Digital technology is transforming enterprises and their operations with evolving technologies like generative AI. Also, cloud-based software and rising demand for automated business processes are prompting new innovations for efficient operations.
Given the industry’s bright prospects, fundamentally sound high-growth tech stocks Pure Storage, Inc. (PSTG), Leidos Holdings, Inc. (LDOS), and N-able, Inc. (NABL) could be ideal portfolio additions to defy market volatility.
With the rapid emergence of generative AI, enterprises are shifting their focus to leverage its capabilities to streamline or automate some of their IT management services. This also indicate an increase in demand for a wide range of new services, offering significant opportunity for providers.
With this, the emerging market for services relating to gen AI/AI is likely to reach $200 billion by 2029 with tech services providers profitability growing upto 30% in the period.
The rapid growth has also resulted in staggering IT spending. According to Gartner, worldwide IT spending is expected to total $5.06 trillion in 2024, reflecting growth of 8% from the prior year driven by enterprises planning for GenAI initiatives and bringing GenAI capabilities to their existing products and services.
Further, with the growing popularity of cloud-based software and rising concern to automate business processes, the demand for IT services worldwide is rapidly growing. The global IT services market is expected to reach $1.85 trillion by 2031, growing at a CAGR of 9.5%.
Besides, amid growing demand for energy-efficient and compact storage solutions in homes and small offices, together with rising adoption of NVMe in enterprises storage systems, and growing usage of 5g technology, the next-generation data storage market is projected to hit $90 billion by 2029, growing at a CAGR of 6.7%.
Considering the encouraging market trends, let’s delve deeper into the fundamentals of the three tech stocks: PSTG, LDOS, and NABL.
Pure Storage, Inc. (PSTG)
PSTG is engaged in the data storage and management technologies, products, and services internationally. Its Purity software is shared across its products and provides enterprise-class data services. The company also offers FlashArray integrated hardware systems, including FlashArray//X, FlashArray//C, FlashArray//XL, FlashArray//E, and FlashArray File Services.
PSTG’s revenue has grown at CAGR of 19.3% over the past three years. The company’s tangible book value has increased 51.2% over the same timeframe, while its total assets and levered free cash flow have improved at CAGRs of 10.3% and 57%, respectively.
On June 5, PSTG announced a strategic investment in LandingAI, the leading visual AI company, to advance vision AI technology. This collaboration aims to integrate PSTG’s data storage platform with LandingAI’s Large Vision Model (LVM) solutions, enhancing enterprises’ AI capabilities and lead to significant AI/ML advancements for the customers.
For the first quarter that ended May 5, 2024, PSTG’s total revenue increased 17.7% year-over-year to $693.48 million. Its non-GAAP gross profit grew 20.4% from the year-ago value to $512.16 million. The company’s non-GAAP net income of $107.30 million and $0.32 per share, indicates increases of 334.7% and 300% from the prior year’s quarter, respectively.
Also, the company’s non-GAAP free cash flow stood at $172.68 million, up 41.7% year-over-year.
According to the company’s guidance, PSTG expects revenue of $755 million and non-GAAP operating income of $125 million for the second quarter of fiscal 2025.
Also, for the fiscal full year 2025, the company expects revenue of $3.10 billion with revenue year-over-year growth rate of 10.5%. Its non-GAAP operating income is expected to be $532 million.
Analysts expect PSTG’s revenue and EPS for the second quarter (ending July 2024) to increase 9.8% and 8.2% year-over-year to $756.09 million and $0.37, respectively. Also, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Over the past six months, PSTG’s stock has gained 80.7% and 69.6% over the past year to close the last trading session at $62.94.
PSTG’s bright outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a 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 an A grade for Growth and Quality. Within the A-rated Technology - Storage industry, PSTG has topped among the stocks.
Click here to access additional ratings of PSTG (Value, Sentiment, Stability, and Momentum).
Leidos Holdings, Inc. (LDOS)
LDOS offers services and solutions in the defense, intelligence, civil, and health markets internationally. The company operates through Defense Solutions; Civil; and Health segments.
LDOS’ revenue and EBITDA have grown at respective CAGRs of 7.3% and 7.1% over the past three years. The company’s EBIT has increased 8.2% over the same timeframe, while its normalized net income and levered free cash flow have improved at CAGRs of 9.2% and 14.1%, respectively.
