Despite the supply chain disruptions, the PC market ended last year with double-digit growth. Global PC shipments surpassed 90 million in the last quarter of 2021 for the second consecutive year. The demand for computer hardware is increasing as individuals and companies are creating remote IT setups amid delays in office reopening plans. Furthermore, the rapid advancements in hardware systems and architectures to support advanced artificial intelligence and machine learning in the big data era are shaping the future of the hardware industry.
One of the most famous names in the computer hardware industry, Western Digital Corporation (WDC), topped the consensus estimates in both top and bottom lines in its last reported quarter. However, WDC shares tumbled on its weaker-than-expected outlook for the ongoing quarter. The company also cited supply chain issues as the reason for not fully meeting strong demand. The stock has slumped 19% over the past six months and 19.4% year-to-date to close its last trading session at $52.57. In addition, several analysts have lowered their price targets on the stock after the company posted its results.
Therefore, to capitalize on the computer hardware industry’s growth, fundamentally sound stocks Canon Inc. (CAJ), NetApp, Inc. (NTAP), Lenovo Group Limited (LNVGY) could be better bets instead.
Canon Inc. (CAJ)
Headquartered in Tokyo, Japan, CAJ operates as a manufacturer and seller of office multifunction devices (MFDs), plain paper copying machines, laser and inkjet printers, cameras, diagnostic equipment, and lithography equipment. The company operates through four segments: Office Business Unit; Imaging System Business Unit; Medical System Business Unit; Industry and Other Business Unit.
Last month, CAJ launched EOS R5 C Full-Frame Mirrorless Camera, which showcases features from the company’s award-winning Cinema EOS line, alongside select still capabilities that have made the EOS R5 camera a popular and trusted choice among professionals and enthusiasts. Given its brand popularity worldwide and its long-standing goodwill in the market, this new launch should be widely in demand.
CAJ also introduced AMLOS (Activate My Line of Sight), a hybrid meeting software solution that can harness the power of Canon’s image processing technology that is being designed to help create an immersive hybrid work experience. AMLOS, designed to work with Microsoft® Teams and Azure, aims to simplify hybrid team collaborations. With hybrid working arrangements becoming the new normal, CAJ’s new venture should be beneficial.
CAJ’s net sales increased 1% year-over-year to ¥955.45 billion ($8.32 billion) in the fiscal fourth quarter ended December 31. Its gross profit stood at ¥437.85 billion ($3.81 billion), up 5.7% from the prior-year quarter. CAJ's net income increased 11.6% year-over-year to ¥59.80 billion ($520.70 million).
Street expects the company’s revenue to increase 148% year-over-year to $32.43 billion in the fiscal period ending December 2022. The consensus EPS estimate of $2.11 indicates a rise of 17.7% year-over-year.
CAJ shares have gained 5.2% over the past year and 3.4% over the past six months to close its last trading session at $23.87.
CAJ’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CAJ is rated a B in Value, Stability, and Quality. Within the Technology - Hardware industry, it is ranked #2 of 46 stocks.
In addition to the POWR Ratings grades I highlighted here, you can see the CAJ’s Growth, Momentum, and Sentiment ratings here.
NetApp, Inc. (NTAP)
NTAP provides software, systems, and cloud services worldwide. The company offers cloud storage services, including NetApp Cloud Volumes, cloud control solutions such as NetApp Cloud Manager and NetApp Virtual Desktop Service, cloud services, and analytics comprising NetApp Cloud Insights.
In December 2021, it announced innovations in its product portfolio and awarded Amazon Web Services (AWS) recognition for its achievements as an AWS Partner. “Together, NetApp and AWS are delivering the best of cloud to our customers and partners to deliver immediate business value, whether in the form of cost efficiency, compliance, data protection, or performance,” said Anthony Lye, Executive Vice President and General Manager of Public Cloud Services at NetApp.
The company also announced that NetApp ONTAP, the world’s leading storage operating system, became the first enterprise storage platform to receive Commercial Solutions for Classified (CSfC) validation from the U.S. National Security Agency (NSA) for security and encryption.
In November 2021, NTAP announced its acquisition of CloudCheckr, a leading cloud optimization platform that provides cloud visibility and insights to lower costs, maintain security and compliance, and optimize cloud resources. This acquisition should enhance NTAP’s operational capabilities.
NTAP’s net revenues increased 10.6% year-over-year to $1.57 billion in the fiscal second quarter ended October 29. Its gross profit grew 13.5% from the year-ago value to $1.06 billion. Net income came in at $224 million, indicating an improvement of 63.5% year-over-year. Its EPS increased 60.7% from its year-ago value to $0.98.
The consensus revenue estimate of $1.61 billion for the fiscal third quarter ended January 2022 indicates an increase of 9.8% year-over-year, while the consensus EPS estimate of $1.29 indicates a rise of 17% year-over-year. In addition, NTAP has topped the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 31.7% over the past year and 9.3% over the past six months to close its last trading session at $87.01.
It’s no surprise NTAP has an overall rating of B, which translates to Buy in our proprietary rating system. NTAP is rated an A in Quality. It is ranked #13 in the Technology - Hardware industry.
Click here to see the NTAP’s ratings for Growth, Value, Momentum, Stability, and Sentiment.
Lenovo Group Limited (LNVGY)
Based in Quarry Bay, Hong Kong, LNVGY develops, manufactures, and markets technology products and services. The company operates through: Intelligent Devices Group and Data Center Group segments.
On January 26, LNVGY unveiled Lenovo TruScale™ High-Performance Computing as a Service (HPCaaS), delivering the power of supercomputing to organizations of all sizes through a cloud-like experience. This new offering expands LNVGY’s everything-as-a-service TruScale portfolio and aims to enable HPC customers to access greater supercomputing resources.
In December, LNVGY introduced the ThinkEdge SE450 server, an Artificial Intelligence platform with advanced intelligence capability that provides faster insights and accelerates real-time decision-making. This AI-ready solution should enhance LNVGY’s ThinkEdge portfolio.
LNVGY’s revenue increased 23.1% year-over-year to $17.87 billion for the fiscal second quarter ended September 30. Its gross profit grew 33.4% from the year-ago value to $3.01 billion. Profit for the period came in at $557 million, indicating an improvement of 59.1% year-over-year. Its EPS increased 59.7% from its year-ago value to $3.96.
Analysts expect the company’s revenue to increase 7.5% year-over-year to $18.53 billion for the fiscal third quarter ended December 2021.
Over the past six months, the stock has gained 17.2% to close its last trading session at $21.83.
LNVGY’s POWR Ratings reflect its solid fundamentals. The company has an overall rating of B, which translates to Buy in our proprietary rating system. LNVGY has a Value grade of A and a Stability grade of B. It is ranked #6 in the same industry.
To see additional LNVGY’s ratings for Growth, Momentum, Sentiment, and Quality, click here.
CAJ shares were unchanged in after-hours trading Wednesday. Year-to-date, CAJ has declined -1.43%, versus a -3.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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