grown at CAGRs of 26.8% and 219.7%, respectively. The company’s tangible book value has increased 27.9% over the same timeframe, and its total assets have improved at a CAGR of 30.4%.
For the fiscal 2024 second quarter ended on December 31, 2023, LMB’s net revenue increased 17.5% year-over-year to $37.04 million. Its gross profit rose 9% from the year-ago value to $15.03 million. In addition, the company’s non-GAAP net income amounted to $2.96 million and $0.08, representing increases of 115.4% and 100% year-over-year, respectively.
As per the business outlook, the company expects revenue in the range of $38 million to $42 million and non-GAAP EPS of $0.09 to $0.13 per share for the third quarter of fiscal 2024. Also, for the fiscal year 2024, LTRX expects revenue between $155 million and $165 million, and non-GAAP EPS is expected to be $0.35 to $0.45 per share.
Analysts expect LTRX’s EPS for the third quarter (ending March 2024) to increase 63.3% year-over-year to $0.10, and its revenue is estimated to grow 22% year-over-year to $40.22 million in the current quarter. Also, the company’s EPS and revenue for the fiscal year 2024 are expected to increase 72.2% and 22.2% year-over-year to $0.40 and $160.29 million, respectively.
Over the past month, the stock has plunged 18.3% to close the last trading session at $3.44.
LTRX’s promising outlook is reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Growth and Momentum. It has a B grade for Quality, Sentiment, and Value. Within the A-rated Technology - Hardware industry, LTRX is ranked first among 37 stocks.
Click here to access additional ratings of LTRX.
AstroNova, Inc. (ALOT)
ALOT designs, develops, manufactures, and distributes specialty printers alongside data acquisition and analysis systems internationally. The company operates through two segments: Product Identification (PI) and Test & Measurement (T&M). The company offers its products under the QuickLabel, TrojanLabel, and GetLabels brands.
On August 1, 2023, ALOT announced a strategic realignment of its Product Identification (PI) segment. The realignment is designed to streamline the cost structure and enhance its operational efficiencies in the segment to capitalize on the synergies of ALOT’s Astro Machine, Inc. subsidiary, acquired in August 2022.
The restructuring plan is expected to generate cost savings of more than $2.40 million on an annualized basis.
ALOT’s revenue and EBITDA have grown at respective CAGRs of 8.2% and 36.6% over the past three years. Also, the company’s tangible book value has increased 11.6% over the same timeframe, while its total assets have improved at a CAGR of 5.8%.
During the fiscal 2024 third quarter that ended October 28, 2023, ALOT reported net revenue of $37.55 million. Its non-GAAP gross profit grew 18.4% year-over-year to $14.78 million. The company’s non-GAAP operating income of $4.62 million indicates growth of 123.8% from the prior year’s quarter.
Furthermore, the company’s non-GAAP net income and non-GAAP EPS came in at $2.75 million and $0.37, up 231.9% and 825% year-over-year, respectively. Its adjusted EBITDA increased 134.5% year-over-year to $5.66 million.
Shares of ALOT have surged 26.6% over the past six months and 26.7% over the past year to close the last trading session at $17.22.
ALOT’s robust prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Growth and a B for Sentiment, Value, and Stability. ALOT is ranked #2 out of 37 stocks in the A-rated Technology - Hardware industry.
To access additional ALOT’s ratings for Quality and Momentum, click here.
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DBX shares rose $0.08 (+0.34%) in premarket trading Monday. Year-to-date, DBX has declined -18.93%, versus a 8.01% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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