Despite a significant setback in the aftermath of the pandemic, the tech industry adeptly navigated through macroeconomic uncertainties and orchestrated a remarkable resurgence, propelled by major breakthroughs in the realms of Artificial Intelligence (AI) and cloud computing.
Given the promising backdrop, in this article, I have highlighted three fundamentally robust penny tech stocks, Boxlight Corporation (BOXL), Ceragon Networks Ltd. (CRNT), and PCTEL, Inc. (PCTI), which could offer investors an affordable entry point to capitalize on the industry tailwinds.
Before diving into the fundamentals of the highlighted stocks, let us look at a few trends that are shaping the industry’s prospects.
Within the broader scope of the technology industry, the communication and network sector has recently experienced a noteworthy transformation. This significant transformation has been propelled by the emergence of revolutionary technologies like 5G, the Internet of Things (IoT), AI, and cloud computing.
These groundbreaking advancements have opened up vast possibilities for companies to lead the way in creating novel services that cater to the ever-evolving demands of individuals and enterprises.
Moreover, 5G technology assumes a pivotal role in shaping the future of communication, connectivity, and technology-driven sectors. The market size of 5G connections is projected to be around $106.64 billion in 2023, with an anticipated expansion to $990.33 billion by 2028, reflecting a robust CAGR of 56.2% during the forecast period spanning from 2023 to 2028.
Furthermore, as the 5G network holds the promise of unleashing the full potential of the technology sector, an increasing number of consumers are anticipated to adopt this system in the years ahead. The global 5G connections are on track to surpass 1.90 billion by the year’s end.
Although penny stocks are associated with volatility, in light of these encouraging trends and prospects, these tech penny stocks could be affordable buys on the backs of their robust fundamentals. Let's delve into these three Technology - Communication/Networking stocks, beginning with number three.
Stock #3: Boxlight Corporation (BOXL)
BOXL develops, sells, and services interactive classroom technology products and solutions for the K-12 education market worldwide. The company’s product portfolio includes interactive and non-interactive projectors and flat panel displays, touch projectors, touchboards, and MimioTeach that could turn any whiteboard interactive.
On June 22, BOXL introduced two new additions to their FrontRow ezRoom product line: PowerLine for ezRoom AV and ezRoom Voice & Alert systems. Additionally, it launched the MyFrontRow app for interactive displays.
FrontRow PowerLine is a cost-effective solution tailored for K-12 classrooms, which ensures a reliable power supply to FrontRow ezRoom classroom audio systems, ensuring uninterrupted audio reinforcement, and can enhance the overall learning experience.
This development reflects BOXL’s commitment to providing innovative solutions for the education sector, making technology integration in classrooms more accessible and efficient.
In the same month, BOXL expanded its educational technology offerings with the introduction of MyBot Recruit, an educational robotics system within the Mimio brand. This innovation elevates the existing MimioSTEM MyBot to a fully assembled educational robotics solution, boasting a user-friendly interface and WiFi connectivity.
The well-rounded design of MyBot Recruit positions it as an ideal out-of-the-box STEM education solution tailored for K-8 students. Additionally, the introduction of MyBot Recruit underscores BOXL’s dedication to enhancing interactive and engaging learning experiences for students.
In terms of forward EV/Sales, BOXL is trading at 0.42x, 84.7% lower than the industry average of 2.73x. The stock’s forward EV/EBITDA of 3.35x is 76.9% lower than the 14.51x industry average. Furthermore, the stock’s forward Price/Sales ratio of 0.10x is 96.3% lower than the 2.64x industry average.
For the fiscal second quarter, which ended on June 30, 2023, BOXL’s revenues amounted to $47.05 million, while its gross profit increased 5.9% year-over-year to $17.83 million.
The company’s income from operations came in at $2.08 million, up 135.6% from the year-ago value. Also, its total comprehensive income stood at $911 thousand versus a total comprehensive loss of $4.61 million in the same period last year.
Analysts expect BOXL’s EPS for the fiscal third quarter (ending September 2023) to increase 41.7% year-over-year to $0.34, while its revenue for the same period is expected to be $59.74 million. Moreover, the company has an excellent earnings surprise history, surpassing the EPS estimates in each of the trailing four quarters.
The stock lost marginally intraday to close the last trading session at $2.06.
BOXL’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Value and Sentiment. In the 52-stock Technology - Communication/Networking industry, it is ranked #11. Click here to see BOXL ratings for Growth, Momentum, Stability, and Quality.
Stock #2: Ceragon Networks Ltd. (CRNT)
Headquartered in Rosh HaAyin, Israel, CRNT provides wireless transport solutions for cellular operators and other wireless service providers. The company uses microwave and millimeter-wave radio technologies to transfer telecommunication traffic between wireless 5G and 4G, 3G, and other cellular base stations.
