Amid a hybrid work culture, the need for modernized and updated computer hardware has become integral for the smooth operation of most businesses. Furthermore, rapid digitalization with the increasing adoption of advanced technologies is expected to drive the industry’s growth.
Given the industry tailwinds, it could be wise to scoop up shares of fundamentally sound technology hardware stocks Canon Inc. (CAJPY) and AstroNova, Inc. (ALOT) for significant gains. But first, let’s gain insight into what bolsters the technology hardware industry’s growth.
Companies in the technology hardware industry manufacture Personal Computers (PCs), smartphones, cameras, monitors, keyboards, ATMs, biometric readers, and other devices.
Tech hardware plays a vital role as it is required for the software to run correctly. Demand for tech hardware should remain strong in the foreseeable future, driven by sustained consumer and government spending and capital spending by enterprises.
In the post-pandemic era, businesses continuously modernize IT infrastructure and update data center hardware to support the workforce in an increasingly hybrid world.
The growing adoption of new and advanced technologies also boosts the industry’s growth. The emergence of AI and machine learning has boosted the demand for specialized hardware components like Graphics Processing Units (GPUs).
Furthermore, IoT technology is considered the primary enabler in boosting digital transformation among enterprises and has created a massive demand for connected hardware devices, including sensors, processors, and wireless communication solutions. The IoT devices market is projected to grow at a CAGR of 22.4% by 2028, as per a report by Mordor Intelligence.
According to a report by The Business Research Company, the global computer hardware market is expected to reach $909.80 billion by 2027, growing at a CAGR of 6.6%. The growing need for more robust and energy-efficient computing systems fuels the market’s prospects.
Furthermore, investors’ interest in technology hardware stocks is evident from Dow Jones US Technology Hardware & Equipment Index’s 22.5% returns over the past six months.
Against the backdrop, it seems wise to watch the shares of established technology hardware companies such as CAJPY and ALOT, which have the potential to benefit from the industry's growth prospects.
Let us now delve deeper into the fundamentals of these stocks.
Canon Inc. (CAJPY)
Headquartered in Tokyo, Japan, CAJPY manufactures and markets office multifunction devices (MFDs), laser and inkjet printers, cameras, medical equipment, and lithography equipment. The company’s segments include Printing Business Unit; Imaging Business Unit; Medical Business Unit; Industrial Business Unit, and Others.
On April 3, CAJPY announced that it was developing an ultra-high-sensitivity ILC equipped with a SPAD sensor. Through clear color image capture, it would support precise monitoring of subjects several kilometers away, even in darkness.
As high-precision monitoring systems become increasingly necessary for national borders, airports, power plants, and other critical infrastructure facilities, the ability to quickly identify targets from long distances and in adverse conditions becomes essential. Hence, such launches should prove valuable for the company’s growth and revenue.
On March 23, CAJPY announced that it had inked an asset purchase agreement with Kyoto Seisakusho Co., Ltd. to acquire technology for mass-producing cells for use in clinical applications and treatments.
By obtaining these assets, CAJPY intends to expedite the development of regenerative medicine technologies and enhance its position in the Bio-science domain, thereby expanding its medical business.
CAJPY’s net sales increased 10.4% year-over-year to $7.25 billion for the first quarter that ended March 31, 2023. Its operating profit grew 10.9% from the year-ago value to $630.41 million. Moreover, net income attributable to CAJPY increased 22.7% year-over-year to $420.97 million, while EPS came in at $0.41, up 26.3% year-over-year.
The consensus revenue estimate of $7.61 billion for the second quarter (ending June 2023) reflects a 4.3% year-over-year improvement. Likewise, the consensus EPS estimate of $0.51 for the current quarter indicates a growth of 25% year-over-year. The stock has gained 9.8% over the past six months to close the last trading session at $23.66.
CAJPY’s strong fundamentals are apparent in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
CAJPY has an A grade for Quality and a B for Value and Stability. It is ranked #4 in the 41-stock Technology - Hardware industry.
In addition to the POWR Ratings I’ve just highlighted, you can see CAJPY’s ratings for Growth, Sentiment, and Momentum here.
AstroNova, Inc. (ALOT)
ALOT designs, manufactures, and markets an array of specialty printers and data acquisition and analysis systems, including hardware and software, that employ advanced technologies to gather, store, analyze, and present data in various formats. Its segments include Test and Measurement (T&M) and Product Identification (PI).
On March 23, Greg Woods, President and CEO of ALOT, said, “During the fourth quarter, we launched the production release of the QL‑E100, our full-color label printer designed for small businesses and production facilities.”
He added, “Looking ahead, we are well positioned in both of our segments, in Product Identification we are excited about the opportunities to continue to capitalize on the synergies provided by Astro Machine, and the rebound in the Aerospace and Defense sectors bodes well for our Test and Measurement segment, as we begin fiscal 2024.”
For the fourth quarter that ended January 31, 2023, ALOT’s non-GAAP gross profit increased 39.1% year-over-year to $13.56 million. Its non-GAAP operating income came in at $2.10 million, compared to a loss of $227 thousand in the previous year’s period.
In addition, the company’s non-GAAP net income and EPS stood at $1.36 million and $0.18, compared to a loss and loss per share of $759 thousand and $0.10 in the prior year’s quarter, respectively.
Shares of ALOT have gained 19.3% over the past six months to close the last trading session at $14.48.
ALOT’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
ALOT has an A grade for Growth and a B for Value, Stability, and Sentiment. Within the same industry, it is ranked #2 out of 41 stocks.
Click here to access additional ALOT ratings for Quality and Momentum.
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CAJPY shares were trading at $23.69 per share on Friday afternoon, up $0.03 (+0.13%). Year-to-date, CAJPY has gained 9.27%, versus a 8.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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