Computer

3 Oversold Computer Hardware Stocks Too Cheap to Ignore

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US tech stocks have seen steep price declines since the start of the year. Amid 40-year-high inflation rates, growing worries about upcoming interest rate hikes and a growing shortage of semiconductors, investors sold off overvalued growth tech stocks. Moreover, the escalation of the conflict between Russia and Ukraine rattled the fragile stock market.

The bearish sentiment surrounding the tech industry is evident in the 18% drop in the tech-heavy NASDAQ composite index year-to-date. About 70% Tech stocks listed on US exchanges have so far fallen in price. However, hardware companies are expected to maintain their growth trajectory in the coming months due to strong demand amid persistent remote culture.

Despite macroeconomic headwinds, fundamentally strong computer hardware stocks of HP Inc. (HPQ), Western Digital Corporation (WDC) and Lenovo Group Limited (LNVGY) are expected to experience robust long-term growth. Thus, we believe that the recent decline in the price of these stocks could be an ideal entry point.

HP Inc. (HPQ)

HPQ of Palo Alto, California develops, manufactures and markets personal computers and other access devices, printing products and related solutions and services in the United States and around the world. The Company operates in three segments: Personal Systems; Impression; and business investment. HPQ serves individuals, small and medium businesses, and large enterprises.

On February 23, 2022, HPQ introduced the HP LaserJet Tank MFP 2600, designed for entrepreneurs and small business owners by streamlining print management. This launch should create new revenue streams for the company.

On February 10, 2022, HPQ acquired Choose Packaging, a packaging development company, to develop its technology. This acquisition could promote sustainability, expand the addressable market and increase revenue.

During the first quarter of fiscal 2022, ended January 31, 2022, HPQ’s net revenue increased 8.8% year-on-year to $17.03 billion. HPQ’s operating profit edged up year-over-year to $1.50 billion. The company’s net profit rose slightly from the same period last year to $1.20 billion. And its net earnings per share rose 19.6% year over year to $1.10.

HPQ is relatively undervalued compared to its peers. In non-GAAP forward P/E terms, HPQ is currently trading at 8.47x, 55.9% below the industry average of 19.20x. Its forward price/sales multiple of 0.58 is 82% below the industry average of 3.22x. Its price-to-cash flow and EV-to-EBIT ratios of 6.93 and 7.42, respectively, compare to industry averages of 18.40 and 16.56.

Analysts expect HPQ’s revenue for its second quarter of fiscal 2022, ending April 31, 2022, to be $16.21 billion, a marginal year-on-year increase. on the other. The Street expects the company’s EPS for the current quarter to be $1.05, representing a 13.2% year-over-year increase. The company has an impressive track record of earnings surprises; it has exceeded consensus EPS estimates in each of the past four quarters.

The stock is down 6% year-to-date and 6.8% in the past month. It closed yesterday’s trading session at $35.41.

HPQ POWR Rankings reflect this promising prospect. HPQ has an overall rating of B, which translates to Buy in our proprietary system. POWR ratings rate stocks on 118 separate factors, each with its own weighting.

HPQ has a B rating for value and quality. In category B Technology – Material industry, it is ranked #7 out of 45 stocks.

To view additional POWR (momentum, stability, growth, and sentiment) ratings for HPQ, Click here.

Western Digital Society (WDC)

WDC in San Jose, California develops, manufactures, markets and sells data storage devices and solutions in the United States, Europe, the Middle East, Africa, Asia and internationally. The company provides consumer devices, flash-based embedded storage products for portable devices, data center devices and solutions, and removable cards for consumer devices. WDC sells its products under the G-Technology, SanDisk and WD brands.

WDC’s net revenue increased 22.6% year-over-year to $4.83 billion in the second quarter of its fiscal 2022, which ended December 31, 2021. gross profit improved 64.9% year over year to $1.58 billion. WDC’s operating profit increased 157% year over year to $882 million. The company’s net income rose 242% year over year to $724 million. And its earnings per share rose 233% year-on-year to $2.30.

LMT trades at a discount to its peers. In non-GAAP forward P/E terms, WDC is currently trading at 6.27x, 67.3% below the industry average of 19.20x. Its forward EV/EBIT multiple of 6.76 is 59.2% below the industry average of 16.56x.

The consensus revenue estimate of $4.40 billion for its third quarter of fiscal 2022, ending March 31, 2022, represents year-over-year growth of 6.2% over the same period in 2021. Consensus EPS estimate of $1.53 for the current quarter represents 49.5% year-over-year. growth over the year. The company has an impressive track record of earnings surprises; it has exceeded consensus EPS estimates in each of the past four quarters.

Shares of WDC have fallen 28.5% year-to-date and 21.2% over the past three months. WDC closed yesterday’s trading session at $46.61.

WDC’s POWR ratings reflect this strong outlook. The stock has an overall rating of B, which translates to Buy in our POWR rating system.

It has an A rating for growth and a B rating for value. It is ranked No. 11 out of 45 stocks in the B-rated Technology – Hardware sector.

Click here to see WDC ratings for Momentum, Sentiment, Stability, and Quality.

Lenovo Group Limited (LNVGY)

LNVGY is an investment holding company in Beijing, China. It develops, manufactures, markets and sells technology products and services worldwide. The company provides commercial and consumer personal computers, servers and workstations, mobile Internet devices, computing products, storage products, networking products, spare parts, computer hardware and computer software system repair services.

In January, LNVGY unveiled Lenovo TruScale High-Performance Computing as a Service (HPCaaS), which brings the power of supercomputing to organizations through a cloud-like experience. This offer could expand LNVGY’s customer base and increase its profitability.

During the third quarter of its fiscal 2022, which ended December 31, 2021, LNVGY’s revenue increased 16.7% year-on-year to $20.13 billion. LNVGY’s gross profit increased 20.4% year-over-year to $3.36 billion. And LNVGY’s operating profit increased 33% year over year to $932 million. Its profit for the period rose 58.2% from its value a year ago to $682 million. And the company’s earnings per share rose 59.7% from its value a year ago at $0.05.

LNVGY is relatively undervalued compared to its peers. In non-GAAP forward P/E terms, LNVGY is currently trading at 6.17x, 67.9% below the industry average of 19.20x. Its price-to-forward multiple of 0.17 is 94.8% below the industry average of 3.22x. And LNVGY’s forward EV/EBITDA ratio of 3.31 compares to the industry average of 13.00.

The consensus revenue estimate of $17.48 billion for its fiscal 2022 fourth quarter, ending March 31, 2022, represents year-over-year growth of 11.8%.

LNVGY stock is down 14.6% year-to-date and 21% over the past year and closed yesterday’s trading session at $20.11.

LNVGY’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, which is equivalent to Buy in our proprietary rating system.

It has a rating of A for value and B for growth, stability and sentiment. Within the B-rated technology and hardware industry, it is ranked No. 2 out of 45 stocks.

To see additional component ratings of POWR (quality and dynamics) ratings for LNVGY, Click here.


HPQ shares were trading at $35.56 per share on Tuesday morning, down $0.10 (-0.28%). Year-to-date, HPQ is down -5.60%, compared to a -12.46% rise in the benchmark S&P 500 over the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using its fundamental approach to stock analysis, Mangeet seeks to help retail investors understand the underlying factors before making investment decisions. Continued…

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