Markets have well and truly changed direction from last year’s bullish trends. The downward shift has brought us a major selloff, and declines of 27% and more in the tech-heavy NASDAQ index. For investors, it’s a situation that requires a close watch on the markets, and clear eye for the opportunities that will pop out as conditions change.
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It’s also a situation in which investors can use expert advice. Jim Cramer, the well-known host of CNBC’s ‘Mad Money’ program, tells investors that when the market starts to change direction, in response to shifting trends or increased volatility, it’s also time to change strategies. And in the current clime, Cramer is recommending profitable stocks in the tech sector – especially those that are beaten-down.
Describing his stance, Cramer says, “Many tech companies that make real things and return capital to shareholders now do sell at reasonable prices after the tsunami of selling… Right now the facts are a lot less hostile to the beaten-down high-flyers…”
With this in mind, we’ve used the TipRanks database to pinpoint two heavily discounted tech stocks that return capital regularly through dividends. Each is a Strong Buy, according to the analyst community, and has a strong upside potential for the coming year. Let’s take a closer look.
Absolute Software (ABST)
First up is Absolute Software, a leader in enterprise resilience, or maintaining normal operations, along with the ability to recover systems and data, against network security breaches. The Canadian-based company’s product lines offer customers the ability to manage, control, and heal devices, networks, data, and operations, shortening recovery times and speeding up the return to normalcy. In addition, Absolute offers IT and security solutions to protect systems and prevent breaches from occurring.
Absolute boasts over 13,000 global customers, including 28 OEMs who factory-embed Absolute products into devices. The company also has 140 patents to protect its intellectual property.
More importantly, however, the move toward remote work in the last two years has put a high premium on networking and network security – a move that has benefited Absolute. The company’s revenues started taking off in the past year, and in the most recent quarter, Q3 of fiscal year 2022 (the quarter ending March 31), the company reported $52 million at the top line, up 69% year-over-year.
The high revenue was supported by an 18% acceleration in annual recurring revenue, which broke above $200 million in the quarter. Quarterly cash from operations grew by $7.3 million to reach a company record of $17 million.
Also of note to investors, the company declared a dividend of 8 cents Canadian per common share for the quarter. At a rate of 6 cents US, the dividend annualizes to 24 cents and gives a yield of 3.3%. Absolute has maintained its dividend for the past 9 years.
Despite these positive drivers, Absolute’s shares are down 51% over the past 12 months. That has not, however, dissuaded Canaccord’s 5-star analyst Michael Walkley from take a bullish view of the stock.
“We believe Absolute has a unique technology moat – an embedded software in the firmware of 500M+ PCs by OEM partners – and the ability to drive towards 20%+ long-term growth in a large and growing TAM, while maintaining its rule of 40 metrics. Further, enterprise / government computers typically run an average of 10+ security apps, which Absolute’s resilience offering can ensure are correctly installed and working properly… management is executing well and the share price represents a very attractive entry point. We believe patient long-term investors are likely to be rewarded,” Walkley opined.
These bullish comments support Walkley’s Buy rating on ABST shares, and his $17 price target implies an upside of ~134% for the coming year. (To watch Walkley’s track record, click here)
Walkley may be particularly bullish here, but he is not the only analyst positive on Absolute Software. The stock’s 4 recent reviews break down to 3 Buys and 1 Hold, for a Strong Buy consensus view, and the $13.56 average price target suggests an 87% one-year upside from the current trading price of $7.25. (See ABST stock forecast on TipRanks)
National Instruments (NATI)
Now we’ll turn to National Instruments, a Texas-based company that offers a wide range of tech products, including automated test equipment and virtual instrumentation software. The company’s products give solutions for a series of tech-related issues, including prototype design and validation, and factory device testing. National Instrument’s product line has found applications as varied as semiconductors and electronics to transportation to aerospace and defense.
National Instruments has been making strong moves to expand its footprint in recent months. This past March, the company completed its purchase, for an undisclosed amount, of the Electronic Vehicle segment of the German firm Heinzinger GmbH. Heinzinger is a leader in Europe’s high-current and high-voltage power systems. The transaction was funded through a combination of cash and credit.
In another acquisition, this May, National Instruments closed its transaction with Kratzer Automation AG. Kratzer provides customer solutions in the EV market, and this acquisition further expands NI’s footprint in the EV market, a growing segment in modern manufacturing.
In the first quarter of the year, NI reported 1Q22 revenue of $385 million, an increase of 15% year-over-year, but below the $402 million estimates. Product orders were up in the quarter, increasing by 27% over the year-ago period. The company reported positive non-GAAP diluted earnings of 41 cents per share, just missing the 43-cent forecast – but increasing 28% from the same metric in 1Q21.
NI ended the first quarter with $143 million in cash on hand. This was more than enough to support a dividend of 28 cents per common share. At current share pricing, this dividend yields 3.5%.
Even though this stock is feeling pressure right now (down 25% year-to-date), Morgan Stanley’s Meta Marshall remains optimistic. The analyst writes, “While we acknowledge a relatively disappointing Q1 result for NATI on greater than expected supply chain challenges / Russia exposure, we view dip as a buying opportunity for the name given operating leverage potential and growing exposures to key megatrends. We remain cognizant that achievement of price target will require NATI to move past supply chain issues and investors gaining greater confidence in ability to measure impact, but think lead times remain competitive (7-8 weeks vs. competitors at 14-16 weeks for some areas)”
In line with this bullish outlook, Marshall rates NATI shares an Overweight (i.e. Buy), with a $44 price target that indicates room for 39% growth in the next 12 months. (To watch Marshall’s track record, click here)
Once again, we’re looking at a stock with 4 recent stock reviews, including 3 Buys against 1 Hold, and a Strong Buy consensus rating. NATI is trading for $31.65 and its $46.50 average target suggests ~47% upside from that level. (See NATI stock forecast on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
