The tech industry has flourished over the past few years. With the rising trend of digitization and significant advancements, investors are turning to technology stocks for potentially high returns.
While I think quality tech stocks Fuji Electric Co., Ltd. (FELTY) and Airgain, Inc. (AIRG) are ideal buys now, MicroVision, Inc. (MVIS) and Vuzix Corporation (VUZI) are best avoided considering their weak fundamentals.
Today technology has enabled the automation of processes, improved communication, facilitated data analysis, enhanced customer service, and transformed marketing.
The U.S. IT market is one of the largest and most competitive markets in the world. With fresh trends emerging every year, the IT sector has become one of the fastest-growing markets. Revenue in the Information technology service is expected to grow at a CAGR of 6.3% until 2027.
Additionally, the U.S. application industry is a significant contributor to the country’s economy, and its growth is primarily driven by the increasing demand for mobile devices and the rise of new technologies such as 5G, AR/VR, and AI.
The worldwide application development software market is estimated to reach $1.16 trillion by 2031, growing at a CAGR of 23.5%.
Despite the growth of the industry, the industry faces critical challenges, primarily linked to supply chain management, workforce optimization, and fostering innovation. These issues are further intensified by the prevalent global and macroeconomic uncertainties.
Let’s discuss the under $10 stocks mentioned above.
Stocks to Buy:
Fuji Electric Co., Ltd. (FELTY)
Headquartered in Tokyo, Japan, FELTY develops power semiconductors and electronics solutions in Japan and internationally.
FELTY’s forward EV/Sales of 0.82x is 49.4% lower than the industry average of 1.62x. Its forward Price/Sales multiple of 0.73 is 42.6% lower than the industry average of 1.28.
FELTY pays $0.20 annually as dividends. This translates to a yield of 2.10% at the current market price, compared to the 4-year average dividend yield of 2.44%. Its dividend payments have grown at a CAGR of 25.1% over the past five years.
During the nine months that ended December 31, 2022, FELTY’s net sales increased 11.4% year-over-year to ¥690.78 billion ($5.23 billion). Its net income increased 16.1% year-over-year to ¥33.22 billion ($252 million), whereas its net income per share increased 14% year-over-year to ¥202.75.
FELTY’s revenue is expected to increase 69.7% year-over-year to $7.54 billion during the current fiscal year ending March 2023. Additionally, it has topped consensus revenue estimates in three of the trailing four quarters.
The stock has gained 2.6% year-to-date to close the last trading session at $9.63.
FELTY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade in Value and Momentum. The stock is ranked #3 in the 41-stock Technology - Electronics industry.
Click here to see the POWR Ratings of FELTY (Growth, Quality, Stability, and Sentiment).
Airgain, Inc. (AIRG)
AIRG provides wireless connectivity solutions that creates and delivers embedded components, external antennas, and integrated systems worldwide.
On March 15, AIRG announced that a leading provider of railcars and associated services to the nation’s top railways had selected AIRG’s NimbeLink asset tracking solution to track and monitor its fleet of railcars.
AIRG’s cellular-based solution allows organizations to track assets, whether indoors, outdoors, or in transit, without the need for additional investment in wireless infrastructure.
This win is the latest for AIRG in a growing global niche in rail that includes the railways themselves as well as multiple suppliers to the industry, all of whom require simple and reliable connectivity to improve operational efficiency.
On February 27, AIRG introduced its new Lighthouse smart repeaters, designed to significantly reduce an operator’s capital expenses for extending range while enhancing 5G coverage and improving the customer experience.
This announcement continues AIRG’s streamlined end-to-end 5G development that includes fixed wireless access, repeaters, and enterprise software management solutions. AIRG begins trial on major operator networks in the second quarter this year.
AIRG’s forward EV/Sales of 0.61x is 77.4% lower than the industry average of 2.69x. Its forward Price/Sales multiple of 0.74 is 72.3% lower than the industry average of 2.65.