On June 13, LDOS was awarded a $738 million follow-on contract to provide enterprise information technology and telecommunications support, including cybersecurity, to Headquarters Air Force, Headquarters Space Force, Air Force District of Washington, and other Department of the Air Force activities and missions in the national capital region.
On May 7, LDOS secured a $631 million award from the U.S. Army Contracting Command to support the army’s DIABLO program. The contract positioned LDOS as a leading mission equipment provider to the Army for the next 10 years.
Also, on May 1, LDOS was awarded a contract by the National Geospatial-Intelligence Agency's Exploitation Services Program to sustain and modernize geospatial processing for increased efficiency and interoperability. The award referred to as Maru, has a ceiling value of $206 million, if all task orders are exercised over a five-year period of performance.
For the first quarter that ended March 29, 2024, LDOS’ revenues increased 7.5% year-over-year to $3.97 billion. Its operating income rose 56.6% year-over-year to $415 million. Non-GAAP net income and EPS attributable to Leidos common stockholders came in at $314 million and $2.29, up 54.7% and 55.8% over the prior year’s quarter.
Furthermore, the company’s non-GAAP EBITDA increased 41.6% from the year-ago value to $490 million.
Analysts expect LDOS’ revenue for the second quarter (ended June 2024) to increase 5.6% year-over-year to $4.05 billion, and its EPS for the same period is expected to grow 24.5% year-over-year to $2.24. Moreover, the company topped the consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
The stock has surged 35.1% over the past six months and 65% over the past year to close the last trading session at $145.73.
LDOS’ POWR Ratings reflect its bright prospects. The stock has an overall grade of A, translating to a Strong Buy in our proprietary rating system.
LDOS has an A grade for Sentiment. It also has a B grade for Stability, Growth, and Momentum. It has topped among the 79 stocks within the Technology - Services industry.
To see the other ratings of LDOS for Quality and Value, click here.
N-able, Inc. (NABL)
NABL provides cloud-based software solutions for managed service providers globally. Their platform supports digital transformation and growth for small and medium-sized enterprises, serving as an integrated, enterprise-grade operating system that scales with MSP businesses.
NABL’s revenue and EBITDA have grown at respective CAGRs of 11.7% and 13.5% over the past three years. The company’s EBIT has increased 28.9% over the same timeframe, while its normalized net income and total assets have improved at CAGRs of 94.4% and 2.5%, respectively.
On May 21, NABL collaborated with MSPAlliance to help equip managed service providers (MSPs) to meet compliance requirements proactively using MSPAlliance’s Cyber Verify program. Through the collaboration, NABL partners can quickly identify gaps, certify alignment with compliance requirements, and offer compliance-as-a-service solutions to customers.
During the first quarter that ended on March 31, 2024, NABL’s subscription and other revenue increased 13.9% year-over-year to $113.75 million while its gross profit rose 14.2% from the year-ago value to $95.45 million. The company’s non-GAAP operating income of $33.21 million indicates growth of 22.6% from the prior year’s quarter.
In addition, the company’s non-GAAP net income and EPS came in at $19.84 million and $0.11, up 32.5% and 37.5% year-over-year, respectively.
Street expects NABL’s EPS for the second quarter (ended June 2024) to increase 15.5% year-over-year to $0.10. Its revenue is expected to grow 10.1% year-over-year to $116.83 million for the same quarter. Furthermore, the company surpassed the consensus revenue and EPS estimates in all of the trailing four quarters.
Shares of NABL have gained 10.3% over the past month and 14.2% over the past six months to close the last trading session at $14.84.
NABL’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
NABL has a B grade for Stability, Sentiment and Growth. It is ranked #16 among 79 stocks in the Technology - Services industry.
In addition to the POWR Ratings we’ve stated above, we also have NABL’s ratings for Value, Momentum, and Quality. Get all NABL ratings here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
PSTG shares were trading at $63.69 per share on Wednesday afternoon, up $0.92 (+1.47%). Year-to-date, PSTG has gained 78.60%, versus a 16.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
The post 3 High-Growth Tech Stocks Defying Market Volatility appeared first on StockNews.com