The 4 Best Tech Stocks to Watch in 2023

Tech stocks witnessed a brutal sell-off last year due to record-high inflation, the Fed’s aggressive rate hikes, geopolitical instability, and growing recessionary fears. However, according to Wedbush’s Dan Ives, tech stocks will jump nearly 20% in 2023 after last year’s “horror show.”

Enterprises are increasingly adopting new, advanced technologies to drive digital transformation. Since the impact of technology has spread far beyond the core IT industry, countless opportunities are emerging worldwide as technology influences every business vertical. So, sustained demand for tech products and services across various sectors should boost the industry’s growth.

Enterprise tech will likely increase significantly this year. According to Gartner Inc.’s (IT) recent projection, global IT investment is expected to reach $4.60 trillion in 2023, an increase of 5.1% from the last year. The information technology market is projected to grow at a CAGR of 8.8% to $13.09 trillion by 2026.

Given the industry’s promising growth prospects, it seems wise to add fundamentally strong technology stocks Dell Technologies Inc. (DELL), Canon Inc. (CAJ), Arrow Electronics, Inc. (ARW), and CTS Corporation (CTS) to your watchlist this year.

Dell Technologies Inc. (DELL)

DELL is a multinational corporation that specializes in information technology solutions.  It operates through two segments, Infrastructure Solutions Group (ISG); and Client Solutions Group (CSG). The company also offers cyber security solutions to its clients, cloud software, and infrastructure.

On November 30, DELL and OneMind Technologies, a wholly owned subsidiary of Affluence Corporation, formed a strategic partnership. Following the contract terms, DELL will include OneMind's Hypervisor in its Digital City Software product.

The ecosystem of partners that DELL has built has helped the company expand. And through this alliance, the company seeks to develop expertise in solving specific problems, deliver tried-and-true solutions with modern architectures, and ensure implementation success.

For the fiscal 2023 third quarter ended October 28, 2022, DELL’s service revenue increased 6.2% year-over-year to $5.78 billion, while its non-GAAP operating income grew 21.7% from the prior year’s quarter to $2.38 billion. The company’s non-GAAP net income came in at $1.71 billion, up 29.9% year-over-year, and its non-GAAP EPS grew 38.6% from the year-ago value to $2.30.

On December 6, DELL's board of directors declared a quarterly cash dividend of $0.33 per common share, payable on February 3 to shareholders of record on January 25. The company pays a $0.99 per share dividend annually, which translates to a 2.46% yield on the current price. Its four-year average dividend yield is 0.28%.

Analysts expect DELL’s EPS estimate of $7.47 for the current fiscal year (ending January 2023) to increase 20% year-over-year. DELL has surpassed its consensus EPS estimates in three of the four trailing quarters. Shares of DELL have gained 3.5% over the past five days to close the last trading session at $40.90.

DELL’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

The stock has a B grade for Growth, Value, and Sentiment. Within the Technology – Hardware industry, it is ranked #12 of 44 stocks.

To see additional POWR Ratings for Quality, Stability, and Momentum for DELL, click here.

Canon Inc. (CAJ)

With headquarters in Tokyo, CAJ produces and markets a broad range of goods, including office multifunction devices, printers, and cameras.  It operates through four segments, Printing Business Unit; Imaging Business Unit; Medical Business Unit; and Industrial and Others Business Unit.

On December 6, CAJ launched the FPA-5520iV LF2 Option for semiconductor lithography systems in Japan. This option allows bulk production of dense circuitry with exposure fields up to 100 mm by 100 mm and supports advanced 3D packaging technologies. With this launch, CAJ intends to expand its semiconductor lithography system portfolio to enable continued technological progress.

On November 24, the company announced its decision to launch Canon Healthcare USA, Inc as a new subsidiary. CAJ is progressing in the fields of healthcare IT and in-vitro diagnostics and aims to accelerate the growth of its medical business by strengthening its position in the sizable American medical market.

For the fiscal 2022 third quarter ended September 30, CAJ’s net sales increased 19.5% year-over-year to ¥996.09 billion ($7.64 billion), and its gross profit grew 16.3% from the year-ago value to ¥451.03 billion ($3.46 billion). The company’s operating profit increased 38.7% year-over-year to ¥81.44 billion ($624.56 million).

Furthermore, net income attributable to CAJ increased 9.7% from the year-ago value to ¥54.12 billion ($415.03 million) while its EPS came in at ¥52.88, a 12.2% increase year-over-year.

CAJ pays a $0.89 per share dividend annually, which translates to a 4.09% yield on the current price. The company’s dividend payouts have grown at a 7.1% CAGR over the past three years, and its four-year average dividend yield is 3.90%.

