The technology industry has been experiencing a solid year backed by widespread 5G deployment, rapid adoption of artificial intelligence, and accelerating digital transformation. In addition, as organizations worldwide adopt hybrid working models and boost their cloud-driven capabilities, the tech industry has been gaining steam.
Investor optimism over the tech industry’s prospects is evident in the iShares Global Tech ETF’s (IXN) 12.1% returns over the past three months versus the SPDR S&P 500 ETF Trust’s (SPY) 7.7% gains. Substantial IT spending, growing demand for semiconductors, and increasing dependency on advanced technology solutions should bolster the tech industry’s growth.
Given this backdrop, we think it could be wise to bet on quality stocks Telefonaktiebolaget LM Ericsson (ERIC – Get Rating), HP Inc. (HPQ – Get Rating), ASE Technology Holding Co., Ltd. (ASX – Get Rating). They each look significantly undervalued at their current price levels.
Sweden-based ERIC is one of the leading providers of information and communication technology (ICT) and software solutions to the telecommunication and other sectors. The company’s Emerging Business and Other segment provides Internet of Things, iconectiv, Cradlepoint, Red Bee Media, and WAN 4G and 5G enterprise solutions. It also offers cloud core, cloud communication, and cloud infrastructure services to its customers.
This month, ERIC expanded its portfolio of 5G radios with three new offerings that will accelerate 5G deployments in urban environments. As a part of Ericsson Street Solutions, these radios will enable communications service providers to provide 5G services across all urban hotspots. With this expansion, the company can maximize its 5G user experience and offer better network performance.
In July, ERIC entered a $8.3 billion multi-year agreement with Verizon. Under this agreement, the company will offer its industry-leading 5G solutions to accelerate the deployment of Verizon’s next-generation 5G network across the United States. This should allow ERIC to serve U.S. consumers, enterprises, and the public sector with the new 5G experience and drive innovation.
ERIC’s net income increased 51% from the prior-year quarter to SEK3.9 billion ($0.45 billion) in the second quarter, ended June 30, 2021. The company’s gross margin was 43.4% for the quarter, compared to 37.6% in the prior-year period. ERIC’s EBIT increased 51% from its year-ago value to SEK5.8 billion ($ 671 million). Also, its EPS rose 49% year-over-year to $1.10 over this period.
Analysts expect ERIC’s revenue for its fiscal year 2022 to be $28.34 billion, representing a 4.40% growth year-over-year. The company’s EPS is expected to grow 18.6% next year. In terms of forward EV/Sales, ERIC is currently trading at 1.41x, which is 65.7% lower than the 4.11x industry average. In terms of its forward Price/Sales, the stock is currently trading at 1.48x, which is 64.5% lower than the 4.17x industry average. ERIC has gained 3% over the past month.
ERIC’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has an A grade for Value, and a B grade for Stability. We’ve also graded ERIC for Growth, Sentiment, Momentum, and Quality. Click here to access all ERIC’s ratings.
ERIC is ranked #20 of 55 stocks in the B-rated Technology-Communication/Networking industry.
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