The adoption of cloud-based communication services, technological advancements, remote work/virtual collaboration trends, and communication security requirements is boosting the growth of the technology communications sector. Therefore, investors could look to buy fundamentally strong tech stocks Extreme Networks, Inc. (EXTR), Gilat Satellite Networks Ltd. (GILT), and PowerFleet, Inc. (PWFL).
With the rise of 5G networks and cloud computing technologies, coverage, speed, flexibility, and cost efficiency are increasing rapidly in all markets. The advent of cutting-edge technologies such as artificial intelligence (AI) and the Internet of Things (IoT) presents the tech sector with immense opportunities.
As digital communication channels are becoming widespread, there is an increasing need for security measures to safeguard sensitive information against cyber threats. Consequently, companies are capitalizing on technological advancements to provide secure communication systems to consumers.
Furthermore, governments are increasing tech investments. According to the latest forecast by Gartner, worldwide government IT spending is projected to total $589.80 billion in 2023, an increase of 7.6% from the past year.
According to Statista, revenue in the communication services market is expected to show a CAGR of 1.4%, resulting in a market volume of $356.70 billion by 2028.
Additionally, investors’ interest in tech stocks is evident from the Technology Select Sector SPDR ETF’s (XLK) 37.6% returns over the past six months.
Given these factors, investors could benefit from the featured tech stocks. Let’s take a closer look at their fundamentals.
Extreme Networks, Inc. (EXTR)
EXTR provides software-driven networking solutions worldwide. The company offers ExtremeCloud IQ, an ML/AI-powered, wired, and wireless cloud network management solution that offers advanced visibility and control over users, devices, and applications.
EXTR’s revenue grew at a CAGR of 7.6% over the past three years. Its levered FCF grew 13.6% over the past three years. In addition, its EBITDA grew at a CAGR of 90.6% during the same time frame.
In terms of forward non-GAAP PEG, EXTR’s 1.26x is 32.6% lower than the 1.87x industry average. Its 2.72x forward Price/Sales is 5.2% lower than the 2.87x industry average. Likewise, its 2.78x forward EV/Sales is 5.1% lower than the 2.93x industry average.
EXTR’s non-GAAP total net revenue increased 16.5% year-over-year to $332.5 million for the fiscal quarter that ended March 31, 2023. The company’s non-GAAP net income increased 41.6% year-over-year to $38.8 million. Also, its non-GAAP net EPS came in at $0.29, representing a 38.1% increase over the prior-year quarter.
EXTR’s EPS and revenue for the quarter ended June 30, 2023, are expected to increase 109.5% and 23.5% year-over-year to $0.31 and $343.54 million, respectively. It has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, EXTR has gained 101.3% to close the last trading session at $27.44
EXTR’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Technology - Communication/Networking industry, it is ranked #3 of 52 stocks. The stock has an A grade for Growth and Quality. Click here to see the additional ratings of EXTR for Value, Momentum, Stability, and Sentiment.
Gilat Satellite Networks Ltd. (GILT)
Headquartered in Petah Tikva, Israel, GILT provides satellite-based broadband communication solutions worldwide. It operates in three segments: Satellite Networks; Integrated Solutions and Network Infrastructure; and Services.
GILT’s levered FCF grew at a CAGR of 45.1% over the past three years. Its EBITDA grew at a CAGR of 8.6% over the past three years. And its EBIT grew at a CAGR of 12.5% over the past three years.
In terms of forward EV/EBITDA, GILT’s 8.39x is 42.0% lower than the 14.47x industry average. Its 1.04x forward EV/Sales is 64.5% lower than the 2.93x industry average. Likewise, its 1.36x forward Price/Sales is 52.7% lower than the 2.87x industry average.
GILT’s non-GAAP net income for the fiscal first quarter ended March 31, 2023, came in at $3.85 million, compared to a $1.78 million loss from the year-ago quarter. Its non-GAAP EPS came in at $0.07, compared to a $0.03 loss per share year-over-year. Also, its adjusted EBITDA increased 231.8% year-over-year to $8.39 million.
Analysts expect GILT’s EPS and revenue for the fiscal quarter ended June 30, 2023, to increase 200.0% and 15.1% year-over-year to $0.03 and $63.84 million, respectively. Over the past three months, GILT has gained 32.7% to close the last trading session at $6.57.
GILT’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. GILT is ranked #5 in the same industry. It has a B grade for Growth and Sentiment. We have also given GILT grades for Value, Momentum, Stability, and Quality. Get all GILT ratings here.
PowerFleet, Inc. (PWFL)
PWFL provides wireless Internet-of-Things (IoT) asset management solutions worldwide. It offers real-time intelligence for organizations to capture IoT data from various types of assets with devices and sensors to increase efficiencies and improve safety and security, as well as increase their profitability.
PWFL’s revenue grew at a CAGR of 10.8% over the past three years, and its total assets grew at a CAGR of 1.1% over the past three years.
PWFL’s 1.16x forward EV/Sales is 60.2% lower than the 2.93x industry average. Likewise, its 0.73x forward Price/Sales is 74.7% lower than the 2.87x industry average.
PWFL’s adjusted EBITDA for the fiscal quarter ended March 31, 2023, came in at $1.38 million, compared to a $614K adjusted EBITDA loss from the year-ago quarter. Its gross profit increased 15.4% year-over-year to $16.62 million. In addition, its net EPS came in at $0.08. compared to a $0.12 net loss per share from the prior-year quarter.
PWFL’s revenue for the quarter ending September 30, 2023, is expected to increase 4.8% year-over-year to $35.92 million. Over the past six months, PWFL has gained 8.7% to close the last trading session at $2.87.
PWFL’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #4 in the Technology - Communication/Networking. It has a B grade for Growth, Value, and Stability. Click here to see the other ratings of PWFL for Momentum, Sentiment, and Quality.
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EXTR shares fell $27.44 (-100.00%) in premarket trading Tuesday. Year-to-date, EXTR has gained 50.90%, versus a 16.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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