The consensus EPS estimate of $0.66 for the current fiscal quarter (ending December 2022) indicates a 42.8% year-over-year improvement. Likewise, the consensus revenue estimate of $8.79 billion for the same quarter reflects a growth of 6.1% from the year-ago quarter.

In addition, the company’s EPS and revenue for the next quarter (ending March 2023) are expected to increase 2% and 6.2% year-over-year to $0.37 and $7.33 billion, respectively. The stock has gained marginally intra-day to close the last trading session at $21.75.

CAJ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

The stock has a B grade for Quality, Stability, and Value. Within the Technology - Hardware industry, it is ranked #5 of 44 stocks.

Beyond what we stated above, we also have CAJ’s ratings for Growth, Sentiment, and Momentum. Get all CAJ ratings here.

Arrow Electronics, Inc. (ARW)

ARW delivers products, services, and solutions to industrial and commercial customers of electronic components and business computer systems across the Americas, Europe, the Middle East, Africa, and Asia Pacific. It operates through two segments, Global Components; and Global Enterprise Computing Solutions.

On November 9, ARW and Oracle Corporation (ORCL) expanded their partnership by integrating Oracle Cloud Infrastructure (OCI) services into their ArrowSphere offering. This partnership will help ARW by providing its clients with more choices and flexibility when using the cloud to help them handle their most significant and challenging business concerns.

On November 7, ARW and Sunway Communication, a producer of parts and modules for RF connection applications, signed a contract under which ARW would distribute and service the complete Sunway portfolio in the Americas, Europe, the Middle East, and Africa. ARW seeks to strengthen its business by supplying Sunway's whole product line.

For the fiscal 2022 third quarter ended October 1, ARW’s sales increased 8.9% from the previous year to $9.27 billion, while its total gross profit grew 10.3% year-over-year to $1.19 billion. Its operating income rose 24.2% from the year-ago value to $502.69 million.

In addition, net income attributable to shareholders increased 18.1% year-over-year to $342.40 million, while EPS came in at $5.27, a 31.8% rise from the prior year’s quarter.

The consensus EPS estimate of $22.35 for the current fiscal year (ending December 2022) indicates a 44.2% year-over-year improvement. Likewise, the consensus revenue estimate of $37.13 billion for the same year reflects a rise of 7.7% from the prior year. Moreover, the company has surpassed its consensus EPS estimates in all four trailing quarters, which is impressive.

Shares of ARW have gained 3.3% over the past five days to close the last trading session at $106.14.

ARW’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.

The stock has a B grade for Value and Momentum. Within the Technology - Electronics industry, it is ranked #10 of 44 stocks.

Beyond what we stated above, we also have ARW’s ratings for Growth, Stability, Sentiment, and Quality. Get all ARW ratings here.

CTS Corporation (CTS)

CTS manufactures and sells sensors, actuators, and connectivity components in North America, Europe, and Asia. It offers switches, temperature sensors, potentiometers, actuators for passenger or commercial vehicles, manufactured piezoelectric substrates, and connectivity parts for telecommunications infrastructure.

For the fiscal 2022 third quarter ended September 30, CTS’ net sales increased 24.1% year-over-year to $151.91 million, and its gross margin grew 16.8% year-over-year to $53.35 million. The company’s operating earnings came in at $22.65 million, a 19.4% increase year-over-year.

Furthermore, CTS’ net earnings and EPS stood at $11.80 million and $0.37, compared to a loss of $63.90 million and $1.97 in the prior year’s quarter, respectively.

On November 10, CTS' Board of Directors declared a cash dividend of $0.04 per share, payable on January 13, 2023, to shareholders of record on December 9, 2022. CTS pays a $0.16 per share dividend annually, which translates to a 0.41% yield on the current price. Its four-year average dividend yield is 0.53%.

The consensus EPS estimate of $2.47 for the fiscal year (ending December 2022) indicates a 27.9% year-over-year improvement. Likewise, the current year's consensus revenue estimate of $593.01 million indicates a rise of 15.6% from the previous year.

Additionally, the company’s EPS and revenue for the next fiscal year (ending December 2023) are expected to increase 4% and 4.1% year-over-year to $2.57 and $617.53 million, respectively. The stock has gained 18.5% over the past six months to the last trading session at $40.12.

CTS’ POWR Ratings reflect its strong outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

The stock has an A grade for Quality and a B for Growth. Within the Technology - Electronics industry, it is ranked #6 of 44 stocks.

Click here to see additional ratings of CTS for Stability, Value, Momentum, and Sentiment.

DELL shares were trading at $41.10 per share on Wednesday afternoon, up $0.20 (+0.49%). Year-to-date, DELL has gained 2.19%, versus a 0.37% rise in the benchmark S&P 500 index during the same period.

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.

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