Despite macroeconomic headwinds, the tech industry is poised to witness significant growth this year due to solid demand and long-term growth prospects. Hence, fundamentally strong tech stocks Microsoft (MSFT), Dell Technologies (DELL), Canon (CAJ), and GoDaddy (GDDY) might be solid buys this new year. Read on….
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High inflation, the Fed’s incessant rate hikes to curb it, and considerable layoffs have disturbed the tech industry to a large extent. The tech-heavy Nasdaq Composite dropped over 28% over the past year.
However, in the face of increased demand for advanced tech solutions and investments due to rapid digitization, experts anticipate rapid growth in the tech industry for the foreseeable future.
For example, the global Information Technology (IT) market is expected to reach $6.2 trillion by 2028, growing at a 4.5% CAGR between 2022 and 2030. Furthermore, Gartner, Inc. (IT) expects worldwide end-user spending on public cloud services to grow 20.7% year-over-year to $591.80 billion in 2023.
Given this backdrop, it could be wise to invest in well-known fundamentally strong tech stocks Microsoft Corporation (MSFT), Dell Technologies Inc. (DELL), Canon Inc. (CAJ), and GoDaddy Inc. (GDDY) this new year.
Microsoft Corporation (MSFT)
Tech giant MSFT is a pioneer in the software field. The company operates in three segments: Productivity and Business Processes; More Personal Computing; and Intelligent Cloud.
On December 14, 2022, MSFT and ViaSat, Inc. (VSAT) announced a new partnership to help deliver internet access to 10 million people around the globe, including 5 million across Africa.
Teresa Hutson, Microsoft’s vice president of Technology and Corporate Responsibility, said, “Working with VSAT, we will use satellite to reach remote areas, and rapidly scale and expand Airband’s reach, exploring a wider pipeline of projects and new countries where we haven’t yet worked.”
On November 3, it was reported that aerospace and defense company Raytheon Technologies Corporation (RTX) and MSFT had deepened their collaboration to co-develop capabilities. MSFT might stand to benefit from helping RTX execute its digital transformation.
On November 29, a quarterly dividend of $0.68 per share was declared by MSFT, which is payable to shareholders on March 9, 2023. This reflects the company’s ability to pay back its shareholders.
For the fiscal first quarter that ended September 30, MSFT’s total revenue increased 10.6% year-over-year to $50.12 billion. Its gross margin rose 9.5% from the prior-year quarter to $34.67 billion. Operating income grew 6.3% from the prior-year period to $21.52 billion. Its EPS came in at $2.35.
For the fiscal third quarter ending March 2023, the consensus EPS estimate of $2.35 indicates a 5.8% improvement year-over-year. Revenue is expected to rise 6.9% year-over-year to $52.77 billion for the same quarter. In addition, MSFT topped consensus EPS and revenue estimates in three of the trailing four quarters, which is impressive.
The stock has gained 4.6% over the past three months and 3% intraday to close its last trading session at $235.77.
MSFT’s POWR Ratings reflect a promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
MSFT is also rated a B in Stability, Sentiment, and Quality. Within the Software – Business industry, it is ranked #9 out of 52 stocks.
To see the additional POWR Ratings for Momentum, Growth, and Value for MSFT, click here.
Dell Technologies Inc. (DELL)
DELL is a multinational corporation that specializes in information technology solutions. It operates through two segments: Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG). The company also offers cyber security solutions to its clients, cloud software, and infrastructure.
On December 6, 2022, DELL declared a quarterly dividend of $0.33 per common share, payable to shareholders on February 3. This reflects the cash generation ability of the company.
On November 30, DELL and OneMind Technologies, a wholly-owned subsidiary of Affluence Corporation, formed a strategic partnership. The company seeks to develop expertise in solving specific problems, deliver tried-and-true solutions with modern architectures, and ensure implementation success through this alliance.
For the third quarter of fiscal 2023 (ended October 28, 2022), DELL’s service revenue increased 6.2% year-over-year to $5.78 billion, while its non-GAAP operating income grew 21.7% from the prior year’s quarter to $2.38 billion.
The company’s non-GAAP net income came in at $1.71 billion, up 29.9% year-over-year, and its non-GAAP earnings per share grew 38.6% from the year-ago value to $2.30.
