We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
3 Stocks to Buy From the Flourishing Technology Services Market
Read MoreHide Full Article
The Technology Services space has observed sufficient growth since the pandemic, driven by the swift adoption of remote work, accelerating the global digital transition. Technological advancements like 5G, blockchain, artificial intelligence (AI) and machine learning (ML) have resulted in industry expansion. Also, the industry’s growth is a result of increased concerns about data security.
Byrna Technologies Inc. (BYRN - Free Report) , Spotify Technology S.A. (SPOT - Free Report) and Climb Global Solutions, Inc. (CLMB - Free Report) are poised to take advantage of the prevailing trends.
About the Industry
The Zacks Technology Services industry encompasses companies producing, developing, and designing various software support, data processing, computing hardware and communications equipment. These offerings range from integrated powertrain technologies, advanced analytics, technology solutions, and contract research services to semiconductor packaging and interconnect technologies, collaboration software, specialty printers, and data acquisition and analysis systems. This industry caters to consumer and business markets and serves diverse end markets and customer segments. Furthermore, some industry players offer advanced analytics, clinical research services, data storage technology and solutions, and technology-enabled financial services for consumers and small business owners.
Factors Structuring the Future of Technology Services
Rising Demand Environment: The industry is mature, with the demand for services remaining strong over time. Revenues, income and cash flows are expected to recover to pre-pandemic levels, benefiting most industry players to pay out stable dividends.
Economic Recovery: The sector is a major beneficiary of the broader economy and service activities. According to the Bureau of Economic Analysis, GDP grew at an annual rate of 2.5% in 2023 compared with 1.9% growth in 2022. Economic activities in the non-manufacturing sector are in good shape. The Services PMI measured by the Institute for Supply Management has stayed above the 50% mark in 48 out of 51 months.
Technological Advancement Takes Center Stage: The global shift toward digitization creates opportunities in various markets, including 5G, blockchain and AI. The United States, a significant player in the IT sector, is positioned for growth in the widespread adoption of smart technologies and increased investments in security. Companies adopt generative AI, ML, blockchain, and data science at a faster rate to gain a competitive advantage. According to Bloomberg, the worldwide generative AI is expected to grow, seeing a 42% CAGR over the next 10 years, and become a $1.3-trillion market by 2032.
Zacks Industry Rank Indicates Promising Outlook
The Zacks Technology Services industry, which is housed within the broader Zacks Business Services sector, carries a Zacks Industry Rank #73 at present. This rank places it in the top 29% of more than 251 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates continued outperformance in the near term. Our research shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
Before we present a few stocks that you may want to consider for your portfolio, let us look at the industry’s recent stock market performance and current valuation.
Industry Outperforms Sector & S&P 500
The Zacks Technology Services industry has outperformed the broader Zacks Business Services sector and the Zacks S&P 500 composite over the past year.
The industry has returned 43.6% over this period compared with the 20.1% rise of the broader sector and the 25.6% rally of the Zacks S&P 500 composite.
One-Year Price Performance
Industry's Current Valuation
On the basis of EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization), which is used for valuing staffing stocks because of their high debt levels, the industry is trading at 48.49X at present compared with the S&P 500’s 18.52X and the sector’s 28.74X.
Over the past five years, the industry has traded as high as 73.68X and as low as 43.38X, with the median being 56.56X, as the charts below show.
EV-to-EBITDA
3 Technology Services Stocks Leading the Pack
Here, we have presented three high-potential technology services stocks anticipated to benefit from a thriving market.
Byrna Technologies: This less-lethal self-defense technology and security solutions provider is gaining from significant changes in its advertising strategy. BYRN’s Celebrity Endorsement Strategy’s success is driven by an increase in direct-to-consumer (D2C) revenues via its website and Amazon.
BYRN’s rise in gross profit margin is due to additional sales through its high-margin D2C channels and was enhanced by an intensive component in cost reduction efforts led by Byrna’s engineering team and economies of scale from rising production volumes.
BYRN flaunts a Zacks Rank #1 (Strong Buy) at present. The Zacks Consensus Estimate for its 2024 bottom line has increased to 5 cents from a loss of 13 cents per share in the past 60 days. Earnings are expected to grow more than 100% year over year in 2024. BYRN shares have gained 136.3% in the year-to-date period.
Climb Global Solutions, Inc.: This value-added information technology distribution and solutions company’s organic growth is led by strengthening relationships with existing partners, signing new emerging technology vendors to its line card and delivering on its acquisitions goals.
CLMB launched a partnership with Automox, which can assist Climb in offering customer capabilities to save time, mitigate risk and automate the patching configuration and control of all Windows, macOS and Linux endpoint systems with one modern IT platform.
CLMB sports a Zacks Rank #1 at present. The Zacks Consensus Estimate for its 2024 bottom line has increased by 12.3% in the past 60 days. Earnings are expected to rise 20.6% year over year in 2024. CLMB shares have gained 66.6% in the year-to-date period.
Spotify Technology: This audio streaming subscription services provider is benefiting from the expansion of its subscription offerings to customers who might be seeking different types of content. SPOT is providing more listening choices, including audiobooks and basic tiers that build on the company's current list of premium plans around the world to subscribers. Apart from the expansion, SPOT implemented a price hike in several markets, including the United States.
SPOT’s paid subscription business is driven by net subscriber additions and strategic pricing. The free ad-supported segment is focusing on developing markets where the company is witnessing potential to convert these users into subscribers but in a much longer time frame.
