The tech sector was hit hard in 2022 due to the Fed’s relentless rate hikes. Moreover, in the face of uncertain economic conditions, employment cutbacks in the IT sector have been increasing.
However, Wedbush analyst Dan Ives predicts a 20% increase in tech stocks in 2023. In addition, according to Gartner, Inc. (IT), worldwide IT spending is expected to reach $4.50 trillion in 2023, a 2.4% increase over the previous year.
Moreover, the information technology market is expected to grow at a CAGR of 7.9% until 2027, driven by increasing market for emerging technologies like the Internet of Things and Artificial Intelligence (AI). Investors’ rising interest in tech stocks is evident from the Technology Select Sector SPDR ETF’s (XLK) 12.3% returns over the past month.
Given the backdrop, investors could consider buying fundamentally sound tech stocks Jabil Inc. (JBL), Pure Storage, Inc. (PSTG), and Vishay Intertechnology, Inc. (VSH) this month.
Jabil Inc. (JBL)
JBL offers products and services for manufacturing all over the world. The company operates in two segments, Electronics Manufacturing Services, and Diversified Manufacturing Services.
In terms of forward EV/Sales, JBL is currently trading at 0.38x, 87.3% lower than the industry average of 3.01x. Its forward Price/Sales of 0.32x is 89.4% lower than the industry average of 3.01x.
JBL’s trailing-12-month ROCE of 41.31% is 767% higher than the 4.75% industry average. Its trailing-12-month ROTA of 4.77% is 213.9% higher than the 1.52% industry average.
JBL’s net revenues came in at $9.64 billion for the fiscal first quarter that ended November 30, 2022, up 12.5% year-over-year. Its gross profit increased 10.1% year-over-year to $743 million. Also, its operating income increased 3.4% year-over-year to $362 million.
Analysts expect JBL’s revenue to increase 3.1% year-over-year to $34.51 billion in 2023. Its EPS is estimated to rise 9.5% year-over-year to $8.38 in 2023. It surpassed EPS estimates in all four trailing quarters. Over the past nine months, the stock has gained 42.2% to close the last trading session at $82.62.
JBL’s POWR Ratings reflect this promising outlook. It has an overall A rating, equating to a Strong Buy. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Momentum and a B for Value and Quality. Within the Technology – Services industry, it is ranked #6 out of 79 stocks. Click here to see the additional POWR Ratings for JBL (Growth, Sentiment, and Stability).
Pure Storage, Inc. (PSTG)
PSTG specializes in providing data storage technologies, goods, and services. Its products and subscription services serve a wide variety of structured and unstructured data at scale and across all data workloads in hybrid and public cloud environments. It also consists of backup and recovery, analytics, and disaster recovery (DR).
PSTG’ forward EV/Sales of 2.98x is 1.1% lower than the industry average of 3.01x. Its forward Price/Cash Flow of 15.95x is 13.7% lower than the industry average of 18.49x.
Its trailing-12-month gross profit margin of 68.34% is 39.6% higher than the industry average of 48.9%. Its trailing-12-month Levered FCF margin of 16.13% is 120.4% higher than the industry average of 7.32%.
PSTG’s total revenue increased 20.1% year-over-year to $676.05 million for the fiscal 2023 third quarter ended November 6, 2022. Its product revenue grew 15% year-over-year to $431.28 million. Its gross profit increased 24.4% from the year-ago value to $466.34 million.
PSTG’ revenue is expected to come in at $2.75 billion in 2023, representing a 26.3% year-over-year rise. The company’s EPS is expected to increase 64.9% year-over-year to $1.27 in 2023. It surpassed EPS estimates in all four trailing quarters. The stock has gained 11.6% over the past year to close the last trading session at $29.45.
It’s no surprise that PSTG has an overall B rating, equating to a Buy in our POWR Ratings system. It also has an A grade for Growth and Quality. PSTG is ranked first in the A-rated Technology – Storage industry. To see the additional POWR Ratings for PSTG (Value, Stability, Sentiment, and Momentum), click here.
Vishay Intertechnology, Inc. (VSH)
VSH manufactures and supplies discrete semiconductors and passive electronic components in Asia, Europe, and the Americas. The company operates through six segments: Metal Oxide Semiconductor Field Effect Transistors (MOSFETs); Diodes; Optoelectronic Components; Resistors; Inductors; and Capacitors.
On February 1, 2023, VSH introduced a new Automotive Grade series of vPolyTan™ surface-mount polymer tantalum molded chip capacitors. The AEC-Q200 qualified VSH Polytech T51 series offers lower ESR, lower voltage derating, and a benign failure mode while maintaining higher volumetric efficiency than traditional tantalum capacitors. This should boost the company’s product portfolio.
VSH’s forward Price/Cash Flow of 0.98x is 68.3% lower than the industry average of 3.08x. Its forward Price/Sales of 6.72x is 64.9% lower than the industry average of 19.16x.
Its trailing-12-month EBIT margin of 17.14% is 191.4% higher than the industry average of 5.88%. Its trailing-12-month EBITDA margin of 21.82% is 95.9% higher than the industry average of 11.14%.
VSH’s net revenues increased 13.7% year-over-year to $924.80 million for the fiscal third quarter that ended October 1, 2022. Its gross margin was $289.54 million, up 28.3% year-over-year. The company’s adjusted EBITDA increased 38.3% from the prior-year period to $223.74 million.
The stock has gained 25.7% over the past nine months to close the last trading session at $23.91.
VSH’s strong fundamentals are reflected in its POWR Ratings. It has an overall A rating, which indicates a Strong Buy in our proprietary rating system. It also has an A grade for Growth and Value.
VSH is ranked #3 out of 44 stocks in the Technology – Electronics industry. Click here for the additional POWR Ratings for Stability, Momentum, Sentiment, and Quality for VSH.
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JBL shares were trading at $82.61 per share on Tuesday morning, down $0.01 (-0.01%). Year-to-date, JBL has gained 21.13%, versus a 7.30% rise in the benchmark S&P 500 index 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 matters understandable for individual investors and help them make appropriate investment decisions. More…
