The Zacks Technology Services industry comprises companies that are engaged in manufacturing, developing and designing of an array of software support, data processing, computing hardware and communications equipment. These include integrated powertrain technologies, advanced analytics, technology solutions and contract research services, semiconductor packaging and interconnect technologies, collaboration software, specialty printers, and data acquisition and analysis systems.
The industry includes consumer as well as business-oriented products and services. It comprises companies with diversified end-markets and customer base.
Prominent players from the industry include Aptiv PLC (APTV - Free Report) and IQVIA Holdings Inc. (IQV - Free Report) .
Here are the industry’s three major themes:
- The industry’s growth is expected to accelerate in the days ahead on increasing number of remote workers in the wake of the coronavirus crisis-induced work-from-home wave. In this era of digital transformation, enterprises are actively seeking a common ground between on-premise and cloud infrastructures that will enable them to provide flexible and easy-to-adopt hybrid solutions. Notably, coronavirus-triggered demand for remote working, digital healthcare and online learning solutions, accelerating the adoption of digital transformation offerings among enterprises, which bodes well for the industry.
- Most of the industry participants are in the process of modernizing their traditional legacy-oriented business processes in order to keep themselves updated. The aim is to integrate synergies of emerging technologies including cloud, IoT, AI and analytics. Moreover, increasing Internet penetration in the emerging markets, particularly across Asia-Pacific, is a tailwind.
- Nevertheless, increasing spend on acquiring skilled talent, and restructuring initiatives involving modernization of IT-service infrastructure are leading to higher debt levels, R&D, and sales & marketing expenses. Furthermore, increasing U.S. protectionism continues to mar the industry’s prospects, as traditional IT services providers are significantly exposed to H1-B visa issuance. Markedly, coronavirus-led economic downturn has triggered layoffs and pay cuts, which are likely to lead to termination of H1-B visas and remain an overhang for some time now.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Technology Services industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #90. This rank places it in the top 36% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term growth prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that investors can buy, let’s take a look at the industry’s recent stock market performance and current valuation.
Industry’s Performance
The Zacks Technology Services industry has outperformed the broader Zacks Business Services sector but underperformed the Zacks S&P 500 composite over the past year.
The industry has declined 0.9% over this period compared with 2.1% decline of the broader sector. The Zacks S&P 500 composite has risen 4.5% in the said time frame.
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 commonly used for valuing technology services stocks, the industry is currently trading at 29.43X compared with the S&P 500’s 11.43X and the sector’s 12.27X.
Over the past two years, the industry has traded as high as 29.43X, as low as 9.48X and at the median of 12.99X, as the charts below show.
EV-to-EBITDA
Bottom Line
Coronavirus-led lockdowns have led to work from home, thereby increasing dependency on technology. Growth opportunities from robust adoption of emerging technologies should offset challenges arising from U.S. protectionism, global regulatory uncertainties and security issues.
Here are three stocks from the Zacks Technology Services industry that carry either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
iClick Interactive Asia Group Limited (ICLK - Free Report) :This Hong Kong-based company provides online marketing services in the People's Republic of China and internationally.
Currently, it carries a Zacks Rank #1. The Zacks Consensus Estimate for current-year EPS has improved more than 100% in the past 60 days.
Price and Consensus: ICLK
SailPoint Technologies Holdings, Inc. : This Texas-based company designs, develops, and markets identity governance software solutions in the United States, Europe, the Middle East, Africa, and internationally.
Currently, it carries a Zacks Rank #2. The Zacks Consensus Estimate for current-year EPS has improved more than 100% in the past 60 days.
Price and Consensus: SAIL
Veritone, Inc. (VERI - Free Report) : This California-basedcompany provides artificial intelligence (AI) and computing solutions in the United States and the United Kingdom.
Currently, it carries a Zacks Rank #2. The Zacks Consensus Estimate for current-year EPS has improved 7.8% in the past 60 days.
Price and Consensus: VERI
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This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
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The Zacks Technology Services industry comprises companies that are engaged in manufacturing, developing and designing of an array of software support, data processing, computing hardware and communications equipment. These include integrated powertrain technologies, advanced analytics, technology solutions and contract research services, semiconductor packaging and interconnect technologies, collaboration software, specialty printers, and data acquisition and analysis systems.
The industry includes consumer as well as business-oriented products and services. It comprises companies with diversified end-markets and customer base.
Prominent players from the industry include Aptiv PLC (APTV - Free Report) and IQVIA Holdings Inc. (IQV - Free Report) .
Here are the industry’s three major themes:
Zacks Industry Rank Indicates Bright Prospects
The Zacks Technology Services industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #90. This rank places it in the top 36% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term growth prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that investors can buy, let’s take a look at the industry’s recent stock market performance and current valuation.
Industry’s Performance
The Zacks Technology Services industry has outperformed the broader Zacks Business Services sector but underperformed the Zacks S&P 500 composite over the past year.
The industry has declined 0.9% over this period compared with 2.1% decline of the broader sector. The Zacks S&P 500 composite has risen 4.5% in the said time frame.
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 commonly used for valuing technology services stocks, the industry is currently trading at 29.43X compared with the S&P 500’s 11.43X and the sector’s 12.27X.
Over the past two years, the industry has traded as high as 29.43X, as low as 9.48X and at the median of 12.99X, as the charts below show.
EV-to-EBITDA
Bottom Line
Coronavirus-led lockdowns have led to work from home, thereby increasing dependency on technology. Growth opportunities from robust adoption of emerging technologies should offset challenges arising from U.S. protectionism, global regulatory uncertainties and security issues.
Here are three stocks from the Zacks Technology Services industry that carry either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
iClick Interactive Asia Group Limited (ICLK - Free Report) :This Hong Kong-based company provides online marketing services in the People's Republic of China and internationally.
Currently, it carries a Zacks Rank #1. The Zacks Consensus Estimate for current-year EPS has improved more than 100% in the past 60 days.
Price and Consensus: ICLK
SailPoint Technologies Holdings, Inc. : This Texas-based company designs, develops, and markets identity governance software solutions in the United States, Europe, the Middle East, Africa, and internationally.
Currently, it carries a Zacks Rank #2. The Zacks Consensus Estimate for current-year EPS has improved more than 100% in the past 60 days.
Price and Consensus: SAIL
Veritone, Inc. (VERI - Free Report) : This California-basedcompany provides artificial intelligence (AI) and computing solutions in the United States and the United Kingdom.
Currently, it carries a Zacks Rank #2. The Zacks Consensus Estimate for current-year EPS has improved 7.8% in the past 60 days.
Price and Consensus: VERI
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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