Rapid digital transformation across businesses and industries worldwide and the growing adoption of emerging technologies have significantly boosted the demand for networking and communication solutions. However, not all tech companies are positioned to benefit from the sector’s tailwinds.
BlackBerry Limited (BB) faces a challenging macroeconomic landscape, weighing on its financial performance and profitability. Further, analysts seem bearish about the company’s prospects. So, investors could instead invest in quality tech stocks Crane NXT, Co. (CXT), Ceragon Networks Ltd. (CRNT), and Boxlight Corporation (BOXL) this month.
Headquartered in Waterloo, Canada, BB offers intelligent security software and services to enterprises and governments globally. It operates through Cybersecurity; IoT; and Licensing and Other segments. The company reported a disappointing fiscal 2024 second-quarter earnings report on September 28.
For the quarter that ended on August 31, 2023, BB posted revenue of $132 million, a decline of 21.4% year-over-year. Its revenue from the Cybersecurity segment declined 28.8% from the prior year’s quarter, while IoT segment revenue was down 3.9% year-over-year. Also, the company reported an adjusted net loss of $23 million and $0.04 per share, respectively.
In addition, analysts appear bearish about the tech company’s outlook. For the third quarter ending November 2023, analysts expect BB’s revenue to increase 2.5% year-over-year to $173.22 million. However, the company is estimated to report a loss per share of $0.02 for the ongoing quarter.
For the fiscal year ending February 2025, BB’s revenue and EPS are expected to decline 13.6% and 53.9% year-over-year to $765.70 million and $$0.01, respectively.
Furthermore, BB’s trailing-12-month EBITDA and net income margin are negative 6.42% and negative 66.91%, compared to the respective industry averages of 9.17% and 2.03%. Likewise, the stock’s trailing-12-month levered FCF margin of negative 10.05% unfavorably compared to the industry average of 7.37%.
Over the past month, BB’s shares have plunged 31.9% to close the last trading session at $3.79. The stock has declined 22.8% over the past year.
The network and communication sector within the technology industry has witnessed a significant transformation in recent years. Moreover, the COVID-19 pandemic created numerous growth opportunities for the industry players, driven by the shift to remote work, rapid adoption of e-learning, reliance on technology for communication, and digitalization across multiple industries.
The notable evolution in the networking and communications industry has been further fueled by technological advancements and trends, including 5G technology, Artificial Intelligence (AI), the Internet of Things (IoT), cloud computing, machine learning, and growing reliance on cybersecurity.
The 5G connections market is projected to reach $990.33 billion by 2028, growing at a CAGR of 56.2% during the forecast period (2023-2028).
Growing demand for network systems to connect, supply, and retrieve information among several companies should propel the growth of the networking industry. According to a report by Grand View Research, the global enterprise networking market is projected to grow at a CAGR of 5.8% from 2023 to 2030.
In light of these favorable trends, let’s look at the fundamentals of the three best Technology - Communication/Networking stocks, beginning with number 3.
Stock #3: Boxlight Corporation (BOXL)
BOXL develops, sells, and services interactive classroom technology products and solutions for the K-12 education market internationally. The company offers interactive and non-interactive projectors and flat panel displays, touch projectors, touchboards, and MimioTeach; accessory document cameras teacher pads for remote control, and assessment systems.
On June 22, BOXL announced the launch of two new products for FrontRow ezRoom: PowerLine for ezRoom AV and ezRoom Voice & Alert systems and the MyFrontRow app for Boxlight interactive displays.
The new launches reflect BOXL’s commitment to delivering innovative audio solutions that meet the evolving needs of educators and are expected to drive the company’s growth and profitability.
On June 15, BOXL introduced a new educational robotics system from its Mimio brand - MyBot Recruit. Recruit elevates the existing MimioSTEM MyBot to a fully assembled educational robotics solution with a user-friendly interface and WiFi connectivity. Its comprehensive design makes it an ideal out-of-the-box STEM education solution tailored for K-8 students.
During the second quarter that ended on June 30, 2023, BOXL reported revenues of $47.05 million, and its gross profit grew 5.9% from the year-ago value to $17.83 million. Its income from operations came in at $2.08 million, an increase of 135.6% year-over-year.
In addition, the company’s comprehensive income came in at $911 thousand, compared to a comprehensive loss of $4.61 million in the prior year’s quarter. As of June 30, 2023, its cash and cash equivalents were $15.59 million versus $14.59 million as of December 31, 2022.
