The technology industry is synonymous with innovation and invention, marked by consistent and groundbreaking advancements. A continuous pipeline of novel products, services, and features, combined with substantial investments channeled towards remarkable technologies, supports robust growth within this sector.
Given this backdrop, let us explore tech stocks such as Extreme Networks, Inc. (EXTR), Ceragon Networks Ltd. (CRNT), and PCTEL, Inc. (PCTI) now.
Before delving deeper into the fundamentals of the aforementioned stocks, let us discuss the promising growth potential evident in the technology industry.
Despite susceptibility to broader macroeconomic uncertainties, the tech industry exhibits an impressive readiness to counter these challenges. Tech companies are distinctly geared toward resilience, ensuring their continued stability in the immediate future.
The communication and network industry has undergone a profound metamorphosis in recent years, spurred by the advent of groundbreaking technologies such as 5G, the Internet of Things (IoT), and cloud computing. Such innovative developments have unlocked immense opportunities for firms to pioneer new services that address the dynamic needs of individuals and businesses.
The escalating necessity for enhanced operational efficiency, cost-effective processing solutions, augmented bandwidth connectivity, and lower latency for crucial applications are pivotal factors propelling the global growth of the 5G infrastructure market. The global 5G technology market is projected to garner $1.80 trillion by 2030, registering a 40.2% CAGR.
Moreover, with an aim to boost network resiliency, reduce the cost of bringing high-speed internet service to unconnected households, and help connect unserved regions, the Federal government’s efforts could further keep the communication technology industry buoyed.
Consequently, on the backs of such increased investments to construct high-speed networks, the global wireless infrastructure market size is expected to reach $259.30 billion by 2028, rising at a 9.5% CAGR.
Therefore, technology communication stocks EXTR, CRNT, and PCTI could be wise portfolio additions now.
Extreme Networks, Inc. (EXTR)
EXTR is a software-driven networking solutions provider. It offers wireless network infrastructure equipment and develops software for network management, policy, analytics, security, and access controls.
On May 10, EXTR announced that, in collaboration with a wide network of customers, partners, and government agencies, EXTR would work with Living Tomorrow Innovation Campus, an experimental lab located just outside of Brussels, Belgium, to build, test and validate cutting-edge, technology-driven experiences and products that will likely become widely adopted by the year 2030.
On May 9, the company introduced ExtremeCloud Edge, the industry’s first networking cloud continuum, delivering more choice and flexibility to customers while running networking applications, including management, analytics, and AI. ExtremeCloud Edge eliminates cloud sovereignty concerns and dramatically boosts the one-network experience.
This new launch reflects EXTR’s continued innovation in enterprise networking and should have a robust market demand.
EXTR’s forward EV/Sales of 2.76x is 9% lower than the industry average of 3.03x. Also, its forward Price/Sales multiple of 2.79 is 8.4% lower than the industry average of 2.95.
The stock’s trailing-12-month ROCE and ROTA of 57.35% and 5.43% are significantly higher than the 0.50% and 0.02% industry averages, respectively. Likewise, its trailing-12-month levered FCF margin of 14.05% is 103.6% higher than the industry average of 6.90%.
In the third quarter that ended March 31, 2023, EXTR’s total net revenue increased 16.5% year-over-year to $332.51 million. Its non-GAAP operating income grew 45.9% from the year-ago value to $52.04 million.
The company’s non-GAAP net income amounted to $38.85 million and $0.29 per share, representing increases of 41.7% and 38.1% from the prior-year quarter, respectively. For the nine months that ended March 31, 2023, its cash stood at $203 million, up 21.9% year-over-year.
The consensus revenue and EPS estimates of $341.92 million and $0.31 for the first quarter ending September 2023 represent 14.9% and 57% improvements year-over-year, respectively. The company surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
EXTR’s shares gained 2.1% intraday to close the last trading session at $27.61. Over the past year, the stock has gained 164.7%.
EXTR’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Growth and Quality. Among the 52 stocks in the Technology – Communication/Networking industry, it is ranked #3.
In addition to the POWR Ratings highlighted above, one can see EXTR ratings for Value, Momentum, Stability, and Sentiment here.
Ceragon Networks Ltd. (CRNT)
Headquartered in Rosh HaAyin, Israel, CRNT provides wireless backhaul and fronthaul solutions that enable cellular operators and other wireless service providers. Its offerings include network management systems, and network and radio planning, site survey, solutions development, network auditing and optimization, maintenance, training, and other services.
