With the increasing consumer demand, the need for efficiency, and improved productivity, the technology market is positioned to experience significant growth in the coming years. Also, the latest technologies like AI, IoT, cloud computing, and other emerging technologies are fueling the segment’s prospects.
Amid this backdrop, investors could consider currently undervalued tech stocks HP Inc. (HPQ), Zoom Video Communications, Inc. (ZM), and Leidos Holdings, Inc. (LDOS) to buy before the year ends.
The tech industry is expanding swiftly with the increasing demand from organizations for digital technologies to accelerate their advancements in AI, cloud computing, and automation for enhancing efficiency, innovations, and productivity. Companies increasingly rely on software for their regular and critical operations, further boosting the tech market.
To adapt to the latest technologies successfully, companies are required to maintain and update their hardware and systems, which, as a result, is propelling the technology hardware demand. The IT hardware market is expected to reach around $191.03 billion by 2029, exhibiting growth at a CAGR of 7.9%.
Further, by now, the world has become familiar with the concept of AI and its application across all industries. Artificial Intelligence (AI) has become the biggest trend in the tech space, and companies are still only exploring its potential. Hence, along with trends like quantum computing, robotics, and cybersecurity, AI will continue to rule in 2025.
With this, the IT services market is expected to grow at a CAGR of 8.8%, resulting in a market value of $5.07 trillion by 2028, driven by rising e-commerce prevalence, adoption of IoT, emphasis on AI, leveraging of augmented reality (AR), and strategic partnerships and collaborations.
Given these favorable market trends, let us analyze the fundamentals of the top tech stocks such as HPQ, ZM, and LDOS.
HP Inc. (HPQ)
HPQ provides personal computing and other digital access devices, imaging and printing products, and related technologies, solutions, and services globally. The company operates in three segments: Personal Systems; Printing; and Corporate Investments.
In terms of forward non-GAAP P/E, HPQ is trading at 9.67x, 63.3% lower than the industry average of 26.32x. Likewise, the stock’s forward EV/Sales multiple of 0.73 is 77.6% lower than the industry average of 3.26. Similarly, its forward Price/Sales of 0.61x is considerably lower than the 3.32x industry average.
On October 30, HPQ announced a new HP Amplify program for partners, HP Amplify AI, which is a customizable program designed to improve partner capabilities in achieving positive AI outcomes, offering AI guidance, tools, resources, training, and certification.
HPQ also announced other enhancements, including new AI-powered tools, refreshed HP Future Ready AI MasterClass content in multiple languages, and global expansion of the HP Business Partner Program.
For the fourth quarter, which ended October 31, 2024, HPQ reported total net revenue of $14.06 billion, which is 4% higher than the prior quarter. Its non-GAAP earnings from operations of $1.20 billion indicate growth of 10.2% from the quarter-ago value. Furthermore, the company’s non-GAAP net earnings were $900 million and $0.93 per share, up 9.9% and 12% quarter-on-quarter, respectively.
As per the forecast for the fiscal 2025 first quarter, HPQ projects non-GAAP net EPS to be in the range of $0.70 to $0.76. Also, for the full fiscal 2025, the company expects non-GAAP net EPS between $3.45 and $3.75.
Analysts expect HPQ’s revenue for the second quarter (ending April 2025) to increase 1.9% year-over-year to $13.05 billion, while the company’s EPS for the same quarter is expected to grow 4.2% year-over-year to $0.85. Furthermore, the company surpassed the consensus revenue estimates in three of the trailing four quarters.
Shares of HPQ have surged 16.1% year-to-date and 15.1% over the past year to close the last trading session at $34.65.
HPQ’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Value, Momentum, and Quality. Within the B-rated Technology - Hardware industry, HPQ is ranked #8 out of 40 stocks.
Click here to access additional HPQ ratings for Sentiment, Growth, and Stability.
Zoom Video Communications, Inc. (ZM)
ZM provides a unified communications platform worldwide. It provides platforms like Zoom Meetings offering HD video, voice, chat, and content sharing, Zoom Phone, an enterprise cloud phone system, and Zoom Chat enables users to share messages, images, audio files, and content.
ZM’s forward EV/EBITDA of 9.27x is 41.1% lower than the industry average of 15.74x. Also, the stock’s forward Price/Book multiple of 2.88 is 35.5% lower than the industry average of 4.46. Also, its forward Price/Cash Flow of 13.10x is 42.4% lower than the industry average of 22.74x.
