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4 Stocks Likely to Gain as Facial Recognition Picks Up Steam

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With rapid strides in technology, applications that once belonged only in the realm of sci-fi movies have increasingly become an integral part of our daily lives. Biometrics technology is a leading proponent of such advancements. This technology of identifying and authenticating individuals on unique biological characteristics in a reliable and fast way is presently being widely used to counter the rising threats from identity theft and document fraud, and curb the growing menace of terrorism and cybercrime. 

In addition, facial recognition system is gradually being used in airports to validate flier identity, and will probably make passports and long security checks an obsolete thing in the near future. Key sectors such as banking, healthcare, retail and mobile commerce are fast embracing biometrics to authenticate a transaction, access healthcare subsidies and prevent fraudulent activities.

The biometrics technology is likely to become more pervasive as China rolls out mandatory facial recognition for all new mobile users registered in the country after Dec 1. The United States is also mulling to expand facial recognition checks for all travelers in the country at major airports, both foreign and domestic.

Facial Recognition: A Brief Synopsis

Facial recognition is reportedly considered to be the most natural of all biometric measurements and refers to the process of identifying or verifying the identity of a person using facial details. It typically involves a three-pronged process, the step first being detection and locating a given human face in images and videos. The face capture process then transforms an analog information (a face) into a set of digital material (data) based on the person's facial features, while the face match process authenticates if two faces belong to the same person.

This easy-to-deploy technology requires no physical interaction by the end user and is very fast. Leveraging AI and ML techniques, the global biometric market is expected to top $50 billion by 2024 according to Global Markets Insights, with applications in security and government sectors being the primary growth drivers.

China’s New Telecom Policy

Facial recognition is being widely used as a tool for government surveillance in China. An estimated 850 million or about 65% of the population use mobile devices to access the Internet. The nation has a stringent “real-name registration” policy in place that requires users to link online accounts with their official government ID. The government has now mandated facial scans for new mobile registration to pre-empt cyber fraud.

However, critics have alleged that the purported move would jeopardize the privacy of users and could compromise sensitive information if the country’s state-run mobile carriers fail to effectively secure the data. In addition, it has raised an alarm among the citizens about increased government surveillance, particularly when the geopolitical situation is highly volatile with continued protests against the administration in Hong Kong.

Facial Scans to Extend at U.S. Airports

The U.S. Homeland Security has issued a draft proposal to extend facial recognition checks at the major airports to all the citizens of the country, eliciting sharp responses from civil liberties group. Facial recognition was earlier mandatory for only foreign travelers to catch illegal immigrants or visitors who overstayed their visa duration. U.S. citizens and green card holders were exempt from this process.

However, the Homeland Security intends to extend this process to all travelers who fly in or out of the country and aims to roll out facial recognition scanners in 20 largest airports across the country by 2021. This has evoked strong protests from various sections regarding possible ploy for increased government surveillance and perceived threat of privacy intrusion due to concerns about a lack of sufficient safeguards to protect the data.

Top 4 Picks Likely to Benefit

Amid the spotlight on the industry, we have cherry-picked four stocks that are likely to benefit in the long run. These stocks have solid Zacks Rank and possess healthy fundamentals. 

Synaptics Incorporated SYNA: Headquartered in San Jose, CA, Synaptics develops intuitive human interface solutions for electronic devices and products worldwide. Its product portfolio includes ClearPad family that supports touchscreen solutions for devices ranging from entry-level mobile phones to flagship premium smartphones, tablets and notebook PCs, and TouchPad family that is integrated into the majority of notebook PCs. It also offers ThinTouch keyboard solutions and technologies for next generation touch-enabled video and display applications.

The company has a VGM Score of A and delivered an average positive earnings surprise of 29.2% in the trailing four quarters, beating estimates on each occasion. The stock has gained 52.5% year to date compared to the industry’s rally of 36.3%. Synaptics sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

CACI International CACI: Based in Arlington, VA, CACI International delivers IT applications and infrastructure to improve communications and secure the integrity of information systems and networks, enhance data collection and analysis, and increase efficiency and mission effectiveness.

This Zacks Rank #2 (Buy) stock has a long-term earnings growth expectation of 10%, and delivered an average positive earnings surprise of 7.1% in the trailing four quarters, beating estimates thrice. The stock has gained 64.7% year to date compared with the industry’s rally of 32%.

Qualcomm Incorporated QCOM: Headquartered in San Diego, CA, Qualcomm designs, manufactures and markets digital wireless telecom products and services based on the Code Division Multiple Access technology. The Qualcomm Snapdragon Sense ID 3D Fingerprint Technology was reportedly the mobile industry's first 3D fingerprint authentication technology. It is designed to provide enhanced authentication capabilities, usability and integration over legacy capacitive touch-based fingerprint technologies by utilizing technology developed for government-grade biometric solutions.

This Zacks Rank #1 stock has long-term earnings growth expectation of 14% and delivered an average positive earnings surprise of 8.7% in the trailing four quarters, beating estimates on each occasion. The stock has gained 44.9% year to date compared with the industry’s rally of 19.5%.

NVIDIA Corporation (NVDA - Free Report) : Santa Clara, CA-based NVIDIA, founded in 1993, offers graphics chip processors and related software for a wide range of visual computing platforms. Nvidia has pioneered smart-surveillance technologies and boasts one of the most compelling facial recognition solutions. Its AI-powered surveillance program scans faces 24/7.

This Zacks Rank #2 stock has long-term earnings growth expectation of 9.6%, and delivered an average positive earnings surprise of 8.8% in the trailing four quarters, beating estimates on each occasion. The stock has gained 56.7% year to date compared to the industry’s rally of 32.6%.

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