The rising adoption of cutting-edge technologies, including Artificial Intelligence (AI), Internet of Things (IoT), big data, and 5G among individuals and enterprises to drive digital transformation is the key factor propelling the technology industry’s growth and expansion.
Given the industry’s solid prospects, investors could consider buying fundamentally sound tech stocks Dolby Laboratories, Inc. (DLB), Knowles Corporation (KN), TaskUs, Inc. (TASK), ON24, Inc. (ONTF), and Crexendo, Inc. (CXDO) for substantial gains.
According to the forecast by Gartner, global IT spending is anticipated to total $5.06 trillion in 2024, up 8% from 2023. This represents an increase from the prior forecast of 6.8% growth, positioning worldwide tech spending to exceed $8 trillion well before the decade’s end. Spending on IT services is expected to grow 9.7% year-over-year to over $1.52 trillion this year.
Revenue in the IT services market is expected to total $1.42 trillion in 2024 and is poised to grow at a CAGR of 5.8% during the forecast period (2024-2029), resulting in a market volume of $1.88 trillion by 2029. Also, in global comparison, revenue in the US is expected to be $522 billion in 2024.
Moreover, AI is opening massive growth opportunities for the technology sector. With large cloud service providers leading the AI investment cycle, increasing AI spending by enterprises and updating endpoint devices will benefit the entire IT industry.
Besides, the increasing need for electronic components in display devices, high demand for IoT devices, and technological advances such as smartphones, laptops, and other consumer electronics are driving growth for the global electronic components market. The market is expected to reach $847.88 billion by 2032, growing at a CAGR of 10.1%.
Notably, investors’ interest in tech stocks is evident from the iShares Global Tech ETF’s (IXN) 35.9% returns over the past year.
Given the industry’s solid growth outlook, investing in fundamentally strong tech stocks such as DLB, KN, TASK, ONTF, and CXDO could be wise for future gains.
Let’s discuss the fundamentals of these stocks in detail:
Dolby Laboratories, Inc. (DLB)
DLB creates audio and imaging technologies that transform entertainment at the cinema, DTV transmissions and devices, mobile devices, OTT video and music services, home entertainment devices, and automobiles.
DLB’s trailing-12-month gross profit margin and EBIT margin of 88.35% and 18.79% are 81.7% and 320.3% higher than the respective industry averages of 48.62% and 4.47%. Likewise, the stock’s trailing-12-month net income margin of 15% is considerably higher than the industry average of 2.34%.
In the second quarter that ended March 29, 2024, DLB reported a total revenue of $364.52 million, of which its revenue from products and services increased 8.2% year-over-year to $26.28 million. Its gross profit was $325.75 million for the quarter.
Furthermore, non-GAAP net income attributable to DLB and non-GAAP EPS came in at $123.19 million and $1.27, up marginally from the prior year’s quarter, respectively. The company’s total assets stood at $3.04 billion as of March 29, 2024, compared to $2.98 billion as of September 29, 2023.
According to the fiscal 2024 third-quarter outlook, DLB expects its total revenue to range from $270 million to $300 million, and its non-GAAP EPS is expected to be from $0.51 to $0.66. Also, for the full year, the company expects total revenue of $1.30 billion and non-GAAP EPS from $3.60 to $3.75.
Street expects DLB’s revenue and EPS for the fourth quarter (ending September 2024) to increase 12% and 25.1% year-over-year to $325.56 million and $0.81, respectively. Moreover, DLB topped the consensus EPS estimates in three of the trailing four quarters.
DLB’s stock gained 2.2% over the past three months to close the last trading session at $82.
DLB’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 an A grade for Quality. DLB is ranked #4 among 42 stocks in the Technology - Electronics industry.
Click here to access additional DLB ratings for Sentiment, Stability, Momentum, Growth, and Value.
Knowles Corporation (KN)
KN offers capacitors, radio frequency (RF) filtering products, balanced armature speakers, micro-acoustic microphones, and audio solutions. It operates through Precision Devices; Medtech & Specialty Audio; and Consumer MEMS Microphones segments.
KN’s trailing-12-month EBIT margin and levered FCF margin of 7.90% and 9.91% are higher than the industry averages of 4.47% and 9.40%, respectively. Also, the stock’s trailing-12-month net income margin of 10.54% is 351.3% higher than the industry average of 2.34%.
In the first quarter that ended March 31, 2024, KN’s revenues increased 36.1% year-over-year to $196.40 million. Its non-GAAP gross profit grew 37.3% from the year-ago value to $74.70 million. Its non-GAAP net earnings and non-GAAP EPS were $18.60 million and $0.20, indicating growth of 264.7% and 300% from the previous year’s quarter, respectively.
In addition, the company’s adjusted EBITDA increased 95.4% year-over-year to $33.80 million.
According to the outlook for the second quarter of 2024, KN expects non-GAAP revenues to be between $199 million and $209 million and non-GAAP EPS between $0.22 and $0.26.
Street expects KN’s revenue to increase 19.6% year-over-year to $206.85 million for the second quarter ending June 2024. The company’s EPS for the ongoing quarter is expected to grow 6.5% year-over-year to $0.25. Also, KN surpassed the consensus EPS estimates in three of the trailing four quarters, which is impressive.
