The tech industry is booming, driven by growing demand for latest technologies, evolution of AI and IoT, and other technological advances. Further, cloud based software, automation of business processes, and emerging technologies play a crucial role in navigating the market trajectory.
Amid this backdrop, investors could consider fundamentally sound tech stocks HP Inc. (HPQ), Hewlett Packard Enterprise Company (HPE), and Zoom Video Communications, Inc. (ZM) with PE ratios under 15 to buy now.
The tech industry is rapidly growing and evolving with the ever-surging demand for new innovation, technology and solutions. The wave has also resulted in the U.S. venture capital funding surging to $55.60 billion in the second quarter largely driven by significant investments in artificial-intelligence companies.
With the growing popularity of cloud-based software and rising demand to automate business processes, the demand for IT services worldwide is growing strongly. The global IT services market is expected to reach $1.85 trillion by 2031, expanding at a CAGR of 9.5%.
Further, the rapid growth of the IT industry has significantly influenced the IT hardware market due to high demand for hardware like laptops and tablets due to their mobility and versatility advantage. The market is estimated to value at $191.03 billion by 2029, growing at a CAGR of 7.9% driven by increasing digitization, worldwide government recognition, and wide application.
Besides, with the adoption of smarter and more connected tech devices and infrastructure, the technology and telecommunications industry is rapidly evolving supported by emerging technologies, such as artificial intelligence (AI) and the Internet of Things (IoT).
Given these favorable market trends, let us deep dive into the fundamentals of the top tech stocks.
HP Inc. (HPQ)
HPQ offers personal computing and other digital access devices, imaging and printing products, and related technologies, solutions, and services globally. The company operates in three segments: Personal Systems; Printing; and Corporate Investments.
In terms of forward non-GAAP P/E, HPQ is trading at 10.10x, 58.6% lower than the industry average of 24.41x. Likewise, the stock’s forward EV/Sales multiple of 0.79 is 73% lower than the industry average of 2.93. Also, its forward Price/Sales of 0.64x is 78.1% lower than the industry average of 2.90x.
On May 20, HPQ unveiled a new class of next-generation AI PCs at Microsoft’s AI Vision Event designed for the AI era to empower people to work and create more meaningfully. HPQ unveiled the HP OmniBook X AI PC and HP EliteBook Ultra AI PC, its first next-gen AI PCs built from the ground up, offering the latest ARM architecture to harness the most powerful AI technologies.
On May 7, HPQ and Hong Kong Productivity Council signed a collaboration agreement to establish the HKPC-HP 3D Printing Technology Centre in Hong Kong for application research development on additive manufacturing, also known as 3D printing.
The center aims to become a pilot transformation base, applying advanced 3D printing technologies that will empower various industries, sharpen their competitive edge, and foster the development of high-value strategic industrial chains.
During the second quarter that ended April 30, 2024, HPQ reported total net revenue of $12.80 billion. Its non-GAAP earnings from operations of $1.12 billion indicate growth of 1.6% from the year-ago value.
Furthermore, the company’s non-GAAP net earnings stood at $812 million and 0.82 per share, up 3.4% and 3.8% year-over-year, respectively.
For the fiscal 2024 third quarter, HPQ estimates its net EPS to be in the range of $0.63 to $0.77 and non-GAAP net EPS to be in the range of $0.78 to $0.92. For fiscal 2024, the company expects non-GAAP net EPS to be in the range of $3.30 to $3.60.
Analysts expect HPQ’s revenue for the third quarter (ending July 2024) to increase 1.3% year-over-year to $13.37 billion, while the company’s EPS for the same quarter is expected to grow marginally year-over-year to $0.86. Furthermore, the company surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of HPQ have surged 16.6% over the past six months and 13.3% over the past year to close the last trading session at $34.85.
HPQ’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 a B grade for Value, and Quality. Within the B-rated Technology - Hardware industry, HPQ is ranked #9 out of 38 stocks.
Click here to access additional ratings of HPQ for Sentiment, Momentum, Growth, and Stability.
Hewlett Packard Enterprise Company (HPE)
HPE provides solutions enabling customers to capture, analyze, and act upon data seamlessly internationally. The company operates through six segments: Compute; HPC & AI; Storage; Intelligent Edge; Financial Services; and Corporate Investments and Other.
In terms of forward non-GAAP P/E, HPE is trading at 10.79x, 55.8% lower than the industry average of 24.41x. Similarly, the stock’s forward Price/Sales multiple of 0.91 is 68.7% lower than the industry average of 2.90. Further, its forward EV/Sales of 1.22x is 58.4% lower than the industry average of 2.93x.
