While the tech industry is expected to remain under pressure due to the forthcoming interest rate increases , rapid digitization across industries should bolster the growth of sturdy computer hardware companies in the coming months. Furthermore, with continuing hybrid working trends, the need for computer hardware is growing.
In addition, the growing use of the internet of things (IoT), artificial intelligence (AI), and cloud-based products and services should further drive the demand for computer hardware. The global hardware market is projected to grow at a 26.2% CAGR to $10.4 billion by the end of 2026.
Therefore, we think it would be wise to add fundamentally sound computer hardware stocks Daktronics, Inc. (DAKT), AstroNova, Inc. (ALOT), Canon Inc. (CAJ), and Seagate Technology Holdings plc (STX) to one’s watchlist. These stocks are rated Buy or Strong Buy in our proprietary POWR Ratings system.
Daktronics, Inc. (DAKT)
DAKT in Brookings, S.Dak., designs, manufactures, markets, and sells electronic display systems and other related products worldwide. It operates through five segments: Commercial; Live Events; High School Park and Recreation; Transportation; and International. The company offers video display systems, including displays to show various video levels, graphics, and animation, and indoor and other outdoor LED video displays.
DAKT's net sales increased 29.1% year-over-year to $164.48 million in the second quarter, ended Oct. 30, 2021. The company reported $4.39 million income, while its net income came in at $2.37 million for the quarter ending Oct. 30, 2021. The company's EPS amounted to $0.05 over the period.
Analysts expect DAKT's revenue to increase 10.4% year-over-year to $532.18 million for its fiscal year 2022. The company's EPS is expected to grow 73.7% year-over-year to $0.33 for its fiscal year 2023.
DAKT's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
DAKT is also rated an A grade for Value and a B for Sentiment. Within the Technology – Hardware industry, it is ranked #15 of 46 stocks.
To see additional POWR Ratings for Growth, Stability, Quality, and Momentum for DAKT, click here.
AstroNova, Inc. (ALOT)
ALOT designs, develops, manufactures, and distributes specialty printers and data acquisition and analysis systems worldwide. The West Warwick, R.I.-based concern operates through two segments: Product Identification (PI) and Test & Measurement (T&M). Its PI segment provides tabletop and production-ready digital color label printers and specialty OEM printing systems under the QuickLabel brand. In contrast, the T&M segment offers airborne printing solutions, such as ToughWriter, to print hard copies of navigation maps and other air traffic control data.
In the third quarter, ended Oct. 30, 2021, ALOT's net sales increased 3% year-over-year to $28.86 million. Its gross profit grew 6.7% from its year-ago value to $10.39 million over the period. The company's cash and cash equivalent stood at $8.73 million for the nine months ended Oct. 30, 2021.
Analysts expect ALOT's revenue to increase marginally year-over-year to $29.69 million for the fourth quarter, ending January 2022. The stock has gained 12.5% in price year-to-date.
ALOT's strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. ALOT is also rated an A grade for Value and Sentiment and a B for Momentum. In the Technology – Hardware industry, it is ranked #1.
In total, we rate ALOT on eight different levels. To see additional POWR Ratings for Growth, Quality, and Stability for ALOT, click here.
Canon Inc. (CAJ)
Headquartered in Tokyo, Japan, CAJ manufactures and sells office multifunction devices (MFDs), plain paper copying machines, laser and inkjet printers, cameras, diagnostic equipment, and lithography equipment. Office Business Unit; Imaging System Business Unit; Medical System Business Unit; and Industry and Others Business Unit are the company’s four operational segments.
Last month, CAJ introduced two lenses–the Canon RF800mm F5.6 L IS USM, and the longest focal length RF lens yet, the RF1200mm F8 L IS USM. The two super -telephoto fixed focal length lenses are relatively light for their considerable abilities. They have common features, such as Super Spectra Coating (SSC) and Air Sphere Coating (ASC) that helps minimize ghosting and flaring, compatibility with both the RF1.4x and RF2x extenders, and an electronic focusing ring which can be customized with manual focus ability during Servo AF.
In January, CAJ announced the EOS R5 C Full-Frame Mirrorless Camera, a hybrid, RF-mount 8K camera with equal parts video and still digital imaging power that is lightweight and compact. This camera displays video formats and features from CAJ's award-winning Cinema EOS line.
During the fourth quarter, ended, Dec. 31, 2021, CAJ's net sales increased 1% year-over-year to ¥955.45 billion ($8.29 billion). Its operating income amounted to ¥75.36 billion ($653.61 million), while its net income grew 11.6% year-over-year to $59.80 billion ($518.66 million). The company's EPS rose 158.7% from its year-ago value to ¥205.29.
The consensus EPS estimate for the first quarter, ended March 31, 2022, represents 20.8% year-over-year growth to $0.46. Analysts expect its revenue to increase 8.7% year-over-year to 7.94 billion for the third quarter, ending Sept.30, 2022. The company's shares have surged 4.9% over the past year.
It is no surprise that CAJ has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. The stock also has an A grade for Quality and a B for Value and Sentiment. In the Technology – Hardware industry, it is ranked #1.
Click here to see the additional POWR Ratings for CAJ (Growth, Stability, and Momentum).
Seagate Technology Holdings plc (STX)
Dublin, Ireland-based STX offers data storage technology and solutions worldwide. It also offers hard disk and solid-state drives, including serial advanced technology attachment, serial attached SCSI, non-volatile memory express products, solid-state hybrid drives, and storage subsystems, along with an enterprise data solutions portfolio.
Last month, STX launched its premiere cloud storage-as-a-service platform, Lyve Cloud, for all business sizes in Singapore. The S3-compatible storage-only cloud, which is recognized for its simplicity, flexibility, and cost predictability, has gained trust from various partners and customers since its launch in the United States last year. STX introduced the Lyve Cloud to facilitate enterprises in building barrier-free mass data environments. It also collaborated with the leading cloud industry ecosystem partner to offer easy, efficient, and integrated cloud storage services.
Also in February, Zadara, a renowned leader in edge cloud services, announced that it is working with STX to deploy zCompute, its elastic, enterprise-grade, expert-managed compute infrastructure, in Seagate's storage-as-a-service (STaaS) Lyve Cloud platform. zCompute allows enterprises to develop, deploy, run, and virtualize any application anywhere, whether colocation, private data center, public cloud, or at the edge.
For the second quarter, ending Dec. 31, 2021, STX's net sales increased 18.8% year-over-year to $3.12 billion. Its operating income increased 66.7% from its year-ago value to $580 million, while its net income grew 78.9% year-over-year to $501 million. The company's EPS rose 99.1% year-over-year to $2.23.
STX is expected to generate $2.92 billion in revenue growth, representing 6.8% year-over-year growth for the third quarter, ending March 31, 2022. The $2.04 consensus EPS estimate for the third quarter, ending March 31, 2022, indicates a 37.9% improvement year-over-year. In addition, the company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 45.8% in price over the past year and 18.1% over the past nine months.
STX's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Quality. In the Technology – Hardware industry it is ranked #14.
Beyond what we've stated above, we have also given STX's grades for Growth, Value, Sentiment, Stability, and Momentum. Get all the STX ratings here.
DAKT shares were trading at $4.52 per share on Thursday afternoon, down $0.05 (-1.09%). Year-to-date, DAKT has declined -10.50%, versus a -7.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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