On May 16, the company signed a multi-year contract worth up to $4.2 million to upgrade the public safety network of the City of Cincinnati. The project includes a multi-technology, multi-service solution that provides a robust, modernized backhaul and routing solution and a long-term maintenance and support plan.
This win is another testament to CRNT’s end-to-end network design and implementation capabilities, and it aligns perfectly with the company’s long-term growth strategy.
The stock’s forward non-GAAP P/E of 10.22x is 57% lower than the 23.78x industry average. Likewise, its forward EV/Sales multiple of 0.69 is 77.4% lower than the industry average of 3.03.
CRNT’s trailing-12-month CAPEX/Sales of 3.60% is 55% higher than the 2.32% industry average. Likewise, its trailing-12-month asset turnover ratio of 1.04x is 71.9% higher than the industry average of 0.61x.
During the fiscal first quarter (ended March 31, 2023), CRNT’s revenue increased 18.6% year-over-year to $83.41 million, while its gross profit grew 45.7% from the year-ago value to $28.18 million in the same quarter.
Its non-GAAP net income and net income per share came in at $3.63 million and $0.04, compared to a non-GAAP net loss and net loss per share of $1.85 million and $0.02 per share, respectively, in the prior-year quarter. In addition, its cash and cash equivalent at the end of the quarter stood at $26.42 million, representing a 5.9% increase year-over-year.
The consensus revenue and EPS estimates of $86.91 million and $0.08 for the fiscal third quarter (ending September 2023) represent 10.5% and 60% improvements year-over-year, respectively.
CRNT’s shares have gained 37.3% over the past three months to close the last trading session at $2.32. Over the past month, the stock has gained 8.4%.
CRNT’s solid prospects are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It also has an A grade for Growth and Sentiment and B for Value and Stability. Within the same industry, it is ranked #2.
Beyond what we have just highlighted above, click here to see the CRNT’s other ratings for Momentum and Quality.
PCTEL, Inc. (PCTI)
PCTI is a global provider of wireless technology solutions. It designs and manufactures precision antennas and industrial IoT devices that are deployed in small cells, enterprise Wi-Fi access points, fleet management, transit systems, and equipment and devices for the industrial IoT.
On May 23, PCTI announced the addition of new 4G LTE and 5G NR network monitoring capabilities to the SeeHawk™ Monitor system, enabling users to rapidly detect and respond to changes in network conditions.
The newly added capabilities support mission-critical coverage, international spectrum coordination, and rogue base station detection, thereby making it highly effective in garnering strong user demand.
In April, PCTI announced its regular quarterly dividend of $0.055 per share on its common stock, which was paid to shareholders on May 15. It pays an annual dividend of $0.22, which translates to a dividend yield of 4.35%. Its four-year average yield is 3.91%.
PCTI’s forward non-GAAP P/E is trading at 14.88x, 37.4% lower than the industry average of 23.78x. Likewise, its forward EV/EBITDA and EV/Sales multiples of 7.73 and 0.75 are 47.5% and 75.2% lower than the industry averages of 14.73x and 3.03x, respectively.
PCTI’s trailing-12-month ROCE and ROTA of 8.63% and 6.78% are significantly higher than the 0.50% and 0.02% industry averages, respectively. Likewise, its trailing-12-month net income margin of 5.77% is 192.2% higher than the industry average of 1.97%.
During the fiscal first quarter that ended on March 31, 2023, PCTI’s revenues increased 1.9% year-over-year to $22.97 million, while its gross profit grew 23.6% from the year-ago value to $11.53 million.
The company’s non-GAAP operating income increased 602.2% from the prior-year quarter to $2.24 million, while its adjusted net income came in at $2.14 million, representing a 603.9% year-over-year improvement. Also, its non-GAAP earnings per share stood at $0.12, up 500% year-over-year.
For the fiscal year ending December 2024, PCTI’s revenue and EPS are expected to increase 11.9% and 38.2% year-over-year to $102.10 million and $0.47, respectively. The company surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 20.1% to close the last trading session at $5.08. The stock has gained 14.4% over the past three months.
PCTI’s POWR Ratings reflect its promising outlook. The stock has an overall A rating, which translates to a Strong Buy in our proprietary rating system.
It also has an A grade for Value and Sentiment and a B for Quality. In the same industry, it is ranked first.
Click here to see additional ratings for PCTI (Growth, Momentum, and Stability).
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EXTR shares were trading at $26.70 per share on Friday afternoon, down $0.91 (-3.30%). Year-to-date, EXTR has gained 45.82%, versus a 18.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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