Analysts expect BOXL’s EPS for the third quarter (ended September 2023) to increase 41.7% year-over-year to $0.34. For the fourth quarter ending December 2023, the company’s revenue is expected to grow 23.3% year-over-year to $52.77 million. Moreover, it has topped the consensus EPS estimates in each of the trailing four quarters.
Shares of BOXL have declined 11.7% over the past month to close the last trading session at $1.82.
BOXL’s POWR Ratings reflect this robust 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.
The stock has a B grade for Value and Sentiment. In the Technology - Communication/Networking industry, it is ranked #12 of 52 stocks.
To access BOXL ratings for Growth, Momentum, Stability, and Quality, click here.
Stock #2: Crane NXT, Co. (CXT)
CXT is an industrial technology company offering solutions to secure, detect, and authenticate customers’ essential assets. Its advanced micro-optics technology for securing physical products, electronic equipment, and associated software leverages proprietary core capabilities with detection and sensing technologies.
Strong results over the first two quarters of fiscal 2023, accompanied by continued customer demand and its sizable backlog, give CXT confidence in its outlook for the second half of this year. The company raised the midpoint of its adjusted EPS guidance range by $0.10 to a range of $3.85-$4.15.
For the second quarter that ended June 30, 2023, CXT’s net sales increased 5.4% year-over-year to $352 million. Its adjusted operating profit grew 15.2% year-over-year to $38 million. As of June 30, 2023, the company’s cash and cash equivalents were $276.90 million, compared to $230.70 million as of December 31, 2022.
Furthermore, the company’s current liabilities reduced to $316.90 million as of June 30, 2023, compared to $631.40 million as of December 31, 2022. Its adjusted free cash flow was $70 million during the second quarter.
Street expects CXT’s revenue for the fiscal year (ending December 2023) to increase 3.8% year-over-year to $1.39 billion. For the fiscal year 2024, the company’s revenue and EPS are expected to grow 3.3% and 6.3% from the previous year to $1.44 billion and $4.35, respectively.
CXT’s stock has gained 30.2% over the past six months and 63.2% over the past year to close the last trading session at $53.78.
CXT’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
CXT is ranked #11 in the same industry. It has a B grade for Quality and Momentum.
In addition to the POWR Ratings I’ve just highlighted, you can see CXT’s ratings for Value, Growth, Stability, and Sentiment here.
Stock #1: Ceragon Networks Ltd. (CRNT)
Headquartered in Rosh HaAyin, Israel, CRNT offers wireless transport solutions for cellular operators and other wireless service providers. The company’s solutions use microwave and millimeter-wave radio technologies to transfer telecommunication traffic between wireless 5G and 4G, 3G, and other cellular base stations.
On May 16, CRNT signed a multi-year contract with the City of Cincinnati to upgrade its public safety network for payment of up to $4.20 million over several years. CRNT’s future-proof plan includes a multi-technology, multi-service solution that offers a robust, modernized backhaul and routing solution and a long-term maintenance and support plan.
This deal win with the City of Cincinnati is another testament to the company’s end-to-end network design and implementation capabilities, including its solid ecosystem, ability to unlock considerable potential in its pipeline, and its strong business momentum in North America.
On March 28, CRNT announced follow-on orders totaling $29 million from Tier 1 Operators in India for 2023. These orders comprise hardware and services, primarily enhancing existing networks for 5G capabilities. The objectives include expanding network capacity, enhancing rural connectivity, and ensuring customers’ accessibility to reliable, high-speed experiences.
CRNT’s revenue increased 21.9% year-over-year to $86.15 million for the second quarter that ended June 30, 2023. Its gross profit grew 41.8% from the year-ago value to $30.36 million. Also, the company’s net income and EPS were $2.09 million and $0.02, compared to a net loss and loss per share of $1.52 million and $0.02 in prior year’s period, respectively.
Analysts expect CRNT’s revenue and EPS for the fiscal year (ending December 2024) to grow 7.9% and 50% from the prior year to $367.90 million and $0.30, respectively. Also, the company has surpassed the consensus revenue and EPS estimates in three of the trailing four quarters, which is impressive.
Over the past six months, the stock has gained 14.7% and 5.4% over the past year to close the last trading session at $1.95.
CRNT’s POWR Ratings reflect its promising prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
The stock has an A grade for Sentiment, Growth, and Value. It is ranked #3 among 51 stocks in the Technology - Communication/Networking industry.
Click here to see the other ratings of CRNT for Momentum, Stability, and Quality.
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CXT shares were unchanged in premarket trading Friday. Year-to-date, CXT has gained 55.31%, versus a 11.13% 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.
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