While macroeconomic uncertainties could hamper near-term growth, the tech industry’s long-term prospects appear bright in the light of government initiatives, increased digital transformation, and rising demand for technology in daily life.
So, it could be wise to add quality tech stocks Cambium Networks Corporation (CMBM), Gilat Satellite Networks Ltd. (GILT), and PCTEL, Inc. (PCTI) to one’s portfolio now.
According to Gartner, global government IT spending is expected to reach $589.80 billion in 2023, a 7.6% rise from 2022.
The next-generation wireless communication market is a collection of the most recent wireless communication technologies and solutions, providing faster and more reliable connectivity with high bandwidth and low latency. The next-generation wireless communication market is expected to grow at 20.5% CAGR until 2030.
The Web Real Time Communication (webRTC) market is expected to grow at a CAGR of 48.9% until 2027, driven by the increasing popularity of video and audio conferencing, the proliferation of WebRTC apps in social media, and the increase in the number of connected devices.
Investors’ interest in tech stocks is evident from the iShares U.S. Technology ETF (IYW) 24.6% returns over the past three months.
Cambium Networks Corporation (CMBM)
CMBM designs, develops, and manufactures wireless broadband and Wi-Fi networking infrastructure solutions. The company offers point-to-point fixed wireless backhaul and point-to-multipoint fixed wireless solutions and enterprise solutions.
CMBM’s forward EV/Sales multiple of 1.24 is 55.3% lower than the industry average of 2.78. Its forward Price/Book multiple of 2.33 is 39.8% lower than the industry average of 3.86.
CMBM’s trailing-12-month ROCE of 19.66% is significantly higher than the industry average of 0.63%. Its trailing-12-month ROTA of 9.20% is significantly higher than the industry average of 0.08%.
CMBM’s revenues for the first quarter ended March 31, 2023, increased 25.1% year-over-year to $77.40 million. The adjusted EBITDA increased 435.7% year-over-year to $10.38 million.
Also, its non-GAAP net income increased significantly year-over-year to $6.81 million. Its non-GAAP EPS came in at $0.24, representing a considerable increase over the prior-year quarter.
The consensus revenue estimate of $332.61 million for the year ending December 2023 represents a 12% increase year-over-year. Its EPS is expected to grow 28.8% year-over-year to $1.21 for the same period. It surpassed EPS estimates in all four trailing quarters. CMBM’s shares have gained 11.2% over the past year to close the last trading session at $15.69.
CMBM’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CMBM has a B grade for Growth. It is ranked #8 out of 50 stocks in the Technology - Communication/Networking industry. Click here for the additional POWR Ratings for Value, Momentum, Stability, Sentiment, and Quality for CMBM.
Gilat Satellite Networks Ltd. (GILT)
Headquartered in Petah Tikva, Israel, GILT offers satellite-based broadband communications. Its segments include Satellite Networks; Integrated Solutions; and Network Infrastructure and Services. Its equipment is utilized by satellite operators, telecom operators, government and defense organizations, and large corporations.
On April 24, 2023, GILT announced that Intelsat is enhancing its collaborative cooperation and increasing its In-Flight Connectivity (IFC) and cellular backhaul capabilities with multimillion-dollar orders for GILT’s multi-service platforms and terminals. Intelsat delivers secure satellite communications to government, non-governmental organizations, and commercial users.
Also, enabling Intelsat’s development allows GILT to expand its coverage with Mobile Network Operators (MNOs), strengthening its position in the satellite-based cellular backhauling industry.
GILT’s forward EV/EBITDA multiple of 6.70 is 52.7% lower than the industry average of 14.15. Its forward EV/Sales multiple of 0.81 is 70.7% lower than the industry average of 2.78.
GILT’s trailing-12-month ROTC of 4.60% is 133.5% higher than the industry average of 1.97%. Its trailing-12-month ROTA of 0.57% is 580.1% higher than the industry average of 0.08%.
For the fiscal first quarter that ended March 31, 2023, GILT’s non-GAAP gross profit increased 50.4% year-over-year to $24.76 million. Its non-GAAP operating income came in at $5.28 million, compared to a loss of $266 million in the previous year’s quarter.
Also, the company’s non-GAAP net income and EPS came in at $3.85 million and $0.07, compared to a loss and loss per share of $1.78 million and $0.03 in the prior year’s period.
Analysts expect GILT’s revenue to increase 8.5% year-over-year to $270.34 Million in 2024. Its EPS is expected to grow 7.4% year-over-year to $0.29 in 2024. It surpassed EPS estimates in three of four trailing quarters. The stock has gained 14.4% over the past month to close its last trading session at $5.40.
It’s no surprise that GILT has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B for Growth, Value, and Sentiment. It is ranked #5 in the same industry.
Beyond what is stated above, we’ve also rated GILT for Stability, Momentum, and Sentiment. Get all GILT ratings here.
PCTEL, Inc. (PCTI)
PCTI provides wireless technology, including purpose-built Industrial IoT devices, antenna systems, and test and measurement solutions. It also offers Radio Frequency (RF) test & measurement products that improve the performance of wireless networks.
PCTI’s forward Price/Sales multiple of 0.98 is 63.6% lower than the industry average of 2.69. Its forward EV/Sales multiple of 0.69 is 75.2% lower than the industry average of 2.78.
PCTI’s trailing-12-month ROCE of 8.63% is significantly higher than the industry average of 0.63%. Its trailing-12-month ROTA of 6.78% is significantly higher than the industry average of 0.08%.
During the fiscal first quarter that ended March 31, 2023, PCTI’s non-GAAP operating income increased 602.2% year-over-year to $2.24 million. Its adjusted EBITDA increased 153.5% from the year-ago value to $2.79 million.
Also, the company’s non-GAAP net income increased 603.9% from the prior year’s quarter to $2.14 million, and non-GAAP EPS came in at $0.12, indicating a 500% year-over-year rise.
Street expects PCTI’s revenue to increase 11.9% year-over-year to $102.10 million in 2024. Its EPS is expected to increase 38.2% year-over-year to $0.47 for the same period. It surpassed EPS estimates in three of four trailing quarters. Over the past year, the stock has gained 15.3% to close the last trading session at $4.83.
PCTI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It is ranked first in the same industry. It has an A grade for Value and a B for Sentiment and Quality. To see additional PCTI’s ratings for Momentum, Stability, and Growth, click here.
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CMBM shares were trading at $15.35 per share on Wednesday morning, down $0.34 (-2.17%). Year-to-date, CMBM has declined -29.16%, versus a 9.43% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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