Despite hampered growth in 2022, the tech industry is well-positioned to witness a massive rebound and expansion in the coming years, thanks to sustained demand for tech solutions and higher enterprise spending. Given the industry’s long-term growth prospects, adding quality tech stocks Cisco Systems, Inc. (CSCO) and Nokia Oyj (NOK) to your watchlist this year could be wise.
The tech industry experienced a series of selloffs last year due to the Fed’s aggressive rate hikes, mounting inflation levels, industry-wide layoffs, concerns of a looming recession, and geopolitical turmoil catalyzed by the Russia-Ukraine conflict. The tech-heavy Nasdaq lost more than 14% over the past year.
However, the emergence of new, advanced technologies, the rise of e-commerce, and growing tech investments should fuel the recovery of tech stocks in the long run. With the global explosion of data over the past few years, cloud computing has emerged as one of the industry's leading drivers by providing firms with cost savings, scalability, agility, and improved efficiency.
According to Gartner, Inc. (IT), worldwide end-user spending on public cloud services is expected to grow 20.7% year-over-year to $591.80 billion in 2023.
The global information technology market is expected to grow at a 4.5% CAGR to reach $6.20 trillion by 2028. Moreover, investors’ interest in tech stocks is evident from the Global X Artificial Intelligence & Technology ETF’s (AIQ) 9.3% returns over the past three months.
Therefore, investors could closely monitor fundamentally sound tech stocks CSCO and NOK to capitalize on the industry’s tailwinds.
Cisco Systems, Inc. (CSCO)
CSCO designs and markets numerous technologies that power the Internet. It is integrating its platforms for cloud computing, networking, security, and collaboration. The company operates through three geographical divisions, the Americas; Europe, the Middle East, and Africa (EMEA); and Asia Pacific, Japan, and China (APJC).
On February 7, 2023, CSCO announced innovations in cloud-managed networking. The company could benefit by offering a unified experience that fosters genuine business agility using its potent new cloud management tools for industrial IoT apps, streamlined dashboards to converge IT and OT operations, and flexible network intelligence.
Also, on November 29, 2022, the company announced significant updates to its cloud-native observability solution AppDynamics Cloud. With the addition of business transaction insights to AppDynamics Cloud, IT teams would now have the information they need to make business-critical decisions. The business might benefit from improved client experiences.
For the fiscal second quarter that ended January 28, 2023, CSCO’s total revenue increased 6.9% year-over-year to $13.59 billion, while its gross margin grew 4.7% from the year-ago value to $8.43 billion. Also, the company’s non-GAAP net income rose 2.6% year-over-year to $3.64 billion, and its non-GAAP EPS increased 4.8% from the prior-year period to $0.88.
The consensus revenue estimate of $56.56 billion for the fiscal year ending July 2023 indicates a 9.7% year-over-year improvement. The consensus EPS estimate of $3.75 for the ongoing year reflects an 11.7% rise from the previous year. Also, CSCO surpassed its consensus EPS estimates in all four trailing quarters, which is impressive.
Shares of CSCO have gained 4.4% over the past month to close the last trading session at $49.31.
CSCO’s POWR Ratings reflect its strong outlook. The stock has an overall rating of A, which equates 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 a B for Stability and Sentiment. In the B-rated 49-stock Technology - Communication/Networking industry, it is ranked #3.
Beyond what we stated above, we also have CSCO’s ratings for Growth, Value, and Momentum. Get all CSCO ratings here.
Nokia Oyj (NOK)
Headquartered in Espoo, Finland, NOK is a global provider of mobile, fixed, and cloud network solutions. Its segments include Mobile Networks; Network Infrastructure; Cloud and Network Services; and Nokia Technologies. It offers products and services for radio access networks ranging from 2G to 5G and microwave radio links for transport networks.
On February 22, 2023, NOK declared that it had secured a ten-year extension to its existing nationwide 5G network deal with Antina Pte. Ltd. As per the agreement, NOK is expected to build a 5G standalone network for indoor and outdoor coverage and extend the existing network using Antina’s 3.5GHz spectrum holdings.
The long-term extension of NOK's contract displays Antina’s confidence in the company’s technological leadership and the strength of its product portfolio.
Furthermore, on February 16, NOK and Tele2 announced a collaboration in Sweden to enable enterprises to utilize robust, reliable 5G private wireless to connect assets and unlock valuable operational data to realize cost, efficiency, and sustainability objectives.
By collaborating with Tele2 as part of their network offering and demonstrating the use cases, the company intends to benefit from the significant business potential of private wireless in Sweden.
The company’s net sales grew 16.1% year-over-year to €7.45 billion ($7.91 billion) in the fiscal fourth quarter that ended December 31, 2022. Its gross profit grew 25.8% year-over-year to €3.19 billion ($3.39 billion). Also, the company’s profit and EPS rose 363.5% and 366.7% year-over-year to €3.15 billion ($3.35 billion) and €0.56, respectively.
Analysts expect NOK’s revenue to increase 9.5% year-over-year to $6.15 billion for the fiscal 2023 first quarter ending March. The company’s EPS for the ongoing quarter is expected to rise 10.9% from the previous year’s quarter to $0.08. Furthermore, the company surpassed its consensus estimates in three of four trailing quarters.
The stock has marginally gained over the past month to close the last trading session at $4.65.
NOK’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of A, equating to Strong Buy in our proprietary rating system.
NOK has an A grade for Value and a B for Growth and Sentiment. Within the same industry, it is ranked #4 of 49 stocks.
In addition to the POWR Ratings I’ve just highlighted, you can see NOK ratings for Stability, Quality, and Momentum here.
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CSCO shares were trading at $48.67 per share on Thursday afternoon, down $0.64 (-1.30%). Year-to-date, CSCO has gained 2.98%, versus a 3.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
2 Tech Stocks to Keep a Close Eye On StockNews.com