On June 18, HPE and CrowdStrike (CRWD) entered into a strategic partnership to secure end-to-end AI innovation, including large language models (LLMs), accelerated by NVIDIA. The integration of the Falcon platform with HPE OpsRamp AIOps unifies security and IT teams in monitoring accelerated AI workload IT alerts and adversary activity
On the same day, HPE and Deloitte announced a collaboration bringing together Deloitte's deep industry knowledge, AI and technology capabilities with the newly revealed NVIDIA AI Computing by HPE solution portfolio. The solution portfolio features HPE Private Cloud AI, a turnkey full-stack private cloud co-developed by HPE and NVIDIA.
The solution will help Deloitte's clients accelerate time to value through the co-development of industry-focused Generative AI applications and use cases.
For the second quarter that ended April 30, 2024, HPE’s net revenues increased 3.3% year-over-year to $7.20 billion and its non-GAAP gross profit was $2.38 billion. The company’s non-GAAP net earnings came in at $561 million and $0.42 for the quarter, respectively.
Also, the company’s free cash flow rose 111.8% from the year-ago value to $610 million.
Analysts expect HPE’s revenue and EPS for the fourth quarter (ending October 2024) to increase 10.8% and 6.7% year-over-year to $8.14 billion and $0.55, respectively. Moreover, the company topped the consensus EPS estimates in each of the trailing four quarters.
Shares of HPE have gained 21.3% over the past six months and 23.7% over the past year to close the last trading session at $20.67.
HPE’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 a B grade for Value. Within the Technology – Communication/Networking industry, HPE is ranked #7 of 42 stocks.
Click here to access additional ratings of HPE for Momentum, Growth, Quality, Sentiment, and Stability.
Zoom Video Communications, Inc. (ZM)
ZM provides unified communications platform worldwide. The company offers Zoom Meetings offering HD video, voice, chat, and content sharing, Zoom Phone, an enterprise cloud phone system, and Zoom Chat enables users to share messages, images, audio files, and content.
In terms of forward non-GAAP P/E, ZM is trading at 11.59x, 52.5% lower than the industry average of 24.41x. Also, the stock’s forward EV/EBIT multiple of 6.19 is 70.2% lower than the industry average of 20.78. Further, its forward Price/Cash Flow of 10.02x is 57.3% lower than the industry average of 23.44x.
On May 21, ZM announced availability of post-quantum end-to-end encryption globally for Zoom Workplace, particularly Zoom Meetings, with Zoom Phone and Zoom Rooms soon to be unveiled. The new launch of the security enhancement makes ZM the first UCaaS company to offer a post-quantum E2EE solution for video conferencing.
On March 25, ZM introduced Zoom Workplace, ZM’s AI-powered collaboration platform, available in AWS Marketplace, a digital catalog with thousands of software listings from independent software vendors that make it easy to find, test, buy, and deploy software that runs on AWS. With this, ZM can reach more customers and be better equipped to enable IT teams to consolidate their technology.
ZM’s revenues for the first quarter ended April 30, 2024, increased 2.7% year-over-year to $1.14 billion. Its gross profit grew 3.2% from the year-ago value to $867.93 million. The company’s non-GAAP income from operations of $456.60 million indicates growth of 8.1% year-over-year.
In addition, the company’s non-GAAP net income came in at $426.32 million and $1.35, up 20.7% and 16.4% from the prior year’s quarter, respectively.
According to the company’s second quarter fiscal 2025 guidance, ZM’s total revenue is expected to be between $1.14 billion and $1.15 billion and its non-GAAP income from operations is expected to be between $415 million and $420 million. Also, the company’s non-GAAP EPS is expected to be $1.20 - $1.21.
For the full year, the company expects total revenue of $4.61 billion - $4.62 billion. The full fiscal year non-GAAP income from operations is expected to range from $1.74 billion to $1.75 billion and non-GAAP EPS is expected to be between $4.99 and $5.02.
Street expects ZM’s revenue for the second quarter (ending July 2024) to grow 1% year-over-year to $1.15 billion and its EPS is expected to be $1.22 for the same quarter. Moreover, the company has topped the consensus revenue and EPS estimates in all of the trailing four quarters.
Over the past month, ZM’s stock has plunged 5.5% to close the last trading session at $58.63.
ZM’s POWR Ratings reflect its bright prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
ZM has a B grade for Value and Quality. It is ranked #7 out of 79 stocks in the Technology - Services industry.
In addition to the POWR Ratings we’ve stated above, we also have ZM’s other ratings for Momentum, Stability, Sentiment, and Growth. Get all ZM ratings here.
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HPQ shares were trading at $34.85 per share on Thursday afternoon, up $0.05 (+0.14%). Year-to-date, HPQ has gained 17.76%, versus a 16.76% 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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