AIRG’s sales increased 40.6% year-over-year to $19.89 million for the fiscal fourth quarter that ended December 31, 2022. The company’s non-GAAP gross profit increased 22.4% year-over-year to $6.07 million. Its non-GAAP operating expenses decreased marginally from the year-ago period to $7.18 million.
Street expects AIRG’s revenue to come in at $16.45 million in the current fiscal quarter (ending March 2023). Additionally, it has topped consensus EPS and revenue estimates in three of the trailing four quarters.
The stock gained 1.1% intra-day to close its last trading session at $5.35.
It’s no surprise that AIRG has an overall rating of B, which translates to a Buy in our POWR Ratings system.
AIRG also has a B grade for Growth and Value. It is ranked #8 in the same industry.
For additional ratings for AIRG for Quality, Momentum, Sentiment, and Stability, Click here.
Stocks to Avoid:
MicroVision, Inc. (MVIS)
MVIS develops and sells lidar sensors used in automotive safety and autonomous driving applications. Its laser beam scanning technology is based on micro-electrical mechanical systems (MEMS), laser diodes, opto-mechanics, electronics, algorithms, and software.
MVIS’s forward EV/Sales of 27.86x is 935.7% higher than the industry average of 2.69x. Its forward Price/Sales multiple of 33.45 is significantly higher than the industry average of 2.65.
During the fiscal fourth quarter that ended December 31, 2022, MVIS’s loss from operations increased 10.9% year-over-year to $14 million. Net loss increased 6.7% year-over-year to $13.48 million, while its adjusted EBITDA decreased 4.5% year-over-year to negative $9.68 million.
MVIS’s EPS is expected to decline 37.5% year-over-year to negative $0.11 in the current fiscal quarter ending March 2023. Its revenue is expected to decline 42.9% year-over-year to $200 thousand for the same quarter. Also, the stock has failed to surpass the revenue estimates in each of the trailing four quarters, which is disappointing.
The stock has plunged 45.7% over the past nine months to close the last trading session at $2.25.
MVIS’s grim prospects are reflected in its POWR Ratings. The stock has an overall F rating, translating to a Strong Sell in our POWR Ratings system.
MVIS also has an F grade for Stability, Quality, and Value and a D for Growth and Sentiment. It is ranked last in the same industry.
Click here to access the Momentum grade for MVIS.
Vuzix Corporation (VUZI)
VUZI designs, manufactures, markets, and sells augmented reality (AR) wearable display and computing devices for consumer and enterprise markets in North America, Europe, the Asia-Pacific, and internationally. It provides M400 and M4000 series of smart glasses for enterprise, industrial, commercial, and medical markets.
VUZI’s forward EV/Sales of 10.37x is 846.4% higher than the industry average of 1.10x. Its forward Price/Sales multiple of 14.39 is significantly higher than the industry average of 0.85.
During the fourth quarter that ended December 31, 2022, VUZI’s total sales decreased 12.6% year-over-year to $2.90 million. The company’s gross loss increased 950% year-over-year to $126 thousand, and loss from operations increased 4.7% year-over-year to $11.85 million.
Analysts expect VUZI’s EPS to come to negative $0.15 for the current fiscal quarter ending March 2023. Its revenue is expected to come in at $3.70 million for the same quarter.
The stock has declined 41.3% over the past nine months to close its last trading session at $3.93.
VUZI’s bleak outlook is reflected in its POWR Ratings. The stock has an overall rating of F, translating to a Strong Sell in our POWR Rating system.
VUZI is also graded an F in Value, Momentum, and Quality and a D in Stability and Sentiment. It is ranked #40 in the same industry.
In addition to the POWR Rating grades stated above, VUZI’s rating for Growth can be seen here.
Consider This Before Placing Your Next Trade…
We are still in the midst of a bear market.
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FELTY shares were trading at $9.60 per share on Tuesday morning, down $0.03 (-0.32%). Year-to-date, FELTY has gained 2.24%, versus a 3.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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