The major market indexes continue to experience extreme volatility due to the aggressive interest rate hikes planned by the Fed to control the multi-decade high inflation and the rising geopolitical tensions between Ukraine and Russia. Technology stocks have experienced a significant sell-off since the beginning of the year, with the Nasdaq Composite declining 11.9% year-to-date.
The technology industry has helped businesses stay functional since the onset of the COVID-19 pandemic. The increased adoption of cloud, service-based IT, and hybrid business structures by businesses lead to solid growth for most technology companies. The technology industry is expected to witness further growth due to the rapid adoption of newer and advanced technologies and solutions. According to Gartner, the worldwide IT spending, which includes data center systems, enterprise software, devices, IT services, and communications services, will rise to $4.50 trillion in 2022, representing an increase of 5.1% from 2021.
That’s why today we're highlighting 3 stocks from our Top 10 Technology screen, which is just 1 of the 10 outperforming screens in our POWR Screens 10 service (more on that below). Internet Initiative Japan Inc. (IIJIY), Extreme Networks, Inc. (EXTR), and Wayside Technology Group, Inc. (WSTG) are well-positioned to capitalize on the industry tailwinds.
Internet Initiative Japan Inc. (IIJIY)
Headquartered in Tokyo, Japan, IIJIY provides internet connectivity, WAN, outsourcing, systems integration, and network-related equipment sales services in Japan. The company operates through the Network Services and Systems Integration Business and ATM Operation Business.
IIJIY’s nine-month revenue ended December 31, 2021, increased 6.1% year-over-year to ¥165.60 billion ($1.43 billion). The company’s operating profit increased 60.9% year-over-year to ¥16.29 billion ($0.14 billion). Also, its net profits rose 96.1% year-over-year to ¥11.52 billion ($0.09 billion). Its EPS came in at ¥127, representing an increase of 95.8% year-over-year.
Analysts expect IIJIY’s revenue for fiscal 2022 to increase 17.2% year-over-year to $1.98 billion. Over the past year, the stock has gained 39.7% to close the last trading session at $30.61.
IIJIY’s strong fundamentals are reflected in its POWR Ratings. It 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, with each factor weighted to an optimal degree.
The stock has an A grade for Stability and a B grade for Value and Quality. It is ranked #6 out of 49 stocks in the A-rated Telecom – Foreign industry. Click here to see the other ratings of IIJIY for Growth, Momentum, and Sentiment.
Extreme Networks, Inc. (EXTR)
EXTR provides end-to-end, cloud-driven networking solutions, services, and support. The company provides solutions from the Internet of Things (IoT) edge to the cloud. Its products include ExtremeWireless, ExtremeSwitching, ExtremeControl, ExtremeCloud IQ, ExtremeAnalytics, ExtremeLocation, Extreme AirDefense, ExtremeGuest, and ExtremeCloud A3.
On September 15, 2021, EXTR announced its acquisition of Ipanema, the cloud-native enterprise SD-WAN division of Infovista. The acquisition will bolster EXTR’s ExtremeCloud portfolio by adding flexibility, capability, and security when connecting locations, applications, and devices. Adding Ipanema’s capabilities to ExtremeCloud’s portfolio will offer new cloud-managed SD-WAN and security software solutions to power the Infinite Enterprise.
For the fiscal second quarter ended December 31, 2021, EXTR’s revenues increased 16% year-over-year to $280.90 million. The company’s non-GAAP net income increased 78% year-over-year to $28.40 million. Also, its non-GAAP EPS came in at $0.21, representing an increase of 62% year-over-year.
For fiscal 2022, EXTR’s EPS and revenue are expected to increase 43.9% and 12.1% year-over-year to $0.82 and $1.13 billion, respectively. It surpassed Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 24.8% to close the last trading session at $12.10.
EXTR’s POWR Ratings reflect solid prospects. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system. It has an A grade for Growth and a B grade for Value and Quality. Within the Technology – Communication/Networking industry, it is ranked first. To see the other ratings of EXTR for Momentum, Stability, and Sentiment, click here.
Wayside Technology Group, Inc. (WSTG)
WSTG operates as a value-added information technology distribution and solutions company. It operates through the Distribution and Solutions segments. It also offers virtualization/cloud computing, security, networking, storage and infrastructure management, application lifecycle management, and other technically sophisticated domains and computer hardware.
On January 11, 2022, WSTG announced its wholly-owned subsidiary Climb Channel Solutions partnered with IRONSCALES, a global leader in AI-powered email security solutions. CEO of Climb Channel Solutions, Dale Foster, said, “We partnered with IRONSCALES to bring our customers a wholistic, leading-edge email security platform that will strengthen their cybersecurity offerings and protect against all forms of phishing before, during and after incidents.”
WSTG’s net sales increased 13% year-over-year to $68.91 million for the third quarter ended September 30, 2021. The company’s adjusted gross billings increased 32.6% year-over-year to $226.93 million. Also, its adjusted EBITDA increased 128.4% year-over-year to $4.23 million.
Analysts expect WSTG’s EPS to increase 22% over the next five years. Over the past year, the stock has gained 53% to close the last trading session at $30.60.
WSTG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system. It has an A grade for Growth and a B grade for Value, Sentiment, and Quality. It is ranked first out of 48 stocks in the Technology – Electronics industry. Click here to see the other ratings of WSTG for Momentum and Stability.
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IIJIY shares were trading at $30.01 per share on Monday afternoon, down $0.60 (-1.96%). Year-to-date, IIJIY has declined -27.20%, versus a -7.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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