Prospects for the tech industry look promising as a result of accelerated adoption of AI, cloud services and rapid digitization by businesses. Given the promising prospects of the sector, quality stocks Dropbox (DBX), Spirent Communications (SPMYY) and AudioCodes (AUDC) could be good additions to your portfolio. These shares are currently trading below $20. Read on.
The tech sector is expected to witness solid growth amid digitalization across industries and the adoption of advanced technologies as companies try to scale and innovate. The US technology market accounts for 35% of the total world market. So fundamentally sound stock, Dropbox, Inc. (DBX), Spirent Communications plc (SPMYY) and AudioCodes Ltd. (AUDC) can be big investments right now.
According to the latest forecast from Gartner, Inc, worldwide IT spending is expected to total $4.50 trillion this year, up 2.4% from 2022. “While inflation is devastating consumer markets, contributing to layoffs at B2C companies, companies continue to increase spending on digital business initiatives despite the global economic slowdown,” said John-David Lovelock, Distinguished VP Analyst at Gartner.
Furthermore, the global information technology market is expected to grow at a CAGR of 10.1% through 2028. Additionally, technologies such as cloud computing are gaining in popularity. The global Cloud Computing Services market is expected to reach USD 2.10 trillion by 2030, growing at a CAGR of 14.7% through 2030.
Furthermore, artificial intelligence, machine learning and automation are growing exponentially in use and are expected to drive solid growth for the tech industry.
Investor interest in technology stocks is evident from the Technology Select Sector SPDR ETF (XLK)’s (XLK) returns of 12.7% over the past three months and 16.3% over the past nine months.
Take a look at the under $20 stocks mentioned above:
Dropbox, Inc. (DBX)
DBX is a collaboration platform provider. Its platform allows users to create, access, organize, share, collaborate and protect content. DBX supports clients in the professional services, technology, media, education, industrial, consumer and retail, and financial services industries.
In future price/cash flow terms, DBX is currently trading at 8.17x, 51.6% below the industry average of 16.88x. Its 12-month EV/EBITDA of 9.09x is 30.5% lower than the industry average of 13.08x.
DBX’s LTM EBITDA margin of 22.15% is 97.4% higher than the industry average of 11.22%. Its gross profit margin of 80.89% for the last 12 months is 65.2% higher than the industry average of 48.97%.
For the fourth fiscal quarter ended December 31, 2022, DBX revenue increased 5.9% year-over-year to $598.80 million. Its net income increased 163.5% year-over-year to $328.30 million. Additionally, EPS reached $0.93, representing an increase of 190.6% over the prior year quarter.
The Street expects DBX revenue to grow 6.7% year-over-year to $2.48 billion in 2023. Its EPS is expected to grow 7% year-over-year to $1.69 in 2023. It beat estimates of EPS over the next four quarters. Over the past nine months, the stock has gained marginally to close the last trading session at $19.96.
DBX’s strong fundamentals are reflected in its POWR ratings. An overall B rating on the stock is equivalent to a Buy under our proprietary rating system. POWR ratings evaluate stocks by 118 different factors, each with its own weighting.
DBX has an A in Quality and B in Value. Within the Technology – Services industry, it is ranked 16th out of 81 stocks. In addition to the above, we also rate DBX for Momentum, Growth, Stability, and Sentiment. Get all DBX ratings here.
Spirent Communications plc (SPMYY)
Headquartered in Crawley, UK, SPMYY provides automated test and assurance solutions for networking, cybersecurity and positioning in the Americas, Asia Pacific, Europe, Middle East and Africa. The company operates in two segments: Lifecycle Service Assurance and Networks & Security.
On February 28, 2023, SPMYY announced a partnership with Microsoft Corp. (MSFT) for pre-certification of third-party network functions (NFs) on the new Microsoft Azure Operator Nexus platform.
Doug Roberts, general manager of Spirent’s Lifecycle Service Assurance business, said: “Microsoft Azure Operator Nexus is a next-generation hybrid cloud platform for carriers built for the future of telecom. This will allow operators to be more competitive, provide new services and increase revenues. We are pleased to assist Microsoft as it works to support deployments at the edge of the cloud, network, or for the enterprise.”
In terms of EV/Forward Sales, SPMYY is currently trading at 1.73x, 36.4% below the industry average of 2.72x. Its 12-month EV/EBITDA of 8.03x is 38.6% lower than the industry average of 13.08x.
SPMYY’s LTM EBITDA margin of 21.96% is 95.7% higher than the industry average of 11.22%. Its gross profit margin of 71.95% for the last 12 months is 46.9% higher than the industry average of 48.97%.
For the year ended December 31, 2022, SPMYY’s adjusted revenues increased 5.5% year-over-year to $607.50 million. Additionally, its adjusted operating profit reached $129.5 million, up 9.3% year-over-year. Its adjusted earnings and EPS came in at $114.5 million and $18.75, up 13.5% and 14% year-over-year.
The stock lost marginally intraday to close the last trading session at $8.60.
It’s no surprise that SPMYY has an overall A rating which equates to a Strong Buy in our POWR ratings system.
It has an A in Stability and Quality and a B in Value. The stock is ranked #1 out of 40 stocks in the Technology – Hardware industry. We also evaluate SPMYY for Growth, Sentiment and Momentum. Get all SPMYY ratings here.
AudioCodes Ltd. (AUDC)
Headquartered in Lod, Israel, AUDC provides advanced communications software, products and productivity solutions for the digital workplace. The company offers solutions, products and services for unified communications, contact centers, VoiceAI lines of business and service provider enterprises.
In terms of EV/Forward Sales, the AUDC is currently trading at 1.24x, 54.5% below the industry average of 2.72x. Its 12-month EV/EBITDA of 7.02x is 46.4% lower than the industry average of 13.08x.
AUDC’s LTM EBITDA margin of 12.47% is 11.2% higher than the industry average of 11.22%. Its gross profit margin of 64.99% for the last 12 months is 32.7% higher than the industry average of 48.97%.
AUDC’s total revenues increased 7.5% year-over-year to $70.66 million for the fourth quarter ended December 31, 2022. Additionally, its gross profit came to $46.16 million, an increase of 3.9 % year on year. Its net income increased 4.1% year-over-year to $7.55 million.
Analysts expect AUDC’s revenue to grow 7.5% year-over-year to $310.18 million in 2024. Its estimated EPS will grow 13.6% year-over-year to $1.59 in 2024. AUDC stock lost 3.7% for the day to close its final trading session at $14.76.
AUDC’s POWR ratings reflect its robust outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
AUDC also scores an A for Quality and a B for Momentum, Value and Stability. It is ranked #5 out of 51 stocks in the B-rated Technology – Communications/Networking industry. For additional rankings for AUDC Growth and Sentiment, click here.
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DBX shares were trading at $20.00 a share on Friday morning, up $0.04 (+0.20%). Year-to-date, the DBX is down -10.63%, versus a 2.74% rise for the benchmark S&P 500 during the same period.
About the Author: RashmiKumari
Rashmi is passionate about capital markets, wealth management and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master’s degree in commerce, she aspires to make complex financial issues understandable to individual investors and help them make appropriate investment decisions.
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