On October 9, ZM and ServiceNow (NOW) expanded their strategic alliance to enter into a new era of intelligence with smarter collaboration and peak productivity across the enterprise. The two companies’ generative AI (GenAI) technologies, ServiceNow Now Assist and Zoom AI Companion, will integrate to offer organizations advanced workflow automation for tasks and activities across Zoom and ServiceNow.
Also, on October 3, ZM launched its industry-leading Zoom Phone in India. Zoom Phone brings MNCs with a domestic presence and homegrown companies unrivaled simplicity and modern functionality to their distributed hybrid workforce and global native coverage in 50 countries and territories.
ZM’s revenue for the third quarter ended October 31, 2024, increased 3.6% year-over-year to $1.18 billion. Its gross profit grew 3.2% from the year-ago value to $893.66 million. The company’s non-GAAP income from operations of $457.79 million indicates growth of 2.4% year-over-year.
Furthermore, the company’s non-GAAP net income totaled $435.07 million and $1.38, up 8.4% and 7% over the prior year’s quarter, respectively.
Analysts expect ZM’s revenue and EPS for the fiscal year (ending January 2025) to increase 3.2% and 5.1% year-over-year to $4.67 billion and $5.47, respectively. Moreover, the company topped the consensus revenue and EPS estimates in each of the trailing four quarters.
Shares of ZM have gained 33.2% over the past six months and 15.5% over the past year to close the last trading session at $83.83.
ZM’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Quality, Sentiment, and Value. Within the B-rated Technology - Services industry, ZM is ranked #10 of 78 stocks.
Click here to access additional ratings of ZM for Momentum, Growth, and Stability.
Leidos Holdings, Inc. (LDOS)
LDOS offers its services and solutions in the defense, intelligence, civil, and health markets internationally. The company operates in Defense Solutions; Civil; and Health segments. It offers national security solutions and air, land, sea, space, and cyberspace systems.
In terms of forward Price/Sales, LDOS is trading at 1.30x, 17.2% lower than the 1.57x industry average. Similarly, the stock’s forward EV/EBIT of 13.80x is lower than the industry average of 17.53x. Also, its forward non-GAAP P/E of 15.82x is 25.5% lower than the industry average of 21.24x.
On October 31, LDOS was awarded a contract by the U.S. Department of Health and Human Services through its Health Resources and Services Administration (HRSA) to modernize the Organ Procurement and Transplant Network (OPTN). The multiple-award, indefinite-delivery/indefinite-quantity contract has a total potential value of $235 million.
On October 30, LDOS received a contract to provide critical supply support for weapons systems that keep the U.S. Navy and Marine Corps forces mission-ready. The Technical Assistance for Repairables Processing (TARP) contract was awarded by the Naval Supply Systems Command Fleet Logistics Center, supporting NAVSUP's Weapon Systems Support (WSS).
For the third quarter that ended September 27, 2024, LDOS’ revenues rose 6.9% year-over-year to $4.19 billion, and its non-GAAP operating income grew 34.4% from the year-ago value to $562 million. The company’s non-GAAP net income and EPS came in at $396 million and $2.93, reflecting growth of 39.9% and 44.3% from the prior year’s quarter, respectively.
Also, the company’s adjusted EBITDA rose 32.2% from the year-ago value to $596 million.
Street expects LDOS’ revenue for the fourth quarter (ending December 2024) to grow 3.7% year-over-year to $4.13 billion, and its EPS is expected to grow 14.4% year-over-year to $2.28 for the same quarter. Moreover, the company has topped the consensus revenue and EPS estimates in all of the trailing four quarters.
Over the past six months, LDOS’ stock has surged 10.7% and 47.9% over the past year to close the last trading session at $160.16.
LDOS’ POWR Ratings reflect its bright prospects. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
LDOS has a B grade for Sentiment, Value, Momentum, and Quality. It is ranked #2 out of 78 stocks in the B-rated Technology - Services industry.
In addition to the POWR Ratings we’ve stated above, we also have LDOS’ other ratings for Stability and Growth. Get all LDOS ratings here.
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HPQ shares were trading at $34.45 per share on Wednesday afternoon, down $0.20 (-0.58%). Year-to-date, HPQ has gained 17.38%, versus a 29.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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