KN’s stock gained 5.5% over the past six months and 6.3% over the past year to close the last trading session at $16.71.
KN’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
The stock has a B grade for Sentiment and Quality. Within the Technology - Electronics industry, KN is ranked #2 out of 42 stocks.
In addition to the POWR Ratings I’ve just highlighted, you can see KN’s ratings for Value, Growth, Stability, and Momentum here.
TaskUs, Inc. (TASK)
TASK provides digital outsourcing services for companies worldwide. The company offers digital customer experience consisting of omnichannel customer care services and other solutions, including experience and customer care services.
TASK’s trailing-12-month gross profit margin and EBITDA margin of 41.72% and 18.07% are 35.1% and 32.8% higher than the respective industry averages of 30.89% and 13.61%. Similarly, its trailing-12-month levered FCF margin of 13.37% is compared favorably to the 6.68% industry average.
For the fourth quarter that ended on December 31, 2023, TASK reported service revenue of $234.26 million. The company’s adjusted EBITDA grew 1.9% year-over-year to $59.02 million. Its net income and EPS came in at $16.28 million and $0.18, up 3.4% and 12.5% from the prior year’s quarter, respectively.
Additionally, the company’s free cash flow of $31.68 million indicates growth of 27.3% year-over-year.
As per the 2024 outlook, the company expects revenue in the range of $222.50 million to $224.50 million for the first quarter. For the full year, TASK expects revenue of $900 million to $950 million and free cash flow between $120 million and $130 million.
Analysts expect TASK’s EPS for the third quarter (ending September 2024) to increase 1.3% year-over-year to $0.32, and its revenue is estimated to grow 3.1% year-over-year to $232.50 million in the same quarter. Further, the company surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has surged 12.5% over the past month and 20.2% over the past six months to close the last trading session at $12.33.
TASK’s promising 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.
The stock has a B grade for Growth, Quality, and Value. Within the Technology - Services industry, TASK is ranked #11 out of 78 stocks.
Click here to access additional ratings of TASK for Momentum, Stability, and Sentiment.
ON24, Inc. (ONTF)
ONTF provides a cloud-based digital engagement platform enabling businesses to convert customer engagement into revenue through interactive webinars, virtual events, and multimedia content experiences globally.
ONTF’s trailing-12-month gross profit margin of 73.32% is 50.8% higher than the industry average of 48.62%. Likewise, the stock’s trailing-12-month levered FCF margin of 15.04% is 60.1% higher than the industry average of 9.40%.
In the fourth quarter that ended December 31, 2023, ONTF reported a total revenue of $39.34 million, of which revenue from subscription and other platform was $35.75 million. Its non-GAAP gross profit was $30.22 million for the quarter. Its non-GAAP operating income was $216 thousand, against a non-GAAP operating loss of $3.46 million in the prior year’s quarter.
According to the financial outlook for the first quarter of 2024, ONTF expects core platform revenue, including services, to be between $35.60 million and $36.60 million. Its total revenue is expected to be between $36.50 million and $37.50 million.
Street expects ONTF’s revenue and EPS for the fiscal year ending (December 2025) to increase 0.6% and 113.8% year-over-year to $145.77 million and $0.10, respectively. Moreover, the company has topped the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Shares of ONTF have soared 9.6% over the past six months to close the last trading session at $6.85.
ONTF’s robust 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 stock has a B grade for Quality, Value, and Sentiment. ONTF is ranked #10 out of 78 stocks in the Technology - Services industry.
To access additional ONTF’s ratings for Stability, Growth, and Momentum, click here.
Crexendo, Inc. (CXDO)
CXDO provides a cloud communication platform and services, video collaboration, and managed IT services for businesses internationally. It operates through two segments: Cloud Telecommunications and Software Solutions.
CXDO’s trailing-12-month gross profit margin and levered FCF margin of 59.63% and 10.87% are 22.6% and 15.7% higher than the respective industry averages of 48.62% and 9.40%.
During the fiscal year that ended December 31, 2023, CXDO’s total revenue increased 41.7% year-over-year to $53.20 million, of which its product revenue rose 89.7% from the prior year to $5.48 million. Its non-GAAP net income and non-GAAP EPS came in at $6.66 million and $0.24, up 61.2% and 50% year-over-year, respectively.
Furthermore, the company’s adjusted EBITDA of $5.74 million indicates a growth of 133% year-over-year. Its cash and cash equivalents stood at $10.35 million as of December 31, 2023, versus $5.47 million as of December 31, 2022.
Street expects CXDO’s revenue for the first quarter (ended March 2024) to increase 12.8% year-over-year to $14.09 million. Its EPS for the same period is expected to grow 150% year-over-year to $0.05. Moreover, the company has surpassed the consensus EPS and revenue estimates in all four trailing quarters.
CXDO’s shares have gained 184.4% over the past six months and 204.5% over the past year to close the last trading session at $4.75.
CXDO’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 an A grade for Sentiment and Quality and a B for Growth. Within the Technology - Services industry, CXDO is ranked #16 out of 78 stocks.
In addition to the POWR Ratings highlighted above, you can check CXDO’s ratings for Stability, Value, and Momentum here.
What To Do Next?
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DLB shares were unchanged in premarket trading Tuesday. Year-to-date, DLB has declined -4.49%, versus a 9.05% 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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