The technology industry faced a tumultuous 2023 amid an unpredictable economic climate and widespread lay-offs from the leading players within the IT sector. However, the swift emergence and adoption of new technologies, coupled with increased investment in digital transformation, heralds an era of long-term growth in the tech industry.
Given this backdrop, quality tech stocks Insight Enterprises, Inc. (NSIT), Turtle Beach Corporation (HEAR), and Boxlight Corporation (BOXL) could be solid buys now.
The technology industry grappled due to the Federal Reserve's aggressive interest rate hikes. A high-interest rate is particularly impactful for this industry, as it relies heavily on borrowing. Despite these challenges, the tech-centric Nasdaq Composite has made substantial progress, recording an 11.7% return over the past three months, spurred by the mounting enthusiasm around generative artificial intelligence (AI).
A potential easing of inflation and anticipated rate cuts could help maintain manageable borrowing costs. High-growth tech firms, particularly those with significant capital expenditure, stand to gain from these reduced financing costs since it enables them to allocate more resources toward innovation and growth.
Moreover, the swift wave of digital transformation sweeping across various sectors – from healthcare and automotive to real estate – has profoundly influenced our lives. This transformation paves the way for accessible and affordable services previously out of reach and also heralds a burgeoning demand for sophisticated technical solutions.
The tech industry's continuously evolving nature is underpinned by continual investment in research and development by global tech firms. Their commitment to staying ahead of emerging trends and creating innovative products puts the tech industry among the world's most lucrative and expansive sectors. Global IT spending is projected to increase 8% year-over-year to $5.07 trillion in 2024.
In the longer term, the technological evolution driven by innovations in robotics and Gen AI is destined to elevate living standards and potentially open up new avenues for growth and profitability for businesses providing these invaluable tech solutions.
In light of these encouraging trends, let's look at the fundamentals of the three tech stocks.
Insight Enterprises, Inc. (NSIT)
NSIT provides information technology (IT) hardware, software services and solutions in the U.S. and internationally. The company operates through three geographical segments: North America; Europe, Middle East, and Africa (EMEA); and Asia-Pacific (APAC).
On December 1, 2023, NSIT acquired SADA, a leading cloud business and technology consultancy and six-time Google Cloud partner of the year. The acquisition advanced NSIT’s strategy and further strengthened its unique position as a leading Solutions Integrator offering market-leading multi-cloud solutions at scale.
SADA adds significant expertise and scale and enhances NSIT’s cloud offerings to clients. The acquisition strengthened NSIT’s current position as a provider of cloud, data, AI, cybersecurity, and intelligent edge solutions and services across the world’s top hyperscale ecosystems: Microsoft Azure, Google Cloud and Amazon Web Services (AWS).
NSIT’s trailing-12-month cash from operations of $717.73 million is 828.9% higher than the industry average of $77.27 million. Its trailing-12-month ROCE and ROTA of 16.52% and 5.28% are significantly higher than the industry averages of 1.46% and 0.48%, respectively.
Over the past three and five years, its levered free cash flow grew at CAGRs 40.7% and 26.5%, respectively. Moreover, its EPS grew at 16.7% and 14.9% CAGRs over the same periods.
For the fiscal third quarter that ended September 30, 2023, NSIT’s total net sales stood at $2.27 billion, while gross profit increased 2.4% year-over-year to $408.87 million. Moreover, its adjusted EBITDA stood at $128.76 million, up 14.5% from the year-ago quarter.
For the same quarter, its adjusted consolidated net earnings and adjusted EPS increased 17% and 19.1% from the prior-year quarter to $81.68 million and $2.37, respectively.
Street expects NSIT’s EPS for the fiscal fourth quarter of 2023 (ended December 2023) to increase 20.8% year-over-year to $3.06. Its revenue is expected to be $2.41 billion for the same quarter.
The stock has gained 66.4% over the past year to close the last trading session at $183.24. Over the past nine months, it has gained 33.6%.
NSIT’s POWR Ratings reflect its positive prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Momentum, Stability, and Quality. Within the Technology – Services industry, it is ranked #28 out of 77 stocks.
To see additional POWR Ratings for Growth, Value, and Sentiment for NSIT, click here.