DELL’s consensus EPS estimate of $7.47 for the current fiscal year (ending January 2023) indicates an increase of 20% year-over-year. Revenue is expected to be $100.88 billion. DELL surpassed the consensus EPS estimates in three out of the four trailing quarters.
Shares of DELL have gained 20.4% over the past three months to close the last trading session at $40.77.
DELL’s strong fundamentals are reflected in the POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has a B grade for Growth, Value, and Sentiment. Within the Technology – Hardware industry, it is ranked #12 out of the 44 stocks.
See DELL’s additional POWR Ratings for Quality, Stability, and Momentum.
Canon Inc. (CAJ)
Headquartered in Tokyo, Japan, CAJ produces and markets a broad range of goods, including office multifunction devices, printers, and cameras. It operates through four segments, Printing Business Unit; Imaging Business Unit; Medical Business Unit; and Industrial and Others Business Unit.
On December 6, 2022, CAJ launched the FPA-5520iV LF2 Option for semiconductor lithography systems in Japan. This option allows bulk production of dense circuitry with exposure fields up to 100 mm by 100 mm and supports advanced 3D packaging technologies. With this launch, CAJ intends to expand its semiconductor lithography system portfolio to enable continued technological progress.
On November 24, the company announced its decision to establish Canon Healthcare USA, Inc as a new subsidiary. CAJ is progressing in the fields of healthcare IT and in-vitro diagnostics and aims to accelerate the growth of its medical business by strengthening its position in the medical market.
For the fiscal third quarter that ended September 30, 2022, CAJ’s net sales increased 19.5% year-over-year to ¥996.09 billion ($6.87 billion), and its operating profit increased 38.7% year-over-year to ¥81.44 billion ($561.66 million).
Furthermore, net income attributable to CAJ increased 9.7% from the year-ago value to ¥54.12 billion ($373.23 million), while net income attributable to CAJ shareholders per share came in at $0.36, up 12.2% year-over-year.
CAJ’s EPS and revenue for the fiscal first quarter (ending March 2023) are expected to increase 2% and 6.2% year-over-year to $0.37 and $7.33 billion, respectively.
The stock has gained marginally intraday to close the last trading session at $21.94.
CAJ’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system.
The stock has a B grade for Quality, Stability, and Value. Within the Technology – Hardware industry, it is ranked #5.
Beyond what we stated above, we also have CAJ’s ratings for Growth, Sentiment, and Momentum. Get all CAJ ratings here.
GoDaddy Inc. (GDDY)
GDDY engages in the design and development of cloud-based technology products. The company provides a domain name registration product that engages customers at the initial stage of establishing a digital identity.
On December 6, 2022, GDDY unveiled its new solution, Managed WooCommerce Stores, which allows merchants to sell wherever customers shop through WordPress e-commerce stores. The new solution should boost the company’s top line.
On September 28, GDDY announced that its Venture Forward research initiative had launched the Microbusiness Data Hub, which provides unprecedented free access to information on more than 20 million micro-businesses. This new offering might benefit the company.
GDDY’s total revenue for the third quarter of fiscal 2022, which ended September 30, 2022, grew 7.2% year-over-year to $1.03 billion. Net income attributable to GDDY grew 2.4% year-over-year to $99.80 million, while net income attributable to GDDY per share of Class A common stock grew by 8.6% from the previous-year quarter to $0.63.
Furthermore, its normalized EBITDA (NEBITDA) grew 15.4% from its year-ago value to $262.70 million.
For the fiscal quarter ending March 2023, analysts expect GDDY’s revenue to be $1.05 billion, indicating a 5% year-over-year growth. Street expects its EPS to increase 28.9% from the prior-year quarter to $0.53. Also, it surpassed consensus EPS estimates in three out of the trailing four quarters.
The stock has gained 4.1% over the past six months and 2.5% intraday to close its last trading session at $74.88.
It is no surprise that GDDY has an overall B rating, which translates to Buy in our POWR Ratings system.
GDDY is also rated a B for Value and Quality. In the Software – Business industry, it is ranked #3.
In addition, GDDY’s POWR Ratings for Growth, Momentum, Sentiment, and Stability can be viewed here.
MSFT shares fell $0.22 (-0.09%) in premarket trading Thursday. Year-to-date, MSFT has declined -1.69%, versus a 3.42% 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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