Rounding out September and heading into the fourth quarter the broader technology sector has lost some steam with the Nasdaq down -6% for the month but still remaining in bull market territory and up +26% for the year.
Even better, quite a few tech stocks were added to the Zacks Rank #1 (Strong Buy) list on Friday spanning a variety of niche industries. Here is a look at these highly-ranked tech stocks that could be poised to rise in October.
Internet & Computers
Several computer and internet-related stocks have strengthening prospects at the moment with EPAM Systems EPAM and VMware VMW getting the nod for a strong buy.
EPAM is a software engineering and IT consulting services company whose stock may be on the cusp of oversold territory after falling -21% YTD. The buying opportunity comes as EPAM’s stock trades at a more reasonable price-to-earnings valuation with annual EPS forecasted over $10.00 a share in fiscal 2023 and FY24.
Annual earnings estimate revisions are modestly higher over the last 60 days offering further support with EPAM trading at 25.9X forward earnings and well below its decade high of 98.9X while offering a 29% discount to the median of 36.5X.
Similarly, rising earnings estimates make software solution provider VMWare’s stock more attractive considering VMW shares have soared +38% YTD but still trade 45% below their decade high of 42.6X forward earnings and at a 24% discount to the median of 30.2X.
Currently at a 23X forward earnings multiple, in the last 30 days, VMWare’s fiscal 2023 and FY24 EPS estimates have risen 6% and 5% respectively. More impressive, annual earnings are now projected to rise 11% this year and jump another 9% in FY24 at $7.93 per share.
Technology Instruments
Camtek CAMT and Watts Water Technologies’ WTS strong buy ratings are fostered by both companies benefitting from very vibrant business industries at the moment.
Camtek’s Electronics-Measuring Instruments Industry is in the top 18% of almost 250 Zacks industries. Demand is increasing for Camtek’s automatic optical inspection systems which enhance production processes and yield for manufacturers.
Remarkably, Camtek’s stock has skyrocketed +183% this year with FY23 earnings estimates rising 9% in the last two months and FY24 EPS estimates climbing 15%. Camtek’s rapid bottom-line expansion has largely justified the surge in CAMT shares with annual earnings now forecasted to dip -1% this year but rebound and leap 20% in FY24 at $2.24 per share. More compelling is that fiscal 2024 projections would represent 314% EPS growth over the last five years with earnings at $0.54 a share in 2020.
As for Watts Water, its Zacks Instruments-Control Industry is in the top 3% of all Zacks industries. After hitting 52-week highs of $192 a share in August, Watts Water’s stock dipped -8% in September but is still up +18% for the year.
The recent selloff may be a buying opportunity as Watts Water continues to expand as a provider of water safety and flow control products for water quality, water conservation, and water flow control markets.
With EPS estimates continuing to trend higher over the last quarter, Watts Water’s annual earnings are now expected to jump 9% in FY23 and rise another 3% in FY24 to $8.01 per share. Fiscal 2024 EPS projections would represent 106% growth over the last five years and Watts Water’s top-line is forecasted to expand 41% during this period.
Bottom Line
After a down month for broader markets, these tech stocks looked poised to help with a potential rebound in October especially among the Nasdaq. Furthermore, September’s selloff has led to more reasonable valuations and their rising earnings estimates are reassuring support for further upside.
VMware, Inc. (VMW): Free Stock Analysis Report
EPAM Systems, Inc. (EPAM): Free Stock Analysis Report
Camtek Ltd. (CAMT): Free Stock Analysis Report
Watts Water Technologies, Inc. (WTS): Free Stock Analysis Report
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