The markets have really changed direction from bullish trends in the past year. The bearish turn brought us big sell-offs, a drop of 27% and more in the tech-heavy Nasdaq. For investors, it’s a situation that requires keeping a close eye on the markets, and a clear eye for opportunities that will arise as conditions change.
It is also a case where investors can use expert advice. Jim Kramer, well-known host of CNBC’s “Mad Money,” tells investors that when the market begins to change direction, in response to changing trends or increasing volatility, it’s also time to change strategies. And in the current climate, Cramer recommends profitable stocks in the technology sector — especially those that have been battered.
Describing his position, Kramer says, “Many tech companies that make real things and return capital to shareholders are now selling at reasonable prices after the tsunami of selling…Currently, the facts are less hostile to the massive upside. Releases…”
With this in mind, we used the TipRanks database to identify two highly discounted technical stocks that regularly return capital through dividends. Each is a solid buy, according to the analyst community, and has strong bullish potential for the year ahead. Let’s take a closer look.
absolute software (ABST)
The first is Absolute Software, a leader in enterprise resilience, or maintaining normal operations, along with the ability to restore systems and data, against network security breaches. The Canada-based company’s product lines provide customers with the ability to manage, monitor and process devices, networks, data and processes, shortening recovery times and speeding up a return to normal life. In addition, Absolute offers IT and security solutions to protect systems and prevent breaches.
Absolute has more than 13,000 global customers, including 28 original equipment manufacturers who have built Absolute products into their in-plant equipment. The company also holds 140 patents to protect its intellectual property.
More importantly, the move toward remote work in the past couple of years has placed great importance on network and network security – a move that Absolute has benefited from. The company’s revenue began to take off last year, and in the last quarter, the third quarter of fiscal year 2022 (the quarter ended March 31), the company posted $52 million at the top line, up 69% year over year.
The higher revenue was supported by an 18% acceleration in annual recurring revenue, which topped $200 million in the quarter. Quarterly cash from operations grew by $7.3 million to a company record of $17 million.
Also of note to investors, the company announced a dividend of 8 Canadian cents per common share for the quarter. At a rate of 6 US cents, the dividend is paid out annually to 24 cents and gives a return of 3.3%. Absolute has maintained its dividend for the past nine years.
Despite these positive drivers, Absolute shares are down 51% over the past 12 months. That didn’t deter five-star Canaccord analyst Michael Walkley, however, from taking an optimistic view of the stock.
“We believe Absolute has a unique technical moat – software built into the firmware of over 500 million computers by OEM partners – and the ability to drive towards 20%+ long-term growth in a large and incremental TAM, while maintaining a base of 40 metrics. Furthermore Enterprise/Government PCs typically run 10+ security applications on average, which Absolute’s resiliency offering can ensure they are properly installed and working properly… Management works well and the stock price is a very attractive entry point. We believe that patient investors are likely to be rewarded in the long term.”
These bullish comments support Walkley’s buy rating on ABST stock, with a $17 price target implying a ~134% rise for the next year. (To watch Walkley’s record, click here)
Wali may be particularly upbeat here, but he’s not the only positive analyst at Absolute Software. The last 4 reviews of the stock split into 3 buys and 1 hold, for a strong consensus view to buy, and the average target price of $13.56 indicates an 87% one-year rise from the current trading price of $7.25. (See ABST stock forecast on TipRanks)
National Bonds (Nati)
We’ll now turn to National Instruments, a Texas-based company that offers a wide range of technology products, including automated test equipment and virtual instrument software. The company’s products provide solutions to a series of technology-related problems, including prototype design and validation, and testing of factory hardware. The National Instrument product line has found applications as diverse as semiconductors and electronics in transportation to aerospace and defense.
National Instruments has been making aggressive moves to expand its presence in recent months. In March, the company completed the purchase of Heinzinger GmbH’s electronic vehicle division for an undisclosed amount. Heinzinger is a leading manufacturer of high current and high voltage power systems in Europe. The transaction was funded by a combination of cash and credit.
In another acquisition, in May, National Instruments closed its deal with Kratzer Automation AG. Kratzer provides solutions to customers in the electric vehicle market, and this acquisition expands NI’s presence in the electric vehicle market, a growing segment of modern manufacturing.
In the first quarter of the year, NI reported Q1-22 revenue of $385 million, an increase of 15% year over year, but below estimates of $402 million. Product orders are up this quarter, increasing 27% over the same period last year. The company reported positive non-GAAP diluted earnings of 41 cents per share, missing expectations of 43 percent — but up 28 percent from the same measure in the first quarter of 21.
NI ended the first quarter with $143 million in cash in the fund. That was more than enough to support a dividend of 28 cents per common share. At current stock pricing, it yields a 3.5% dividend.
Although this stock is feeling pressure at the moment (down 25% year-to-date), Morgan Stanley’s Meta Marshall remains bullish. The analyst writes: “While we acknowledge NATI’s relatively disappointing first-quarter result on larger-than-expected supply chain challenges/exposure to Russia, we view the decline as a name buying opportunity given the potential for operating leverage and increased exposure to major major trends. We remain aware that achieving the price target will require It’s NATI to move past supply chain issues and investors gain more confidence in the ability to measure impact, but I think lead times remain competitive (7-8 weeks versus competitors at 14-16 weeks for some regions)”
In line with this bullish outlook, Marshall rates NATI’s stock as overweight (ie buy), with a $44 price target indicating room for 39% growth in the next 12 months. (To watch Marshall’s Record, click here)
Once again, we’re looking at a stock with 4 recent stock ratings, including 3 buys versus 1 hold, and a solid buy consensus rating. NATI is trading at $31.65 and its average target of $46.50 suggests a rally of about 47% from this level. (See NATI stock forecast on TipRanks)
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Not giving an opinion: The opinions expressed in this article are only those of our featured analysts. The content is intended for informational use only. It is very important to do your own analysis before making any investment.