Turtle Beach Corporation (HEAR)
HEAR operates as an audio technology company in North America, Europe, the Middle East, and the Asia Pacific. It develops, commercializes, and markets products under the Turtle Beach and ROCCAT brands.
On December 15, 2023, HEAR launched its critically acclaimed and highly-anticipated wireless controller, the Designed for Xbox Turtle Beach Stealth Ultra Wireless Smart Game Controller.
The Stealth Ultra uses HEAR’s proprietary low-latency wireless technology for connecting with Xbox consoles and Windows PCs and Bluetooth for gaming on compatible Smart TVs and Android mobile devices.
The company expertly delivered premium components, build quality, and features to elevate the Stealth Ultra above other controllers in the market today, raising the bar for the whole category. This milestone underscores HEAR’s commitment to providing gamers with cutting-edge technology and an unparalleled gaming experience.
HEAR’s trailing-12-month levered FCF margin of 16.15% is 86.7% higher than the industry average of 8.65%, while its trailing-12-month asset turnover ratio of 1.39x is 124.8% higher than the industry average of 0.62x.
Over the past three and five years, its levered free cash flow grew at CAGRs of 8.2% and 20.3%, respectively.
For the fiscal third quarter that ended September 30, 2023, HEAR’s net revenue and gross profit increased 15.3% and 143.7% year-over-year to $59.16 million and $17.69 million, respectively. Moreover, its adjusted EBITDA came to $1.04 million, compared to an adjusted EBITDA of negative $6.95 million in the prior year quarter.
For the nine months that ended September 30, 2023, its net cash provided by operating activities came at $7.94 million, compared to the net cash used for operating activities of $69.52 million in the year-ago period. For the same period, its cash at end of period increased 17.5% from the prior-year period to $12.34 million.
Street expects HEAR’s revenue and EPS for the fiscal fourth quarter of 2023 (ended December 2023) to increase 10.6% and 456% year-over-year to $111.60 million and $0.56, respectively.
The stock has gained 19.6% over the past three months to close the last trading session at $10.32. Over the past year, it has gained 16.6%.
HEAR’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system.
HEAR has a B grade for Growth, Value, and Sentiment. It is ranked #10 out of 41 stocks within the B-rated Technology – Electronics industry.
Click here for the additional POWR Ratings for HEAR (Momentum, Stability, and Quality).
Boxlight Corporation (BOXL)
BOXL develops, sells, and services interactive classroom technology products and solutions for the K-12 education market worldwide.
On January 4, BOXL launched MimioPro G, a Google EDLA-certified interactive flat panel that includes free Google-certified training. BOXL is the only education technology solutions provider to offer this unique combination, reinforcing its commitment to innovative and holistic offerings.
The EDLA-certified MimioPro G interactive flat panel provides easy, native access to Google accounts and tools, including the Google Play Store and Google Workspace for Education, streamlined lesson delivery, and BOXL’s suite of education software.
BOXL’s trailing-12-month asset turnover ratio of 0.92x is 48.1% higher than the industry average of 0.62x. Over the past three and five years, its revenue grew at CAGRs of 84.1% and 42.1%, respectively.
For the fiscal third quarter that ended September 30, 2023, BOXL’s net revenues and gross profit stood at $49.67 million and $18.01 million, respectively. Moreover, its adjusted EBITDA stood at $4.93 million.
For the nine months that ended September 30, 2023, its net cash provided by operating activities increased significantly from the year-ago period to $8.24 million. As of September 30, 2023, BOXL’s cash and cash equivalents stood at $18.42 million, compared to $14.59 million as of December 31, 2022.
Street expects BOXL’s revenue for the fiscal fourth quarter of 2023 (ended December 2023) to be $38.49 million. The company surpassed consensus EPS estimates in three of the trailing four quarters, which is impressive.
The stock has declined 3% intraday to close the last trading session at $1.02.
BOXL’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
BOXL has a B grade for Value and Sentiment. Within the Technology – Communication/Networking industry, it is ranked #11 out of 52 stocks.
Beyond what we’ve stated above, we have also rated the stock for Growth, Momentum, Stability, and Quality. Get all ratings of BOXL here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
NSIT shares were unchanged in premarket trading Tuesday. Year-to-date, NSIT has gained 3.41%, versus a 0.29% 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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