The ongoing economic recovery and fears over rising inflation caused investors to rotate away from expensive tech stocks to quality cyclical stocks earlier this year. However, the sector is well positioned for solid growth because businesses are increasingly adopting advanced technologies to stay competitive in the digital era. Furthermore, because hybrid working arrangements are expected to persist for the foreseeable future, demand for cloud computing, 5G, and other advanced technologies should continue increasing. Indeed, the industry is expected to hit a $5 trillion market value by year’s end.
Given the industry’s solid growth prospects, investors are gradually returning to tech stocks. This is evident in the Technology Select Sector SPDR Fund’s (XLK) 6.3% returns over the past month versus the SPDR S&P 500 Trust ETF’s (SPY) 2.3% gains.
Given this backdrop, we think it wise to bet on Nokia Corporation (NOK) and Sharp Corporation (SHCAY). They are currently trading at less than $10 but hold immense upside potential.
Nokia Corporation (NOK)
Headquartered in Espoo, Finland, NOK provides mobile and fixed network solutions worldwide. It operates through four segments: Mobile Networks, Network Infrastructure, Cloud and Network Services, and Nokia Technologies. The company focuses on mobile radio, including macro radio, small cells, and cloud native radio solutions for communications service providers and enterprises.
NOK opened its first Open RAN (O-RAN) Collaboration and Testing Center at its offices in Dallas, Texas on June 16, 2021. Pasi Toivanen, Head of Edge Cloud at Nokia, said “Our new O-RAN Collaboration and Testing Center highlights our continued commitment towards O-RAN and the development of new solutions.”
NOK’s comparable net sales increased 3% year-over-year to €5.08 billion ($6.15 billion) for the first quarter ended March 31, 2021. Its comparable operating profit grew 375% year-over-year to €551 million ($668.01 million), while its comparable profit for the period increased 1,036% year-over-year to €375 million ($454.64 million). Also, its comparable EPS came in at €0.07 ($0.08), up 600% year-over-year.
The company’s EPS is expected to come in at $0.30 in its fiscal year 2022, which represents a 3.4% year-over-year rise. It surpassed the Street’s EPS estimates in three of the trailing four quarters. NOK’s revenue is expected to increase 4.3% year-over-year to $26 billion in 2021. The stock’s price has surged 35.3% year-to-date to close yesterday’s trading session at $5.29.
NOK’s POWR Ratings reflects this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Growth and Sentiment, and a B grade for Value. Within the B-rated Technology - Communication/Networking industry, NOK is ranked #11 of 56 stocks.
To see the additional POWR Ratings for NOK (Quality, Momentum and Stability), click here.
Click here to check out our Cloud Computing Industry Report for 2021
Sharp Corporation (SHCAY)
Headquartered in Sakai, Japan, SHCAY manufactures and sells telecommunication equipment, electric and electronic application equipment, and electronic components internationally. The company operates through three segments: Smart Life, 8K Ecosystem, and ICT. In addition, it offers refrigerators, LCD TVs and mobile phones.
On May 31, 2021, SHCAY announced that it would be installing a roof-mounted solar power system at a plant belonging to one of Thailand's major tire manufacturers, the Deestone Group*2. SHCAY remains committed to promoting the use of renewable energy worldwide, and the Deestone Group*2 contract should help increase its sales considerably in the near term.
SHCAY’s net sales increased 7.2% year-over-year to ¥2,425.91 billion ($22.03 billion) for its fiscal year ended March 31, 2021. Its operating profit grew 61.5% year-over-year to ¥83.11 billion ($754.92 million), while its ordinary profit increased 25.9% year-over-year to ¥63.17 billion ($573.83 million). Also, its EPS came in at ¥87.2 ($0.79), up 288.1% year-over-year.
Analysts expect SHCAY’s revenue to increase 108.9% year-over-year to $22.67 billion in its fiscal year 2022. The stock gained 60.5% over the past year to close yesterday’s trading session at $4.27.
SHCAY’s POWR Ratings reflect solid prospects. The company has an overall rating of B, which translates to Buy in our proprietary ratings system. It has an A grade for Value, and a B grade for Stability and Momentum.
Click here to see the additional POWR Ratings for SHCAY (Growth, Sentiment and Quality).
SHCAY is ranked #9 of 46 stocks in the B-rated Technology - Hardware industry.
NOK shares were trading at $5.22 per share on Wednesday afternoon, down $0.07 (-1.32%). Year-to-date, NOK has gained 33.50%, versus a 13.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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