The technology industry is booming, driven by growing demand for advanced solutions amid rapid consumer demand and surging enterprise requirements. Also, technological advances such as AI, big data analysis, and digital transformation play a vital role in the industry’s expansion.
Amid this backdrop, investors could consider fundamentally sound tech stocks, Box, Inc. (BOX), SolarWinds Corporation (SWI), and Docebo Inc. (DCBO), positioned for future growth.
Gartner expects the global IT spending to reach $5.26 trillion in 2024, reflecting robust growth of 7.5% from the previous year. Also, IT services are anticipated to grow by 7.1% year-over-year to $1.61 trillion. The factors contributing to the staggering spending levels include a tech-focused market, heavy investment in digital transformation by global enterprises.
Further trends like prevalence of Artificial Intelligence (AI), no-code, and sustainable tech boost the demand for tech services. The information technology market is expected to grow to $12.42 trillion by 2028, exhibiting growth at a CAGR of 8.3%, driven by trends like digital transformation, cybersecurity innovations, and e-commerce evolution.
Also, with the rising investment in business software, the overall software market revenue is projected to reach $704.10 billion in 2024. Further, the revenue is expected to growth at a CAGR of 5% resulting in a market volume of $898.90 billion by 2029. Most revenue is expected to be generated in the United States of $363.40 billion in the present year.
Considering these conducive trends, let’s assess the fundamentals of the abovementioned technology stocks.
Box, Inc. (BOX)
BOX provides a cloud content management platform allowing organizations of various sizes to manage and share their content from anywhere on any device. The company’s Software-as-a-Service platform that enables users to work with their content as they need from secure external collaboration and sharing, workspaces and portals, e-signature processes, and content workflows.
BOX’s revenue and EBITDA have grown at respective CAGRs of 12.3% and 14.4% over the past three years. The company’s EBIT has increased 17.0% over the same timeframe, while its tangible book value and total assets have improved at CAGRs of 7.3% and 7.4%, respectively.
On June 27, BOX unveiled powerful enhancements to BOX AI which involves unlimited queries for Enterprise Plus customers, integration with GPT-4o, and support for more file types. The added features will improve content management and workflow efficiency using advanced AI capabilities.
For the first quarter that ended April 30, 2024, BOX’s revenues increased 5.1% year-over-year to $264.66 million. Its non-GAAP gross profit rose 8.1% year-over-year to $212.18 million. The company’s non-GAAP operating income grew 22.7% from the year-ago value to $70.40 million.
Also, the company’s non-GAAP attributable net income of $58.40 million and $0.39 per share reflects increases of 22.9% and 21.9% from the prior year’s quarter, respectively. Its non-GAAP free cash flow increased 13.9% year-over-year to $123.24 million.
As per the company’s outlook for the second quarter 2024, BOX expects its revenue between $268 million and $270 million, reflecting a 3% increase year-over-year. Its non-GAAP net income per share is expected to be $0.40 - $0.41.
Analysts expect BOX’s revenue for the second quarter (ending July 2024) to increase 3% year-over-year to $269.20 million and its EPS is expected to grow 12.5% year-over-year to $0.41 for the same quarter. Furthermore, the company surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.
Shares of BOX have surged 6.9% over the past month and 5.6% over the past six months to close the last trading session at $28.16.
BOX’s bright 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 POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Quality and Growth. It also has a B grade for Value. Within the Technology - Services industry, BOX is ranked #5 out of 76 stocks.
Click here to access additional ratings of BOX for Sentiment, Momentum, and Stability.
SolarWinds Corporation (SWI)
SWI offers information technology (IT) management software products internationally. The company provides a suite of network management software that provides real-time visibility into network utilization and bandwidth, and ability to detect, diagnose, and resolve network performance problems.
SWI’s revenue and EBITDA have grown at respective CAGRs of 6% and 37% over the past three years. The company’s EBIT has increased 67.1% over the same timeframe, while its levered free cash flow has improved at CAGR of 15.1%.
