Thanks to the continued digital transformation and increased tech dependency, the tech sector might quickly rebound from the recent sell-offs caused by the rising interest rates and recession fears. Thus, we think buying the dip in quality tech stocks Juniper Networks (JNPR), AudioCodes (AUDC), and Extreme Networks (EXTR) could be rewarding. Continue reading….
Tech stocks have fared poorly this year due to the Fed’s aggressive interest rate hikes to tame the multi-decade high inflation. The tech-heavy Nasdaq Composite has declined 21% year-to-date.
Although the macro environment is expected to remain challenging in the upcoming months and hurt the industry’s financials, significant price declines of tech stocks offer attractive buying opportunities for long-term investors. Moreover, many analysts expect the bearish sentiment to ease out in the second half of the year, thanks to the better-than-expected corporate earnings.
The digital transformation and increasing use of cloud computing, artificial intelligence (AI), Virtual reality (VR), and the internet of things (IoT) are expected to keep driving the industry’s long-term growth. The global information technology market is expected to reach $13.81 trillion by 2026, growing at a CAGR of 10.3%.
Thus, we think investors should buy the dip in quality tech stocks Juniper Networks, Inc. (JNPR), AudioCodes Ltd. (AUDC), and Extreme Networks, Inc. (EXTR).
Juniper Networks, Inc. (JNPR)
JNPR is a marketer of networking and security solutions in the cloud, artificial intelligence (AI), and the 5G era. It provides products and services for high-performance networks to enable customers to build scalable, reliable, secure, and cost-effective networks for their businesses while achieving agility and improved operating efficiency through automation.
On July 31, 2022, the company announced that Frasers Property Australia had decided JNPR to upgrade its network infrastructure, enhance business agility and IT efficiency for simplified connectivity, and enhance end-user experience across diverse operations nationwide. This reflects the growing demand for JNPR’s services and the company’s vast market reach.
JNPR’s net revenue for the fiscal second quarter ended June 30, 2022, increased 8.3% year-over-year to $1.27 billion. The company’s operating income grew 25.8% year-over-year to $107.80 million. Its non-GAAP net income increased 34.2% year-over-year to $136.40 million. Also, non-GAAP EPS increased 35.4% year-over-year to $0.42.
For the third quarter ending September 30, 2022, analysts expect JNPR’s EPS and revenue to increase 9% and 13.7% year-over-year to $0.50 and $1.35 billion, respectively. It surpassed the EPS estimates in each of the trailing four quarters.
The stock has declined 22.4% year-to-date to close the last trading session at $27.71. It is currently trading 27.3% below its 52-week high of $38.14, which it hits on March 31, 2022.
JNPR’s POWR Ratings reflect solid prospects. According to our proprietary rating system, it has an overall rating of B, translating to a Buy. The POWR Ratings assesses stocks by 118 different factors, each with its own weighting.
It has a B grade for Value and Quality. It is ranked #11 out of 54 stocks in the Technology – Communication/Networking industry. Click here to see the other ratings of JNPR for Growth, Momentum, Stability, and Sentiment.
AudioCodes Ltd. (AUDC)
Headquartered in Lod, Israel, AUDC is a leading vendor of advanced voice networking and media processing solutions for the digital workplace. It offers solutions, products, and services for unified communications, contact centers, VoiceAI business lines, and service provider businesses.
On April 25, 2022, the company announced that it had been approved as a partner for Microsoft’s Operator Connect Accelerator. “AudioCodes Live Cloud is the ideal SaaS solution for assisting service providers in accelerating Operator Connect customer onboarding and operations, all on a per-user per-month plan,” said Lior Aldema, Chief Business Officer at AudioCodes.
He added, “Service providers can take full advantage of AudioCodes’ field-proven voice expertise to simplify Microsoft Teams voice connectivity, as well as offer Microsoft-certified business phones and meeting room devices as a service.”
AUDC’s total revenues increased 12.8% year-over-year to $68.36 million for the second quarter ended June 30, 2022. The company’s gross profit grew 5.8% year-over-year to $44.51 million.
Analysts expect AUDC’s revenue for the fiscal third quarter (ending September 2022) to increase 10.8% to $70.29 million. Its EPS for fiscal 2023 is expected to increase 22% year-over-year to $1.70. It surpassed EPS estimates in three of the trailing four quarters.
Over the past nine months, the stock has lost 36.9% to close the last trading session at $22.34. It is currently trading 40.2% below its 52-week high of $37.35, which it hits on November 17, 2021.
AUDC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Quality and a B for Stability. It is ranked first in the Technology – Communication/Networking industry. Click here to see the other ratings of AUDC for Growth, Value, Momentum, and Sentiment.
Extreme Networks, Inc. (EXTR)
EXTR is a software-driven networking solutions provider. It offers wireless network infrastructure equipment and develops software for network management, policy, analytics, security, and access controls.
On June 7, 2022, the company introduced a suite of new solutions: AIOps and SD-WAN for intelligent, flexible, and more secure networking. The new solutions with twin digital capabilities enhance the ExtremeCloud portfolio and are expected to witness high demand across organizations.
During fiscal 2022 (ended June 30, 2022), EXTR’s revenue increased 10.2% year-over-year to $1.11 billion. Its non-GAAP net income increased 43.2% year-over-year to $103.50 million. The company’s non-GAAP net income per share came in at $0.77, representing a 35% increase year-over-year.
Analysts expect EXTR’s EPS and revenue for the second quarter (ending December 2022) to increase 9.5% and 7.1% year-over-year to $0.23 and $300.84 million, respectively. The company surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 46% over the past month. However, it has declined 16.7% year-to-date to close the last trading session at $13.07. It is currently trading 21.3% below its 52-week high of $16.61, which it hits on December 30, 2021.
The stock has an overall rating of A, equating to a Strong Buy in our POWR Ratings system. EXTR has a B grade for Growth, Value, and Quality. Again, in the same industry, the stock is ranked #2. Click here to see more of EXTR’s component grades.
JNPR shares were unchanged in premarket trading Wednesday. Year-to-date, JNPR has declined -21.40%, versus a -13.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta’s profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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