The tech sector was hit the hardest in 2022 amid the Fed’s aggressive rate hikes and fears of a possible recession. The tech-heavy Nasdaq Composite lost 18.7% over the past year. Moreover, job cuts in the tech space have been mounting in the face of uncertain economic conditions.
However, experts predict that rising demand for advanced tech solutions due to rapid digitalization across various industries and rising investments would cause substantial growth in the tech industry this year despite lingering macro headwinds.
According to the recent forecast by Gartner, Inc. (IT), worldwide IT spending is projected to reach $4.50 trillion in 2023, up 2.4% from the last year. The global Information Technology market is expected to grow at a 4.5% CAGR to reach $6.20 trillion by 2028.
Given the backdrop, it could be wise to buy and hold fundamentally strong tech stock Dell Technologies Inc. (DELL) this year. However, WiSA Technologies, Inc. (WISA) could be best avoided due to its financial weakness and dim growth prospects.
Stock to Buy:
Dell Technologies Inc. (DELL)
DELL designs, manufactures, markets, and supports a range of comprehensive and integrated solutions, products, and services on a global scale. Its segments include Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG). The company also offers information security solutions to shield its clients from online threats.
On January 17, 2023, DELL expanded the industry’s top-selling server portfolio1 by adding 13 next-generation Dell PowerEdge servers designed to accelerate performance and reliability for powerful computing across core data centers, large-scale public clouds, and edge locations.
With this launch, DELL should be able to provide the performance that would speed up scientific advancement and spread innovation around the globe, contributing to the business's expansion.
Furthermore, on November 17, 2022, DELL strengthened its industry leadership in data protection appliances and software to assist clients in protecting their data on-premises, in public clouds, and at the edge. The Dell PowerProtect Data Manager Appliance is at the forefront of a series of innovations in multi-cloud data protection that are simple to use and consume.
DELL's innovation in AI-powered resilience and operational security accelerates the adoption of Zero Trust architectures, protecting enterprises from the growing threat of cyberattacks. This should prove strategically beneficial for DELL.
For the third quarter that ended October 28, 2022, DELL’s services revenue grew 6.2% year-over-year to $5.78 billion. Its non-GAAP operating income rose 21.7% from the year-ago value to $2.38 billion. Also, the company’s non-GAAP net income increased 29.9% from the prior year’s period to $1.71 billion, while its non-GAAP EPS stood at $2.30, up 38.6% year-over-year.
DELL pays a $1.32 per share dividend annually, which translates to a 3.30% yield on the current price level. Its four-year average dividend yield is 0.33%.
The consensus EPS estimate of $7.46 for the fiscal year that ended January 2023 indicates a 19.9% year-over-year improvement. Furthermore, the company surpassed its consensus EPS in three of four trailing quarters, which is impressive. Shares of DELL have gained 1.5% intraday to close the last trading session at $40.62.
DELL’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Growth, Value, and Sentiment. In the 44-stock Technology - Hardware industry, it is ranked #11.
Beyond what we stated above, we also have DELL’s ratings for Stability, Quality, and Momentum. Get all DELL ratings here.
Stock to Avoid:
WiSA Technologies, Inc. (WISA)
WISA develops and markets wireless audio technology for smart devices and next-generation home entertainment systems in the United States, Taiwan, China, Japan, and Korea. It provides immersive audio experiences for high-definition material, such as movies, videos, music, sports, gaming/esports, and other media.
On January 26, 2023, the company approved a 1-for-100 reverse split of its common stock. In general, market participants do not view a reverse stock split favorably. It suggests that the stock price has reached its lowest point and that firm management is seeking to artificially increase the prices without presenting a viable business proposition.
Also, on December 27, 2022, WISA reported receiving a letter from Nasdaq Stock Market LLC informing that it had been given an additional 180 days to comply with the rule governing the minimum bid price on Nasdaq, or until June 20, 2023.
Nasdaq had notified the company that its common stock no longer fulfilled the minimum $1 bid price per share criterion based on the previous 30 consecutive business days. This prompted WISA to effect a reverse stock split during the second compliance period.
For the third quarter that ended September 30, 2022, WISA’s revenue decreased 48.1% year-over-year to $937 thousand, while its gross profit declined 74.3% from the prior year’s quarter to $130 thousand.
Its loss from operations worsened by 62.7% year-over-year to $4.75 million. Also, the company’s net loss and net loss per share widened 125.6% and 106.7% year-over-year to $4.65 million and $0.31, respectively.
Analysts expect WISA to report a loss per share of $84 for the fiscal year that ended in December 2022. Moreover, the company’s revenue for the same year is expected to decline 46.5% year-over-year to $3.50 million. Also, WISA missed its consensus EPS estimates in three of four trailing quarters, which is disappointing.
The stock has plunged 30.1% over the past five days and 91.1% over the past year to close the last trading session at $10.49.
WISA’s poor fundamentals are apparent in its POWR Ratings. The stock has an overall rating of F, equating to a Strong Sell in our proprietary rating system.
WISA has an F grade for Quality and Stability and a D for Sentiment and Growth. Within the same industry, it is ranked #41 of 44 stocks.
In addition to the POWR Ratings I’ve just highlighted, you can see WISA’s ratings for Value and Momentum here.
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DELL shares were trading at $40.74 per share on Wednesday afternoon, up $0.12 (+0.30%). Year-to-date, DELL has gained 2.11%, versus a 5.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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