The global tech industry thrives thanks to widespread automation, substantial investments in digitization initiatives, and the integration of advanced technologies like Generative AI. Given the industry's solid growth prospects, investors could consider buying fundamentally strong tech stocks Motorola Solutions, Inc. (MSI), Dolby Laboratories, Inc. (DLB), and TaskUs, Inc. (TASK) for the long-term.
Gartner forecasts global IT spending will reach $5.06 trillion in 2024, up 8% from 2023. This demonstrates technology's pivotal role in transforming operations, enhancing resilience, and boosting productivity. Investments in automation, digital transformation, cloud services growth, and the adoption of advanced technologies are helping drive the demand for tech services.
Gartner expects spending on IT services to grow 9.7% year-over-year to $1.52 trillion this year. Consequently, the increasing need for cutting-edge communication and networking gear, fueled by innovations such as 5G, IoT integration, and the adoption of cloud services, is growing, especially in areas of public safety and enterprise security solutions.
The global optical communication and networking equipment market is projected to grow at a 15.8% CAGR, reaching $107.46 billion by 2030.
On top of it, the widespread adoption of technology in sectors like media, e-commerce, and entertainment is driving increased demand for smart home electronics. With devices becoming more intelligent and automated, and consumer preferences evolving, the tech industry is experiencing rapid growth. This year, the consumer electronics market hit $1.05 trillion and is projected to grow by 3% annually until 2028.
Considering these conducive trends, let’s assess the fundamentals of the abovementioned technology stocks.
Motorola Solutions, Inc. (MSI)
MSI provides public safety and enterprise security solutions internationally. The company operates in two segments: Products and Systems Integration and Software and Services.
On March 27, 2024, MSI announced ScotRail's deployment of over 1,000 of MSI’s VB400 body cameras across its network, aiming to enhance safety for passengers and staff by providing objective evidence, promoting positive interactions, and combating abusive behavior on trains and at stations in Scotland.
In terms of the trailing-12-month gross profit margin, MSI’s 49.88% is 2.6% higher than the 48.61% industry average. Likewise, its 14.71% levered FCF margin is 54% higher than the 9.55% industry average. Also, the stock’s 0.76x trailing-12-month asset turnover ratio is 24.1% higher than the industry average of 0.62x.
MSI’s net sales for the fourth quarter ended December 31, 2023, increased 5.2% year-over-year to $2.85 billion. The company’s non-GAAP operating earnings increased 5.8% year-over-year to $870 million. Also, its non-GAAP EPS came in at $3.90, representing an increase of 8.3% year-over-year.
Street expects MSI’s EPS and revenue for the quarter ended March 31, 2024, to increase 13.4% and 7.8% year-over-year to $2.52 and $2.34 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past six months, the stock has gained 24.4% to close the last trading session at $349.02.
MSI’s POWR Ratings reflect robust prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #7 out of 47 stocks in the Technology - Communication/Networking industry. It has a B grade for Stability, Sentiment, and Quality. Click here to see MSI’s Growth, Value, and Momentum ratings.
Dolby Laboratories, Inc. (DLB)
DLB creates audio and imaging technologies that transform entertainment at the cinema, DTV transmissions and devices, mobile devices, OTT video and music services, home entertainment devices, and automobiles.
In terms of the trailing-12-month net income margin, DLB’s 14.70% is 483.5% higher than the 2.52% industry average. Likewise, its 8.13% trailing-12-month Return on Common Equity is 148.3% higher than the industry average of 3.27%. Additionally, its 6.41% trailing-12-month Return on Total Assets is 341.1% higher than the industry average of 1.45%.
For the fiscal first quarter that ended December 29, 2023, DLB reported a total revenue of $315.57 million and an operating income of $66.22 million. DLB’s non-GAAP net income and EPS stood at $98.64 million and $1.01, respectively. Moreover, as of December 29, 2023, its total liabilities came to $573.22 million, compared to $607.58 million as of September 29, 2023.
For the quarter ending June 30, 2024, DLB’s EPS and revenue are expected to increase 39.4% and 5.1% year-over-year to $0.77 and $313.64 million, respectively. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past six months, DLB’s stock has gained marginally to close the last trading session at $79.91.
DLB’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Quality. Within the Technology - Electronics industry, it is ranked #5 out of 42 stocks. To access the additional ratings of DLB for Growth, Value, Momentum, Stability, and Sentiment, click here.
TaskUs, Inc. (TASK)
TASK provides digital outsourcing services for companies internationally. It offers a digital customer experience consisting of omnichannel customer care services primarily delivered through non-voice digital channels, other solutions, including experience and customer care services for new products or market launches, and customer acquisition solutions.
On March 25, 2024, TASK and V7 announced a strategic partnership to optimize training data creation for AI product development, offering accelerated delivery, reduced costs, and turnkey solutions for enterprise clients across various industries.
Their collaboration leverages TASK’s expert annotators and V7's data infrastructure to expedite AI product launches, streamline training data production, and provide industry-specific solutions in a security-focused environment.
On March 4, 2024, TASK partnered with Quavo to enhance their Risk + Response offerings, combining TASK’s compliance knowledge and global resources with Quavo's dispute management solution to provide improved automation, cost efficiency, and customer experience for financial institutions facing increased online transaction fraud risks.
In terms of the trailing-12-month EBIT margin, TASK’s 11.50% is 15.1% higher than the 9.99% industry average. Its 18.07% trailing-12-month EBITDA margin is 32.6% higher than the 13.63% industry average. Likewise, its 8.75% trailing-12-month Return on Total Capital is 24.1% higher than the industry average of 7.05%.
TASK’s service revenue for the fourth quarter, which ended December 31, 2023, stood at $234.26 million. Its adjusted net income came in at $32.25 million, while its adjusted EPS increased 6.1% from the year-ago value to $0.35. The company’s adjusted EBITDA increased 1.9% year-over-year to $59.02 million.
Also, as of December 31, 2023, the company’s total liabilities amounted to $423.49 million, compared to $446.40 million as of December 31, 2022.
Analysts expect TASK’s revenue for the quarter ending September 30, 2024, to increase 3.1% year-over-year to $232.50 million. Its EPS for the same quarter is expected to grow 1.3% year-over-year to $0.32. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past six months, the stock has gained 31.6% to close the last trading session at $11.30.
TASK’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has a B grade for Growth, Value, and Quality. Within the Technology - Services industry, it is ranked #13 out of 78 stocks. To see TASK’s Momentum, Stability, and Sentiment ratings, click here.
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MSI shares were unchanged in premarket trading Friday. Year-to-date, MSI has gained 11.79%, versus a 7.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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