While disappointing third-quarter earnings from big tech added to the pressure tech companies were facing due to the consistent increase in borrowing costs and slowing demand, the industry is consistently evolving and is well-positioned to grow significantly in the long run. Therefore, you would regret not investing in fundamentally sound tech stocks Microsoft (MSFT), Gartner (IT), and Jabil (JBL) at the current low-price levels. Read on….
The technology industry has been bearing the brunt of the Fed’s aggressive interest rate hikes this year. Concerns over rising borrowing costs and slowing demand have led to tech stocks witnessing massive sell-off since the beginning of the year. The tech-heavy Nasdaq has lost close to 30% year-to-date.
The latest disappointing third-quarter earnings and weak guidance from big tech companies added to the pressure on tech stocks. Except for Apple (AAPL), all tech giants disappointed investors with weak results and dreary guidance last week.
Although the headwinds are expected to be around for a while, the tech industry’s opportunities for growth and competitive advantage are assured, given its increasing role in this digital era. The information technology market is expected to grow at a CAGR of 8.8% to reach $13,092.49 billion in 2026.
Therefore, the current low prices of quality tech stocks, Microsoft Corporation (MSFT), Gartner, Inc. (IT), and Jabil Inc. (JBL), make them solid investments to capitalize on the industry’s rosy long-term prospects. These companies are forming partnerships and building systems to streamline supply-chain challenges and adapt to the changing economy.
Microsoft Corporation (MSFT)
Global software giant MSFT needs no introduction. The company develops, licenses, and supports software, services, devices, and solutions worldwide. The company operates in three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing.
On October 12, 2022, Cisco (CSCO) and MSFT announced a new partnership to provide customers with more choices. President of Collaborative Apps and Platforms at Microsoft, Jeff Teper, said, “By welcoming Cisco as our newest partner building devices Certified for Microsoft Teams, we are excited to bring leading collaboration hardware and software to market together for our joint customers.”
For the fiscal quarter ended September 30, 2022, MSFT’s total revenues increased 10.6% year-over-year to $50.12 billion. The company’s operating income increased 6.3% from the prior-year period to $21.52 billion. In addition, its gross margin increased 9.5% year-over-year to $34.67 billion.
MSFT’s revenue for the quarter ending December 31, 2022, is expected to increase 3.1% year-over-year to $53.33 billion. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. Over the past six months, the stock has fallen 18.6% to close the last trading session at $235.87.
MSFT’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Software – Business industry, it is ranked #10 out of 52 stocks. The company has a B grade for Stability and Quality.
Click here to see the additional POWR Ratings of MSFT for Growth, Value, Momentum, and Sentiment.
Gartner, Inc. (IT)
IT operates as a worldwide research and advisory company. It operates through three segments: Research, Conferences, and Consulting. The Research segment delivers its research primarily through a subscription service, the Conferences segment caters to business professionals in an organization, and the Consulting segment offers market research, custom analysis, and on-the-ground support services.
For the fiscal second quarter ended June 30, 2022, IT’s revenues increased 18% year-over-year to $1.38 billion. Its operating income increased 8.2% year-over-year to $297.1 million. The company’s non-GAAP adjusted EBITDA increased 9.6% year-over-year to $389 million. Additionally, its non-GAAP adjusted EPS came in at $2.85, representing a 27.2% increase from the prior-year quarter.
Analysts expect IT’s revenue for the quarter ended September 30, 2022, to increase 12.1% year-over-year to $1.30 billion. The company has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 9.2% to close the last trading session at $302.01.
IT’s strong 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. It is ranked #4 of 10 stocks in the A-rated Outsourcing – Tech Services industry. It has an A grade for Quality.
We have also given IT grades for Growth, Value, Momentum, Stability, and Sentiment. Get all IT ratings here.
Jabil Inc. (JBL)
JBL provides manufacturing services and solutions worldwide. It operates in two segments, Electronics Manufacturing Services, and Diversified Manufacturing Services. The company serves 5G, wireless, cloud, digital print and retail, industrial, and semi-cap industries.
On July 12, 2022, IdentifySensors Biologics, a pathogen-detection platform technology company, partnered with JBL to develop processes for manufacturing portable devices that rapidly detect a wide range of infections with accuracy.
CEO and co-founder of IdentifySensors, Gregory Hummer, believes it is a great partnership and that JBL has the experience and bandwidth to ensure it is manufactured efficiently and effectively with the highest quality controls.
JBL’s net revenue for the fiscal fourth quarter ended August 31, 2022, increased 21.9% year-over-year to $9.03 billion. The company’s non-GAAP operating income increased 42.4% from the year-ago period to $447 million, while the net income attributable to JBL increased 80% year-over-year to $315 million. In addition, its non-GAAP EPS came in at $2.34, representing a 62.5% increase from the prior-year quarter.
JBL’s EPS and revenue for the quarter ending November 30, 2022, are expected to increase 16.9% and 9% year-over-year to $2.24 and $9.33 billion, respectively. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 10.8% to close the last trading session at $65.35.
JBL’s solid prospects are reflected in its POWR Ratings. The company has an overall rating of A, which equates to a Strong Buy. In the Technology – Services industry, it is ranked #2 out of 76 stocks. In addition, it has a B grade for Value, Momentum, and Quality.
To see the other ratings of JBL for Growth, Stability, and Sentiment, click here.
MSFT shares fell $2.87 (-1.22%) in premarket trading Monday. Year-to-date, MSFT has declined -29.98%, versus a -17.53% rise in the benchmark S&P 500 index during the same period.
Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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