Tech stocks endured a challenging 2022 due to the Fed’s aggressive rate hikes. The tech-heavy Nasdaq Composite has lost 29.7% over the past year. However, the tech industry remains well-poised for long-term growth due to consistent spending by businesses on cloud solutions, software, and cyber security.
According to the latest CNBC Technology Executive Council survey, 74% of tech executives believe their companies will spend more on new technology in the next 12 months.
On top of it, according to Wedbush analyst Dan Ives, the tech sector would jump 20% in 2023. Moreover, the information technology market is expected to grow at a CAGR of 7.9% to reach $11.99 trillion by 2027.
In the long run, the demand for advanced technology solutions and higher tech spending is expected to fuel the recovery of tech stocks. Hence, it could be wise for investors to buy and hold fundamentally strong tech stocks Dell Technologies Inc. (DELL) and Celestica Inc. (CLS) for the next decade.
Dell Technologies Inc. (DELL)
DELL designs, develops, manufactures, markets, sells, and supports various comprehensive and integrated solutions, products, and services worldwide. The company operates through two segments, Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG).
In terms of the trailing-12-month asset turnover ratio, DELL’s 0.95% is 51% higher than the 0.63% industry average. Likewise, its 2.84% trailing-12-month Capex/Sales is 13.6% higher than the industry average of 2.50%. Furthermore, the stock’s 65.63% trailing-12-month ROCE is significantly higher than the industry average of 4.99%.
On November 30, 2022, OneMind Technologies, a wholly-owned subsidiary of Affluence Corporation, announced its strategic partnership with DELL. Following the contract terms, DELL would incorporate OneMind’s Hypervisor in its Digital City Software product. This strategic partnership should enable DELL to solve specific problems, bring proven solutions with modern architectures, and ensure successful implementations.
DELL’s non-GAAP operating income for the fiscal third quarter ended October 28, 2022, increased 21.7% year-over-year to $2.38 billion. The company’s non-GAAP net income increased 29.9% year-over-year to $1.71 billion. Additionally, its non-GAAP EPS came in at $2.30, representing a 38.6% increase from the year-ago period.
DELL's EPS for the fiscal year 2023 is expected to increase 20% year-over-year to $7.47. It has a commendable earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. The stock has gained 22.2% over the past three months to close the last trading session at $42.28.
DELL’s strong outlook is reflected in its POWR Ratings. The company has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #12 out of 44 stocks in the Technology - Hardware industry. In addition, it has a B grade for Growth, Value, and Sentiment.
Click here to see the additional ratings of DELL (Momentum, Stability, and Quality).
Celestica Inc. (CLS)
Headquartered in Toronto, Canada, CLS provides hardware platform and supply chain solutions in North America, Europe, and Asia. It operates through two segments: Advanced Technology Solutions; and Connectivity & Cloud Solutions.
In terms of the trailing-12-month asset turnover ratio, CLS’ 1.43% is 127.1% higher than the 0.63% industry average. Likewise, its 8.88% trailing-12-month ROCE is 78.1% higher than the industry average of 4.99%.
CLS’ revenue increased 31.1% year-over-year to $1.92 billion for the third quarter, which ended September 30, 2022. The company’s adjusted gross profit increased 33.5% year-over-year to $171.50 million. Its adjusted net earnings increased 46.5% year-over-year to $63.60 million.
In addition, its adjusted EPS came in at $0.52, representing a 48.6% increase from the prior-year quarter.
CLS’ EPS and revenue for the quarter ending December 2022 are expected to increase 21.9% and 29.7% year-over-year to $0.54 and $1.96 billion, respectively. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 30.6% over the past three months to close the last trading session at $11.74.
It is no surprise that CLS has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It is ranked first out of 78 stocks in the Technology - Services industry. The company has an A grade for Growth and a B for Value, Momentum, and Sentiment.
Click here to see the other ratings of CLS for Stability and Quality.
DELL shares were trading at $42.50 per share on Tuesday afternoon, up $0.22 (+0.52%). Year-to-date, DELL has gained 5.67%, versus a 1.82% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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