Semiconductor companies, such as NVIDIA Corporation (NVDA), are struggling due to the market decline, export restrictions and declining demand. However, the broader technology market is expected to be uncertain in the near term and to continue to grow as a result of ongoing digitization. That’s why we think high technology stocks Cisco (CSCO) and Hackett Group (HCKT) are better investments than NVDA. Keep reading….
NVIDIA Corporation (NVDA) provides graphic, computing and networking solutions worldwide. on October 7, new restrictions were imposed on chipmakers, including NVDA, to prevent technology from increasing China’s military might. The companies are now required to obtain a license from the Ministry of Commerce to export advanced chips and chip-making equipment.
The above restrictions closely followed last month’s announcement in which the White House Blocked NVDA from exporting high-end graphics chips to China because of similar concerns. The company said the ban impacted $400 million in potential sales to China.
For the second quarter of fiscal 2022, NVDA’s non-GAAP net revenue and EPS decreased 50.7% and 51% year-over-year to $1.29 billion and $0.51, respectively. Analysts also expect earnings per share and revenue for the third quarter of fiscal 2023 (ending October 2022) to come in at $0.71 and $5.85 billion, pointing to a decline of 39.3%, respectively. and 17.6% year on year. The stock has fallen 59.9% so far.
The recently released job data for September appears to have paved the way for another significant rate hike by the Federal Reserve at its meeting next month. This signals a new headwind for technology companies.
Despite the current headwinds, demand for ubiquitous tech goods and services is expected to continue to grow with the increasing adoption of cloud computing, artificial intelligence (AI), virtual reality (VR), the Internet of Things (IoT), and increasing business automation. processes.
The global technology market is expected to grow at a CAGR of 25.7% over the next five years to reach $3.17 billion by 2027, with the United States expected to strengthen its leadership in this area.
Therefore, we recommend investing in fundamentally strong technology stocks Cisco Systems, Inc. (CSCO) and Hackett Group Inc. (HCKT) instead of NVDA for better risk-adjusted returns.
Cisco Systems, Inc. (CSCO)
CSCO designs, manufactures, and markets Internet protocol-based networks and other networking, security, collaboration, application, and cloud products. The company operates in three geographic segments: Americas; Europe, Middle East and Africa (EMEA); and Asia-Pacific, Japan and China (APJC).
On October 5, CSCO announced an extension of its existing SD-WAN partnership with Microsoft (MSFT) to enable customers to bypass the public internet and MPLS to route their Cisco SD-WAN traffic over the latter’s Azure cloud backbone. This is expected to add value by providing speed and cost benefits.
For the 2022 fiscal year ending July 31, CSCO’s revenue grew 3.6% year-over-year to $51.6 billion, while the operating income rose 8.9% year-over-year to $13.97 billion. The company’s non-GAAP net income increased 3.7% year-over-year to $14.10 billion, translating to earnings per share of $3.36, up 4.3% year-over-year.
Analysts expect CSCO’s revenue and earnings per share for fiscal 2023 to grow 5% and 5.1% year-over-year to $54.11 billion and $3.53, respectively. The company has a distinguished history of earnings surprises, exceeding consensus EPS estimates in each of the next four quarters.
Over the past month, CSCO’s stock fell 9.6% to close out its latest trading session at $40.27.
CSCO’s overall B rating corresponds to a Buy in our POWR ratings system. The POWR Ratings rate stocks on 118 different factors, each with its own weighting.
It has an A grade for quality. Within the Technology – Communication/Networking industry, it ranks 5th out of 49 stocks.
Click here to view the additional POWR ratings for growth, momentum, stability, sentiment and value for CSCO.
Hackett Group Inc. (HCKT)
HCKT is a business and technology consultancy. The company provides benchmarking, executive consulting, business transformation, and cloud business application deployment.
On September 22, HCKT announced the launch of a new Market Intelligence Service for software and service providers and users. The service measures the ability of software and service providers to deliver business value and their unique capabilities to help businesses achieve Digital World Class performance.
HCKT believes the new service will be a powerful and compelling value proposition for all C-level executives and their respective teams.
HCKT’s total revenue increased 3.7% year over year to $75.93 million for the second quarter of 2022. The company’s total assets were $217.89 million as of July 1, 2022, compared to $207.54 million on December 31, 2021.
Analysts expect HCKT’s revenue and earnings per share for fiscal 2022 to grow 6.6% and 10.4% year-over-year to $297.20 million and $1.45, respectively. The company has also surpassed consensus EPS estimates in each of the next four quarters.
Shares of HCKT are down 2.4% in the past month to close out the latest trading session at $19.05.
HCKT’s promising outlook is reflected in the overall POWR rating of A, which translates to a strong buy in our proprietary rating system. It also has an A for Sentiment and Quality and a B for Value and Stability.
HCKT tops the list of 10 A-rating stocks Outsourcing – technical services industry.
click here for an additional assessment of HCKT (growth and momentum).
NVDA shares traded at $116.70 per share Monday afternoon, down $4.06 (-3.36%). Year-to-date, NVDA is down -60.29%, versus a -23.32% rise in the benchmark S&P 500 index over the same period.
Fascinated by the traditional and evolving factors influencing investment decisions, Santanu decided to pursue a career as an investment analyst. Before moving to investment research, he was a process officer at Cognizant. With a master’s degree in business administration and a fundamental approach to analyzing companies, he aims to help private investors identify the best long-term investment opportunities.
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