On March 28, CRNT announced follow-on orders totaling $29 million from Tier 1 Operators in India for the year 2023. These orders encompass both hardware and services, with a primary focus on enhancing existing networks for 5G capabilities. The objectives include expanding network capacity, enhancing rural connectivity, and ensuring customers have access to reliable, high-speed experiences.
CRNT anticipates delivering and deploying these products and services primarily during the second and third quarters of 2023, reflecting their continued contribution to advancing India's 5G infrastructure. This development underscores CRNT’s commitment to delivering reliable and high-speed wireless solutions to enhance the overall mobile experience for customers in India.
On February 21, CRNT launched Ceragon Insight, which is an AI-powered Intelligence and Management Software Suite designed for planning, overseeing, analyzing, and automating complex wireless transport networks, even when using multiple vendors.
Ceragon Insight's centralized management suite offers its customers advanced tools to enhance operational efficiency, optimize network performance, and speed up troubleshooting.
CRNT’s forward non-GAAP P/E of 9.25x is 59.5% lower than the 22.81x industry average. Its forward EV/Sales multiple of 0.55x is 79.9% lower than the industry average of 2.73x. Furthermore, the stock’s forward Price/Sales of 0.46x is 82.7% lower than the 2.64x industry average.
CRNT’s revenue for the second quarter (ended June 30, 2023) increased 21.9% year-over-year to $86.15 million, while its gross profit rose 41.8% from the year-ago value to $30.36 million.
During the same period, its operating income came in at $5.65 million. In addition, the company’s net income and EPS amounted to $2.09 million and $0.02, compared to a net loss and loss per share of $1.52 million and $0.02 in the same period last year, respectively.
Street expects CRNT’s revenue for the fiscal third quarter (ending September 2023) to increase 7.5% year-over-year to $84.55 million, while its EPS for the same period is expected to be $0.05. Also, its EPS is projected to improve by 15% per annum over the next five years. Moreover, the company topped its revenue and EPS estimates in three of the trailing four quarters, which is promising.
Over the past six months, the stock has gained 7% to close the last trading session at $1.83.
CRNT’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has an A grade for Growth, Value, and Sentiment. Within the same industry, it is ranked #4. Click here to see the other ratings of CRNT for Momentum, Stability, and Quality.
Stock #1: PCTEL, Inc. (PCTI)
PCTI provides industrial Internet of Thing devices (IoT), antenna systems, and test and measurement solutions worldwide. The company designs and manufactures precision antennas and industrial IoT devices that are deployed in small cells, enterprise Wi-Fi access points, fleet management, and transit systems and in equipment and devices for the industrial IoT.
On August 15, PCTI paid its shareholders a quarterly dividend of $0.06 per share on its common stock. The company’s annual dividend of $0.22 translates to a 5.24% yield on the prevailing prices, while its four-year average dividend yield is 3.95%.
In the same month, PCTI introduced a new 5G FR1 Omnidirectional antenna specially tailored for Industrial IoT applications. As the need for dependable, secure wireless connectivity with broad coverage grows, PCTI’s latest 5G FR1 omnidirectional antenna is engineered to address the demands of modern wireless networks and ensure uninterrupted connectivity even in challenging environments.
In terms of forward EV/Sales, PCTI is trading at 0.58x, 78.6% lower than the industry average of 2.73x. The stock’s forward EV/EBITDA of 6.66x is 54.2% lower than the 14.51x industry average. Furthermore, the stock’s forward Price/Sales ratio of 0.94x is 64.6% lower than the 2.64x industry average.
In the fiscal second quarter, which ended on June 30, 2023, PCTI’s revenues amounted to $20.58 million, while its operating income grew 152.4% from the year-ago value to $828 thousand. Also, the company’s net income amounted to $999 thousand and $0.05 per share, up 143.1% and 150% from the prior-year quarter, respectively.
For the third quarter (ending September 2023), PCTI’s revenue and EPS are projected to be $20.50 million and $0.06, respectively. While its EPS is forecasted to improve by 10% annually over the next five years. Additionally, the company surpassed its EPS estimates in each of the trailing four quarters, which is impressive.
PCTI’s shares have gained marginally over the past month to close the last trading session at $4.20.
It’s no surprise that PCTI has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Value and Sentiment and a B for Stability and Quality. In the same industry, it is ranked first.
In addition to the POWR Ratings we’ve stated above, we also have PCTI’s ratings for Growth and Momentum. Get all PCTI ratings here.
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CRNT shares were trading at $1.86 per share on Wednesday afternoon, up $0.03 (+1.64%). Year-to-date, CRNT has declined -2.62%, versus a 17.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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