For immediate release
Chicago, IL – August 23, 2024 – Today, Zacks Investment Ideas offers highlights on Qualys QLYS and Celestica Inc. CLS.
2 Top-Rated Under-the-Radar Tech Stocks to Buy for Big Upside
The bulls are back in control of the stock market. The S&P 500 and Nasdaq are trading above their 21-day and 50-day moving averages after the massive two-week comeback.
There could be more selling and volatility ahead given that stocks like Nvidia surged over 30% in an instant.
Regardless of what happens in the near term, the bulls are in the driver’s seat as they look forward to robust technology-driven earnings growth and interest rate cuts. The Fed’s July minutes appeared to lock in the start of a dovish cycle at the next FOMC meeting on September 17-18.
The only question on Wall Street’s collective mind is whether the Fed will start with a 25 basis point cut or 50. The CME Fed Watch Tool has the odds of a 50 bps cut at around 35% right now.
Investors likely want to keep adding exposure to the stock market.
Today we dive into two Zacks Rank #1 (Strong Buy) technology stocks with solid growth prospects in key industries that offer value and great upside potential.
Buy Qualy’s stock down 40% from its highs?
Qualys provides cloud-based cyber security, compliance and IT solutions. Qualys’ diverse customer base includes enterprises, SMEs, governments and other entities, helping Qualys remain resilient to consumption patterns and business cycles.
Cybersecurity is a constant threat in our digital age, making it increasingly difficult for businesses and entities of all kinds to cut back on spending, much less cut it out entirely.
Qualys continues to face cybersecurity competition from much larger companies. About 40% of its sales came from outside the US last year, meaning Qualys faces near-term headwinds with slowing global economic growth and currency fluctuations.
Qualys stock has been punished by its diminishing sales outlook after five-plus years of double-digit revenue expansion and its fading earnings picture.
Qualys boasts over 10,000 subscription customers globally and average revenue growth of 15% over the past five years. The company is expected to grow its sales by 8% in both FY24 and FY25 to reach $649 million next year (adding around $100 million to the top line by 2023).
Qualys is expected to grow its adjusted earnings by 6% in 2024 and 4% next year. Qualys’ management provided positive EPS guidance when it reported its Q2 results on August 6.
The cybersecurity firm’s recently improved bottom-line outlook helps Qualys earn a Zacks Rank #1 (Strong Buy). The positive revisions after Q2 help wash away some of the downward revisions from earlier this year that contributed to its falling share price.
Qualys stock is down 40% since the end of 2023. Despite the huge decline, QLYS is up 395% in the past 10 years to crush the Zacks Tech sector’s 300%. Qualys shares are trading just below their 200-week moving average for only the second time in the past decade, and at their most oversold RSI levels since 2016 – QLYS stock hit its most overbought levels in late 2023 before collapsing .
Qualys may be poised to break out after recent upward revisions, especially as Wall Street hunts tech stock deals. Qualys also boasts a strong balance sheet that will help it thrive in a vital industry.
Valuation-wise, QLYS is trading at a 10-year low at 31.1X forward 12-month earnings, marking a 90% discount to its 10-year highs and 50% value compared to its median.
Why Celestica Stock is a strong buy right now
Celestica Inc. is a leader in design, manufacturing, hardware platform, supply chain solutions and more. Celestica’s portfolio serves companies across communications, aerospace and defense, energy, health technology, industrial equipment and other key areas.
Celestica benefits from the expansion of data centers, artificial intelligence, the energy transition and various other growth segments. Celestica operates two reportable units: Advanced Technology Solutions (ATS) and Connectivity & Cloud Solutions (CCS).
Celestica expanded its revenue by 29% in 2022 and 10% in FY23, and it had a solid beat-and-raise Q2 FY24 at the end of July. The $6.4 billion market cap company is expected to grow its revenue by 19% this year and another 9% in 2025 to rise from $7.96 billion last year to $10.28 billion in FY25.
Celestica is expected to realize a 50% adjusted earnings per stock growth this year and 9% higher next year after averaging adjusted EPS growth of 35% over the past four years.
Celestica’s improved earnings outlook helps it land a Zacks Rank #1 (Strong Buy) right now, with its FY24 and FY25 consensus estimates up 10% since its second quarter release. Celestica’s latest positive earnings revisions extend its impressive streak of rising earnings.
Celestica stock is up 685% in the past five years compared to Tech’s 146%, including a 150% gain in the past year. Celestica stock was caught in the latest wave of tech selling, with CLS trading 15% below its mid-July highs. Celestica found support near its 200-day and is hovering near its 50-day and at neutral RSI levels.
Investors don’t have to pay for Celestica’s growth prospects and outperformance, with CLS shares trading at a 43% discount to the broader Zacks Tech sector at 15.6X forward 12-month earnings. Celestica is also trading 58% below its 10-year highs.
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Past results are no guarantee of future results. Inherent in any investment is the potential for loss. This material is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice or a recommendation to buy, sell or hold any security. No recommendations or advice are given as to whether an investment is suitable for a particular investor. It should not be assumed that investments in the securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date herein and is subject to change without notice. Any views or opinions may not reflect those of the company as a whole. Zacks Investment Research does not engage in investment banking, market making or securities asset management. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. For information on the performance numbers shown in this press release, visit https://www.zacks.com/performance.
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Celestica, Inc. (CLS): Free Stock Analysis Report
Qualys, Inc. (QLYS): Free Stock Analysis Report
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