The emergence of new technologies and the growing demand for communication and tech equipment present fresh opportunities for industry participants. Given this backdrop, it could be wise to keep an eye on promising tech equipment stocks such as Motorola Solutions, Inc. (MSI), Hewlett Packard Enterprise Company (HPE), and IPG Photonics Corporation (IPGP) that are poised to deliver substantial returns.
As we transition from post-pandemic times and a hybrid work environment becoming the new normal, there has been a surge in demand for electronic products and tech equipment. Orders for electrical equipment, appliances, and components increased by 0.8% in March, while bookings for computers and electronic products surged by 1.9%.
Ongoing digitization, increasing dependency on technology, and constant innovation to amplify enterprise solutions have been boosting the demand for tech equipment. Growth opportunities from the robust adoption of the multi-cloud model should help offset macroeconomic challenges arising from high inflation and persistent interest rate hikes.
In addition, the growing demand for high-speed data transfer and reliable wireless connectivity amid increased adoption of 5G technology is driving the growth of the global networking equipment market, which is projected to reach $143.46 billion by 2031, growing at a CAGR of 4.4%.
Furthermore, investors’ interest in networking stocks is evident from the iShares North American Tech-Multimedia Networking ETF’s (IGN) 5.2% returns over the past year.
With this in mind, let’s evaluate the fundamentals of the above-mentioned stocks:
Motorola Solutions, Inc. (MSI)
MSI is engaged in the provision of public safety and enterprise security solutions in the United States, the United Kingdom, Canada, and internationally. The company operates through two segments: Products and Systems Integration; and Software and Services.
Recently, the U.K. government selected MSI to equip prison staff with 13,000 VB400 body-worn cameras across England and Wales. MSI's high-quality video and audio capture feature allows the government to enhance safety and security across prison operations.
On May 2, MSI launched a mobile broadband-enabled V700 body camera to give public safety agencies another critical source of real-time field intelligence and collaboration.
The new camera integrates with the company’s command center, in-car video, and radio solutions to offer agencies enhanced awareness before, during, and after an incident. With such well-equipped features, the newly launched device is poised to witness strong demand.
During the first quarter that ended on March 31, 2023, MSI’s net sales increased 14.7% year-over-year to $2.17 billion. Adjusted net earnings attributable to MSI increased 30.6% from the year-ago value to $384 million, while its non-GAAP operating earnings grew 42.2% year-over-year to $6.89 billion. MSI’s adjusted EPS rose 30.6% from the prior-year quarter to $2.22.
The consensus revenue estimate of $2.36 billion for the second quarter (ending June 30, 2023) represents a 10.3% increase year-over-year. The consensus EPS estimate of $2.52 for the current quarter indicates a 21.6% year-over-year improvement. The company has a promising earnings surprise history, as it surpassed the EPS estimates in each of the trailing four quarters.
Shares of MSI have gained 34.1% over the past year to close its last trading session at $285.43.
MSI’s POWR Ratings reflect this promising outlook. It 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.
It has a B grade for Growth, Sentiment, and Quality. Out of 51 stocks in the Technology - Communication/Networking industry, it is ranked #7. To see the additional ratings of MSI for Value, Momentum, and Stability, click here.
Hewlett Packard Enterprise Company (HPE)
HPE is an edge-to-cloud platform-as-a-service company. The company operates through six segments: Compute; High Performance Computing & AI (HPC & AI); Storage; Intelligent Edge; Financial Services; and Corporate Investments and Other segments.
On March 20, HPE announced the acquisition of OpsRamp, an IT Operations Management (ITOM) company. The integration of OpsRamp hybrid digital operations management solution with the HPE GreenLake edge-to-cloud platform would provide a unified approach to manage multi-vendor computing, networking, storage, and application resources in hybrid and multi-cloud IT environments.
Additionally, in the same month, the company strengthened its network security with the acquisition of a cloud security provider, Axis Security. This acquisition enables HPE to expand its edge-to-cloud security capabilities by offering a unified Secure Access Services Edge (SASE) solution to meet the increasing demand for integrated networking and security solutions delivered as-a-service.
With the increase in remote users and the ongoing cloud transition, Axis Security’s Security Services Edge (SSE) platform addresses the need for improved application performance and increased network security.
In the fiscal first quarter (ended January 31, 2023), HPE's net revenue increased 12.2% year-over-year to $7.81 billion. Its non-GAAP earnings from operations increased 19.5% from the year-ago value to $918 million, while its non-GAAP net earnings grew 18.8% year-over-year to $697 million and $0.63 per share, respectively.
For the fiscal second quarter (ended April 30, 2023), HPE's EPS and revenue are expected to increase 10% and 8.9% year-over-year to $0.48 and $7.31 billion, respectively. Furthermore, it surpassed the EPS estimates in three of the trailing four quarters.
The stock has gained marginally over the past five days to the last trading session at $14.38.
HPE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
It has an A grade for Growth and a B for Value. Within the same industry, it is ranked #14. Click here to see the additional ratings for HPE (Momentum, Stability, Sentiment, and Quality).
IPG Photonics Corporation (IPGP)
IPGP is engaged in the development, manufacture, and sale of high-performance fiber lasers, fiber amplifiers, and diode lasers that are used for diverse applications, primarily in materials processing. Its products include lasers, beam delivery, medical, telecom equipment, product finder and components such as pump diodes, chillers, and mid-IR crystals.
On January 30, IPGP launched six high-efficiency diode laser solutions that offer various advantages over thermal ovens in industrial heating and drying applications. On the same day, it also introduced three high-power deep ultraviolet lasers with non-linear crystals to provide robust and flexible solutions over lasers using conventional frequency conversion materials.
Such introductions reflect the company’s continuous innovation that helps deliver new capabilities and flexibility for its customers while enabling new industry applications.
IPGP’s total operating expenses decreased 9.1% year-over-year to $71.51 million for the first quarter that ended March 31, 2023. Its cash flow from operating activities improved 127% year-over-year to $37.28 million. Also, its total liabilities came in at $332.63 million for the period that ended March 31, 2023, compared to $357.92 million for the period that ended December 31, 2022.
Street expects IPGP’s EPS and revenues to increase 18.5% and 3.8% year-over-year to $1.37 and $362.21 million, respectively, in the fiscal third quarter (ending September 2023). Moreover, it surpassed the EPS and revenue estimates in three of the trailing four quarters.
Over the past six months, the stock has gained 23.6% to close the last trading session at $114.24.
IPGP’s POWR Ratings reflect its solid prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Momentum and Quality. In the same industry, it is ranked #12 of 51 stocks. Click here to see the other ratings of IPGP for Growth, Value, Stability, and Sentiment.
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MSI shares were trading at $282.94 per share on Wednesday afternoon, down $2.49 (-0.87%). Year-to-date, MSI has gained 10.16%, versus a 7.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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