On May 21, SWI launched SolarWinds® AI to transform IT operations and empower tech pros to manage the complexities of modern digital environments. The purpose-built generative AI engine has been developed by its AI by Design framework to help ensure privacy, security, and reliability in developing advanced AI technologies.
SolarWinds AI in service desk quickly summarizes complex ticket histories, it offers suggested agent responses to inquiries, and can generate real-time recommended steps for resolving faced issues. The new AI system will act as a valued partner for IT pros in their everyday lives.
For the first quarter that ended March 31, 2024, SWI’s total revenues increased 3.9% year-over-year to $193.31 million. Its non-GAAP gross profit grew 4.3% from the year-ago value to $175.77 million. The company’s non-GAAP net income and non-GAAP EPS came in at $49.83 million and $0.29, indicating growths of 51.5% and 45% from the previous year’s quarter, respectively.
Furthermore, the company’s adjusted EBITDA increased 19% from the prior year’s quarter to $92.07 million. Its unlevered free cash flow grew 38% year-over-year to $56.54 million.
Analysts expect SWI’s revenue and EPS for the second quarter (ended June 2024) to increase 2% and 8.3% year-over-year to $188.67 million and $0.23, respectively. Moreover, the company has topped the consensus revenue and EPS estimates in all of the trailing four quarters.
Shares of SWI have gained 6.2% over the past six months and 22.8% over the past year to close the last trading session at $11.93.
SWI’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has an A grade for Growth and a B for Value, Sentiment, and Stability. Within the B-rated Software - Business industry, SWI is ranked #2 of 40 stocks.
Click here to access additional ratings of SWI for Quality and Momentum.
Docebo Inc. (DCBO)
Headquartered in Toronto, Canada, DCBO operates as a learning management software company which offers artificial intelligence (AI)-powered learning platform in internationally. It provides Learning Management System (LMS) to train internal and external workforces, partners, and customers.
DCBO’s revenue has grown at a CAGR of 38.9% over the past three years. The company’s levered free cash flow has increased 48.6% over the same timeframe. Also, its revenue improved at CAGR of 45.1% over the past five years.
In terms of the trailing-12-month gross profit margin, DCBO is trading at 80.88%, 64.5% higher than the 49.18% industry average. Its trailing-12-month net income margin of 3.55% is 13.8% higher than the industry average of 3.11%. Also, the stock’s 15.03% trailing-12-month levered FCF margin is 54.3% higher than the 9.74% industry average.
DCBO’s total revenue increased 24% year-over-year to $51.40 million during the first quarter that ended March 31, 2024. Its gross profit rose 24.2% from the year-ago value to $41.48 million. The company’s adjusted net income came in at $7.27 million and $0.23 per share, up 125.4% and 155.6% from the prior year’s quarter, respectively.
In addition, the company’s adjusted EBITDA grew 237.9% year-over-year to $7.47 billion.
Street expects DCBO’s revenue and EPS for the second quarter (ended June 2024) to grow 19.9% and 57.1% year-over-year to $52.29 million and $0.22, respectively. Furthermore, the company has topped the consensus EPS and revenue estimates in each of the trailing four quarters.
Over the past nine months, DCBO’s stock has surged 0.4% and marginally over the past year to close the last trading session at $38.23.
DCBO’s POWR Ratings reflect its bright prospects. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
DCBO has an A grade for Growth and Quality. The stock has a B grade for Sentiment. It is ranked #13 out of 134 stocks in the Software - Application industry.
In addition to the POWR Ratings we’ve stated above, we also have DCBO’s other ratings for Momentum, Value, and Stability. Get all DCBO ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
BOX shares were trading at $28.24 per share on Wednesday afternoon, up $0.08 (+0.28%). Year-to-date, BOX has gained 10.27%, versus a 16.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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