The technology sector was the worst affected sector in the broader market sell-off earlier this month, as evidenced by the tech-heavy Nasdaq 100 index’s 11.3% decline year-to-date.
Worries about the Federal Reserve raising interest rates to combat inflation and overvaluations have caused tech stocks to underperform versus the broader market so far this year. Because the Fed is expected to hike benchmark interest rates at least three times this year, tech stocks are expected to remain under pressure in the near term.
Given this backdrop, Wall Street analysts expect speculative tech stocks Ubiquiti Inc. (UI), Citrix Systems, Inc. (CTXS), and Inseego Corp. (INSG) to decline more than 5% in price in the near term.
Ubiquiti Inc. (UI)
UI is an American technology company that develops networking technology for consumers, service providers, and enterprises. The San Jose, Calif.-based company develops software platforms for high-capacity distributed Internet access, unified information technology, and consumer electronics.
Several class-action lawsuits have been filed against UI, alleging that the company downplayed a data breach that occurred in January last year. The lawsuits allege that positive statements released by UI regarding its business operations and growth prospects are materially misleading.
UI’s revenues decreased 3.1% year-over-year to $458.91 million in the first quarter of its fiscal 2022, ended Sept. 30, 2021.UI’s gross profit declined 8.2% year-over-year to $209.45 million, and its income from operations declined 14.8% year-over-year to $161.70 million. Its net income decreased 15.5% year-over-year to $132.77 million. And the company’s EPS decreased 14.2% from the year-ago value to $2.12.
The $467.79 million consensus revenue estimate for its fiscal second quarter, ended Dec. 31, 2021, represents a 2.4% year-over-year decline. And the $2.29 consensus EPS estimate indicates a 9.6% decline year-over-year.
Over the past year, the stock has declined 6.3% in price to close Friday’s trading session at $279.68. The 12-month median price target of $260 indicates a 7% potential downside.
UI’s POWR Ratings reflect this bleak outlook. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting. UI has a D grade for Value and Growth. Within the Technology -Communication/Networking industry, it is ranked #23 of 56 stocks.
To see additional POWR Ratings (Momentum, Growth, Stability, Quality, and Sentiment) for UI, click here.
Citrix Systems, Inc. (CTXS)
CTXS is a leading enterprise software company. It provides workspace services such as Citrix Workspace, Citrix Virtual Apps and Desktops, and Citrix Content Collaboration, app delivery and security services, and professional services worldwide. The Fort Lauderdale, Fla.-based company serves healthcare, technology, manufacturing, financial services, consumer, and government agencies.
CTXS announced today that it has agreed with Vista Equity Partners for Vista to acquire CTXS in an all-cash transaction valued at $16.5 billion. CTXS shareholders will receive $104 in cash per share. However, the CTXS is being sold at a discount which might not be profitable for the company’s shareholders.
Last December, the Schall Law Firm filed a securities class action lawsuit against CTXS. The lawsuit alleges that the company made false and/or misleading statements and failed to disclose that its cloud product was substantially similar to its on-premises offering.
In its fiscal 2021 third quarter, ended September 30, CTXS’ total cost of net revenues increased 15.3% year-over-year to $146.82 million. Its gross profit decreased 1.3% year-over-year to $631.63 million. Its total operating expenses rose 7% from the same period last year to $547.16 million. Its net income declined 47.3% from the year-ago value to $51.79 million. And the company’s adjusted earnings per share slumped 47.4% from their year-ago value to $0.41.
Analysts expect CTXS’s EPS for its fiscal fourth-quarter 2021, ended December 31, to be $1.07, representing a 26.4% decline year-over-year.
Shares of CTXS declined 22.6% in price over the past year and closed Friday’s trading session at $105.55.
Of the eight Wall Street analysts that rated CTXS, one rated it Buy, while three rated it Hold, and four rated it sell. The 12-month median price target of $93.50 indicates an 11.4% decline from Friday's closing price of $105.55.
CTXS has a D grade for Growth, Momentum, and Sentiment. It is ranked #19 of 60 stocks in the D-rated Software - Business industry.
Click here to see CTXS ratings for Stability, Value, and Quality.
Click here to check out our Software Industry Report for 2022
Inseego Corp. (INSG)
INSG engages in the designing and developing wireless solutions, industrial Internet of Things (IIoT), and cloud solutions for consumers, governments, and businesses worldwide. The San Diego, Calif.-based company’s products include mobile hotspots, universal serial bus (USB) modems, wireless routers for Internet of Things (IoT) applications, and mobile tracking hardware devices.
In its fiscal 2021 third quarter, ended Sept. 30, 2021, INSG’s total net revenues decreased 26.6% year-over-year to $66.22 million. The company’s gross profit declined 24.7% year-over-year to 18.94 million. Its net loss attributable to INSG increased 32.1% year-over-year to come at a negative $7.19 million. In addition, the company’s net loss per share rose 50% from its year-ago value to a negative $0.09.
INSG’s revenues are expected to decline 17.3% year-over-year to $71.19 million for its fiscal fourth quarter, ended Dec. 31, 2021. The company has missed consensus EPS estimates in three of the four trailing quarters.
Over the past year, INSG declined 78.4% in price. The 12-month median price target of $3 indicates a 27.7% decline from Friday's closing price of $4.15.
INSG’s weak fundamentals are reflected in its POWR Ratings. The company has an overall D rating, which translates to Sell in our proprietary rating system. INSG has a D grade for Sentiment and Growth. Among the 56 stocks in the Technology – Communication/Networking industry, it is ranked #52.
Click here to see the additional POWR Ratings for Growth, Momentum, Value, and Stability for INSG.
UI shares were trading at $291.92 per share on Monday afternoon, up $12.24 (+4.38%). Year-to-date, UI has declined -4.82%, versus a -5.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
3 Technology Stocks Wall Street Predicts Will Move Even Lower StockNews.com
