Increasing investments in digitization and the integration of advanced technologies into everyday operations are enhancing the outlook for the tech industry. Thus, investors could consider buying fundamentally sound tech stocks, Telefonaktiebolaget LM Ericsson (ERIC), TaskUs, Inc. (TASK), and Nortech Systems Incorporated (NSYS), for potential June breakouts.
In the United States, the IT Services market is expected to grow as organizations are increasingly looking for technology solutions to enhance their business operations and boost efficiency. Cloud computing, cybersecurity, and artificial intelligence are among the most sought-after services. Therefore, revenue in the IT services market is expected to be $1.88 trillion by 2029.
Moreover, the ever-evolving tech industry is driven by ongoing investment in research and development by global tech companies. According to the latest forecast by Gartner, Inc., worldwide IT spending is expected to increase 8% year-over-year to reach a staggering $5.06 trillion in 2024.
Additionally, the rising need for reliable and seamless communication networks across various sectors like healthcare, defense, and public safety is fueling the next-generation wireless communication industry. The development of 5G connectivity, offering high-speed connections, low latency, and high reliability, further accelerates market growth.
Hence, the next-generation wireless communication market is projected to grow at a CAGR of 17.8% by 2032.
Furthermore, tech stocks are in demand, evidenced by the strong performance of the Vanguard Information Tech ETF (VGT), which has returned a staggering 31% over the past year.
Given these favorable industry trends, let us dive deep into the fundamentals of the top tech stocks:
Telefonaktiebolaget LM Ericsson (ERIC)
Headquartered in Stockholm, Sweden, ERIC provides mobile connectivity solutions for telecom operators and enterprise customers in North America, Europe, Latin America, the Middle East, Africa, North East Asia, South East Asia, Oceania, and India. The company operates in four segments: Networks; Cloud Software and Services; Enterprise; and Other.
On May 23, 2024, ERIC and Dell Technologies (DELL) announced a strategic partnership to combine their deep industry expertise with telecom software, solutions and support, to guide Communications Service Providers (CSPs) through their Radio Access Network (RAN) cloud transformation journeys.
On May 14, 2024, Vonage, a division of ERIC and a prominent player in cloud communications aiding businesses in advancing their digital journey, expanded its Vonage Premier for Service Cloud Voice offering.
This expansion now includes integration with Salesforce Einstein Conversation Insights. These AI-driven insights and analytics will enable brands to elevate both agent and customer experiences through intelligent, global calling capabilities.
ERIC’s forward EV/Sales of 0.87x is 70% lower than the industry average of 2.90x. Its forward Price/Sales multiple of 0.84 is 71.1% lower than the industry average of 2.92. Likewise, ERIC’s EV/EBITDA of 6.91x is 54.2% lower than the industry average of 15.08x.
For the first quarter that ended March 31, 2024, ERIC reported net sales and gross income of SEK 53.30 billion ($5.04 billion) and SEK 22.70 billion ($2.15 billion), respectively. Its EBIT increased 36.7% year-over-year to SEK 4.10 billion ($387.92 million). Its net income grew 62.5% from the previous year’s quarter to SEK 2.60 billion ($246 million).
Street expects ERIC to post revenue of $5.52 billion for the second quarter ending June 2024. The company’s EPS is expected to increase 2.3% year-over-year to $0.07 for the same quarter. Moreover, it surpassed consensus EPS estimates in three of the trailing four quarters, which is impressive.
Shares of ERIC have gained 20.9% over the past six months to close the last trading session at $5.97.
ERIC’s POWR Ratings reflect its promising outlook. 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, with each factor weighted to an optimal degree.
ERIC has a B grade for Value and Quality. It is ranked #5 among 45 stocks in the Technology - Communication/Networking industry.
Click here to access the additional ERIC ratings (Momentum, Stability, Growth, and Sentiment).