SPOT flaunts a Zacks Rank #1 at present. The Zacks Consensus Estimate for 2024 EPS has increased by 28.4% in the past 60 days. Earnings are expected to rise more than 100% year over year in 2024. SPOT shares have gained more than 74.9% in the year-to-date period.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
3 Stocks to Buy From the Flourishing Technology Services Market
The Technology Services space has observed sufficient growth since the pandemic, driven by the swift adoption of remote work, accelerating the global digital transition. Technological advancements like 5G, blockchain, artificial intelligence (AI) and machine learning (ML) have resulted in industry expansion. Also, the industry’s growth is a result of increased concerns about data security.
Byrna Technologies Inc. (BYRN - Free Report) , Spotify Technology S.A. (SPOT - Free Report) and Climb Global Solutions, Inc. (CLMB - Free Report) are poised to take advantage of the prevailing trends.
About the Industry
The Zacks Technology Services industry encompasses companies producing, developing, and designing various software support, data processing, computing hardware and communications equipment. These offerings range from integrated powertrain technologies, advanced analytics, technology solutions, and contract research services to semiconductor packaging and interconnect technologies, collaboration software, specialty printers, and data acquisition and analysis systems. This industry caters to consumer and business markets and serves diverse end markets and customer segments. Furthermore, some industry players offer advanced analytics, clinical research services, data storage technology and solutions, and technology-enabled financial services for consumers and small business owners.
Factors Structuring the Future of Technology Services
Rising Demand Environment: The industry is mature, with the demand for services remaining strong over time. Revenues, income and cash flows are expected to recover to pre-pandemic levels, benefiting most industry players to pay out stable dividends.
Economic Recovery: The sector is a major beneficiary of the broader economy and service activities. According to the Bureau of Economic Analysis, GDP grew at an annual rate of 2.5% in 2023 compared with 1.9% growth in 2022. Economic activities in the non-manufacturing sector are in good shape. The Services PMI measured by the Institute for Supply Management has stayed above the 50% mark in 48 out of 51 months.
Technological Advancement Takes Center Stage: The global shift toward digitization creates opportunities in various markets, including 5G, blockchain and AI. The United States, a significant player in the IT sector, is positioned for growth in the widespread adoption of smart technologies and increased investments in security. Companies adopt generative AI, ML, blockchain, and data science at a faster rate to gain a competitive advantage. According to Bloomberg, the worldwide generative AI is expected to grow, seeing a 42% CAGR over the next 10 years, and become a $1.3-trillion market by 2032.
Zacks Industry Rank Indicates Promising Outlook
The Zacks Technology Services industry, which is housed within the broader Zacks Business Services sector, carries a Zacks Industry Rank #73 at present. This rank places it in the top 29% of more than 251 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates continued outperformance in the near term. Our research shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
Before we present a few stocks that you may want to consider for your portfolio, let us look at the industry’s recent stock market performance and current valuation.
Industry Outperforms Sector & S&P 500
The Zacks Technology Services industry has outperformed the broader Zacks Business Services sector and the Zacks S&P 500 composite over the past year.
The industry has returned 43.6% over this period compared with the 20.1% rise of the broader sector and the 25.6% rally of the Zacks S&P 500 composite.
One-Year Price Performance
Industry's Current Valuation
On the basis of EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization), which is used for valuing staffing stocks because of their high debt levels, the industry is trading at 48.49X at present compared with the S&P 500’s 18.52X and the sector’s 28.74X.
Over the past five years, the industry has traded as high as 73.68X and as low as 43.38X, with the median being 56.56X, as the charts below show.
EV-to-EBITDA
3 Technology Services Stocks Leading the Pack
Here, we have presented three high-potential technology services stocks anticipated to benefit from a thriving market.
Byrna Technologies: This less-lethal self-defense technology and security solutions provider is gaining from significant changes in its advertising strategy. BYRN’s Celebrity Endorsement Strategy’s success is driven by an increase in direct-to-consumer (D2C) revenues via its website and Amazon.
BYRN’s rise in gross profit margin is due to additional sales through its high-margin D2C channels and was enhanced by an intensive component in cost reduction efforts led by Byrna’s engineering team and economies of scale from rising production volumes.
BYRN flaunts a Zacks Rank #1 (Strong Buy) at present. The Zacks Consensus Estimate for its 2024 bottom line has increased to 5 cents from a loss of 13 cents per share in the past 60 days. Earnings are expected to grow more than 100% year over year in 2024. BYRN shares have gained 136.3% in the year-to-date period.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Climb Global Solutions, Inc.: This value-added information technology distribution and solutions company’s organic growth is led by strengthening relationships with existing partners, signing new emerging technology vendors to its line card and delivering on its acquisitions goals.
CLMB launched a partnership with Automox, which can assist Climb in offering customer capabilities to save time, mitigate risk and automate the patching configuration and control of all Windows, macOS and Linux endpoint systems with one modern IT platform.
CLMB sports a Zacks Rank #1 at present. The Zacks Consensus Estimate for its 2024 bottom line has increased by 12.3% in the past 60 days. Earnings are expected to rise 20.6% year over year in 2024. CLMB shares have gained 66.6% in the year-to-date period.
Spotify Technology: This audio streaming subscription services provider is benefiting from the expansion of its subscription offerings to customers who might be seeking different types of content. SPOT is providing more listening choices, including audiobooks and basic tiers that build on the company's current list of premium plans around the world to subscribers. Apart from the expansion, SPOT implemented a price hike in several markets, including the United States.
SPOT’s paid subscription business is driven by net subscriber additions and strategic pricing. The free ad-supported segment is focusing on developing markets where the company is witnessing potential to convert these users into subscribers but in a much longer time frame.
SPOT flaunts a Zacks Rank #1 at present. The Zacks Consensus Estimate for 2024 EPS has increased by 28.4% in the past 60 days. Earnings are expected to rise more than 100% year over year in 2024. SPOT shares have gained more than 74.9% in the year-to-date period.