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The technology industry is poised for long-term growth due to rapid adoption of emerging technologies and increased spending on digitalization initiatives driven by growing demand for innovative solutions. So let’s evaluate whether tech stocks NetApp (NTAP) and Dropbox (DBX) are smart investments to take advantage of industry tailwinds. Continue reading.
The technology sector is popular for its ability to quickly adapt and respond to new challenges. The industry is expected to grow strongly in the long term due to increasing demand for advanced technology and increased spending on digital transformation initiatives across various sectors.
Given the positive outlook for the industry, it may be wise to consider investing in fundamentally strong tech stocks. NetApp, Inc. (NTAP) and Dropbox, Inc. (DBX).
Before we delve into its fundamentals, let’s discuss what is shaping the outlook for the technology industry.
After a slump in 2022, the tech industry rebounded strongly last year on the back of hype around generative AI and expectations that the Federal Reserve will cut interest rates this year. The tech-heavy Nasdaq Composite Index is up 6.8% since the beginning of the year and 38.5% over the past year.
The technology sector is one of the fastest growing sectors today due to continuous innovation and cutting-edge products. Technology companies are pushing the boundaries of innovation to come up with solutions that make companies more productive, flexible, competitive, and efficient.
Gartner predicts global IT spending will increase 5 trillion dollars, an increase of 6.8% from the previous year this year. The popularity of cloud-based services and the growing demand for cybersecurity solutions, data storage solutions, and advanced networking technologies are driving the demand for technology services. Spending on IT services is expected to reach $1.5 trillion this year, up 8.7% from a year ago.
Additionally, the IT hardware market is expected to reach $191.03 billion by 2029 and is growing rapidly. CAGR of 7.9%. This growth is being driven by the increasing complexity of software applications and the rise of data-intensive workloads.
Furthermore, the adoption of virtual reality, augmented reality, Internet of Things (IoT), and artificial intelligence in various industries is expected to increase the demand for cutting-edge hardware.
Investor interest in tech stocks is driven by the Technology Select Sector SPDR ETF (XLK) has returned 47.2% over the past year.
Let’s take a look at the fundamentals of the tech stocks mentioned above.
NetApp Corporation (NTAP)
NTAP provides cloud-driven, data-centric services for managing and sharing data on-premises and in private and public clouds around the world. It operates in two segments: hybrid cloud and public cloud. The company provides intelligent data management software, storage infrastructure solutions, cloud storage and data services, cloud operational services, and application-enabled data management services.
NTAP’s trailing twelve month net profit margin of 15.21% was 500.6% higher than the industry average of 2.53%. ROTC for the trailing 12 months was 20.56%, which is 760.3% higher than the industry average of 2.39%. Also, his 12-month trailing ROCE for the company is his 89.69%, which is significantly higher than the industry average of his 3.06%.
NTAP’s net revenue for the fiscal third quarter ended January 26, 2024 was $1.61 billion, an increase of 5.2% compared to the same period last year. Non-GAAP gross profit Sales increased by 14.4% from the same period last year to $1.17 billion. The company’s non-GAAP net income increased 36.2% year over year to $410 million. Additionally, his non-GAAP net income per share was $1.94, an increase of 41.6% year-over-year.
Street expects NTAP’s EPS and revenue for the quarter ending April 30, 2024 to be $1.78 billion and $1.65 billion, up 15.6% and 4.4% year over year, respectively. There is. He exceeded consensus EPS estimates in each of the subsequent four quarters. NTAP stock has increased 60.3% over the past year, closing at $104.80.
NTAP power rating reflects this promising outlook. The overall rating is B, which is equivalent to a “buy” according to our own rating system. POWR Ratings evaluates stocks by 118 different factors, each with its own weighting.
A grade for momentum and quality, B grade for growth. Within B rating Technology – Hardware It ranks 11th out of 36 stocks in the industry. To see NTAP’s assessment of Value, Stability, and Sentiment, go to click here.
Dropbox Inc. (DBX)
DBX provides a global content collaboration platform and offers both free and paid subscription plans with premium features. We serve a variety of industries including professional services, technology, media, education, and finance.
DBX’s trailing twelve month asset turnover ratio was 0.82x, which is 34% higher than the industry average of 0.61x. The trailing 12 month ROTC of 12.45% beats the industry average of 2.39% by 421%. Moreover, the company’s trailing twelve month net profit margin was 18.13%, which was 616.1% higher than the industry average of 2.53%.
DBX’s revenue for the fiscal fourth quarter ended December 31, 2023 was $635 million, an increase of 6% compared to the same period last year. Gross profit improved 6.2% year over year to $513 million.
The company’s non-GAAP net income and net income per share increased 21% and 25%, respectively, to $170.8 million and $0.50 compared to the same period last year.
DBX’s EPS and revenue for the quarter ending March 31, 2024 are expected to be $0.50 and $628.76 million, up 18.4% and 2.9% year-over-year, respectively. It beat Street EPS estimates in each of the subsequent four quarters. Shares have increased 16.8% over the past year, closing at $23.80.
DBX receives an overall A rating, which equates to a Strong Buy in the POWR Ratings system.
It has an A grade for quality and a B grade for growth and value. Ranked 3rd out of 79 stocks. Technology – Services industry. In addition to the above, we also evaluated DBX’s momentum, stability, and sentiment. Get all ratings for DBX here.
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NTAP stock was unchanged in premarket trading Thursday. Year-to-date, NTAP has increased by 19.57%. In comparison, the benchmark S&P 500 index rose 7.25% in the same period.
About the author: Rashmi Kumari
Rashmi has a passion for capital markets, asset management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With her Master’s degree in Commerce, she hopes to make complex financial issues easier to understand for individual investors and help them make good investment decisions.
post Are NetApp (NTAP) and Dropbox (DBX) the strongest stocks to own in the technology industry? It first appeared stocknews.com