TaskUs, Inc. (TASK)
TASK provides digital outsourcing services for companies in the Philippines, the United States, India, and internationally. It offers a digital customer experience that consists of omnichannel customer care services primarily delivered through non-voice digital channels and other solutions, including experience and customer care services for new product or market launches and customer acquisition solutions.
On March 25, 2024, TASK, a leading provider of outsourced digital services and next-generation customer experience to the world’s most innovative companies, and V7, a leading training data platform, announced their strategic partnership.
TASK and V7 combined their expertise in AI and data annotation to optimize training data creation for AI product development at some of the world’s biggest technology companies.
On February 27, TASK announced AssistAI, a new knowledge-based assistant built on the TaskGPT platform. Custom-trained on client knowledge bases, training materials, and historical customer interactions, AssistAI uses the information to provide accurate and personalized responses to teammate queries, saving them time to focus on more complex tasks and improving overall efficiency.
TASK’s forward EV/Sales of 1.50x is 17.7% lower than the industry average of 1.82x. Its forward Price/Sales multiple of 1.35 is 10.2% lower than the industry average of 1.50. Likewise, ERIC’s EV/EBITDA of 6.61x is 41.3% lower than the industry average of 11.25x.
For the first quarter ended March 31, 2024, TASK reported service revenue at $227.47 million. Its adjusted EBITDA came in at $50.61 million. The company’s adjusted net income stood at $27.27 million and $0.30 per share. In addition, as of March 31, 2024, the company’s total assets stood at $874.51 million, compared to $864.20 million as of December 31, 2023.
Analysts expect TASK’s revenue for the third quarter (ending September 2024) to increase 3.9% year-over-year to $234.37 million, while its EPS is expected to grow 1% year-over-year to $0.32, respectively. In addition, the company surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.
TASK’s stock has soared 46.7% over the past nine months to close the last trading session at $14.37.
TASK’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system.
The stock has a B grade for Quality, Growth, and Value. TASK is ranked #9 out of 78 stocks in the Technology - Services industry.
Beyond what is stated above, we’ve also rated TASK for Sentiment, Stability, and Momentum. Get all TASK ratings here.
Nortech Systems Incorporated (NSYS)
NSYS provides design and manufacturing solutions for electromedical devices, electromechanical systems, assemblies, and components in the United States, Mexico, and China.
On May 21, 2024, NSYS announced the issuance of a new patent for their groundbreaking Active Optical Xtreme (AOX) technology platform.
This groundbreaking technology, which incorporates advanced transceivers, receivers, and optical fiber into a non-magnetic cable or connector assembly tailored for magnetically sensitive environments, is poised to revolutionize data transmission across various sectors such as medical imaging, avionics, wireless communications, scientific instrumentation, and industrial applications.
NSYS’ trailing-12-month EV/Sales of 0.31x is 90.1% lower than the industry average of 3.16x. Its trailing-12-month Price/Sales multiple of 0.23 is 92.5% lower than the industry average of 3.07.
During the first quarter that ended March 31, 2024, NSYS’ net sales were reported at $34.22 million. Its gross profit stood at $5.45 million. The company’s net income and EPS grew 12.3% and 12% year-over-year to $765 million and $0.28, respectively. In addition, as of March 31, 2024, the company’s total assets stood at $75.45 million, compared to $75.13 million as of December 31, 2023.
Shares of NSYS have surged 27% over the past six months to close the last trading session at $11.68.
NSYS’s POWR Ratings reflect bright prospects. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
NSYS has an A grade for Value and a B for Sentiment and Stability. It is ranked #2 out of 43 stocks in the Technology - Electronics industry.
In addition to the POWR Ratings highlighted above, one can access NSYS’ ratings for Growth, Momentum, and Quality here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
ERIC shares were trading at $6.03 per share on Thursday afternoon, up $0.17 (+2.90%). Year-to-date, ERIC has declined -2.79%, versus a 10.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
The post 3 Tech Stocks Set for June Breakouts appeared first on StockNews.com