3 Stocks Insiders Are Buying Amid the resurging tech industry and the growing prominence of artificial intelligence (AI), investor interest has gravitated toward tech stocks. Thus, I think fundamentally strong Dynatrace (DT), Amdocs (DOX), and...
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Amid the resurging tech industry and the growing prominence of artificial intelligence (AI), investor interest has gravitated toward tech stocks. Thus, I think fundamentally strong Dynatrace (DT), Amdocs (DOX), and Data Storage (DTST), which have seen surging insider purchases, might be ideal buys. Keep reading.
The Nasdaq Composite is now up 23.6% year-to-date, far outpacing the other major U.S. indexes. As the potential of artificial intelligence takes center stage and the tech industry experiences a resurgence, investors are fleeing to buy stocks in the tech industry.
Therefore, I think investors could consider quality tech stocks Dynatrace, Inc. (DT), Amdocs Limited (DOX), and Data Storage Corporation (DTST), which have seen a surge in insider purchases, might offer intriguing investment opportunities.
At the beginning of the year, the tech industry faced layoffs and cost cuts as significant companies struggled with revenue growth and declining stock prices. Moreover, the consistent interest rate hikes implemented by the central bank weighed heavily on tech stocks throughout the previous year. The Fed funds target range reached 5%-5.25% in early May.
However, there are indications of a potential shift in monetary policy as recent minutes from the Federal Reserve meeting suggest that some members anticipate a slowdown in economic growth, which could lead to a decrease in the need for further tightening. This less aggressive approach to monetary policy is viewed as a positive signal for tech stocks and other riskier assets.
Moreover, investor focus has shifted towards AI as tech companies demonstrate real-world applications of this long-anticipated technology. OpenAI's success with its chatbot ChatGPT and Microsoft's integration of AI in various products have generated significant attention. The rush of interest in artificial intelligence (AI) has helped to fuel a $4 trillion rally in tech stocks this year.
Let's explore the fundamentals of the featured stocks:
Dynatrace, Inc. (DT)
DT offers a unified observability and security platform with analytics and automation for dynamic, hybrid, multi-cloud environments. Its product offerings include application and microservices monitoring, runtime application security, infrastructure monitoring, log management and analytics, digital experience monitoring, digital business analytics, and cloud automation.
DTST's revenue has grown at a CAGR of 28.5% over the past three years. Moreover, its levered cash flow has grown at a CAGR of 24.9% over the past three years.
On May 23, 2023, DT announced new integration capabilities for Event-Driven Ansible from Red Hat. As a result, Red Hat Ansible Automation Platform customers can integrate AI-powered insights and action from DT with Event-Driven Ansible to automate a broader range of DevSecOps use cases.
DT's total revenue increased 24.5% year-over-year to $314.48 million in the fourth quarter that ended March 31, 2023. Its adjusted operating income grew 35.2% from the year-ago value to $77.94 million. The company's non-GAAP net income stood at $92.46 million and $0.31 per share, rising 91.5% and 82.4% year-over-year, respectively.
Street expects DT's revenue for the current quarter ending June 30, 2023, to increase 22.4% year-over-year to $327.07 million. Its EPS for the same quarter is expected to increase 22.7% year-over-year to $0.22.
Moreover, DT's revenue and EPS are expected to rise 20.8% and 3.1% year-over-year to $1.40 billion and $1 in the current fiscal year ending March 2024. It is worth noting that the company surpassed consensus revenue and EPS estimates in each of the previous four quarters.
Shares of DT have gained 33.1% year-to-date and 20.6% over the past month to close the last trading session at $50.99.
DT's POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a B grade for Sentiment, Growth, and Quality. The stock is ranked #28 in the 133-stock Software – Application industry.
Click here to see DT's additional POWR Ratings (Value, Momentum, and Stability).
Amdocs Limited (DOX)
DOX provides software and services worldwide. It designs, develops, operates, implements, supports, and markets open and modular cloud portfolios.
DOX's revenue has grown at a CAGR of 4.5% over the past three years. Its EBIT has grown at a CAGR of 6% over the past three years. Moreover, its EPS has grown at a CAGR of 6.4% in the same time frame.
On May 17, 2023, DOX announced that it had completed a modernization project that provides WindTre with a future-proof, 5G-ready monetization solution deployed entirely on Google Cloud, enabling the Italian mobile operator to enhance further its agility and time to market for innovative new products and services.
On May 15, DOX revealed new use cases developed with Microsoft Corporation (MSFT) in its Americas 5G Experience Lab in Dallas, Texas, offering a look at how private networks, edge computing solutions, Internet of Things (IoT) and more can come together for a better digital society.
These partnerships position DOX as a leading player in the telecommunications sector, capable of delivering cutting-edge solutions and driving digital transformation.
DOX's revenue for the fiscal second quarter ended March 31, 2023, increased 6.8% year-over-year to $1.22 billion. Its operating income rose 11.4% over the prior-year quarter to $182.28 million and free cash flow increased 113.3% year-over-year to $259.36 million.
Moreover, the company's non-GAAP net income attributable to DOX amounted to $178.59 million and its EPS came to $1.47.
DOX's EPS and revenue for the fiscal third quarter ending June 30, 2023, are expected to increase 16.5% and 6.5% year-over-year to $1.48 and $1.24 billion, respectively.
Moreover, DOX's revenue and EPS are expected to rise 6.7% and 11.4% year-over-year to $4.88 billion and $5.90 in the current fiscal year ending September 2023. The company has an excellent earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 10.2% over the past nine months and 3.2% over the past month to close the last trading session at $94.17.
DOX's strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
In addition, the stock has an A grade for Stability, Sentiment, and Quality. It is ranked #10 in the 50-stock Software - Business industry.
Beyond what we have highlighted above, we have also given DOX grades for Growth, Value, and Momentum. Get all the DOX ratings here.
Data Storage Corporation (DTST)
DTST provides multi-cloud information technology solutions primarily in the United States. The company offers data protection and disaster recovery solutions, high availability, data vaulting, retention, Infrastructure as a Service, standby servers, support and maintenance, and internet solutions.
DTST's revenue grew at a CAGR of 37.1% over the past three years.
On May 12, DTST announced that its wholly owned subsidiary, Flagship Solutions Group, has secured a multi-million-dollar order with a Forbes Global 2000 listed company.
Chuck Piluso, the CEO of DTST, added, "We continue to build upon Flagship's great brand throughout the USA with their excellent array of solutions and deep partnerships. We look forward to further penetrating this multi-billion-dollar market."
DTST's selling, general and administrative expenses decreased 13.4% year-over-year to $2.13 million in the first quarter ended March 31, 2023. Its sales came in at $6.88 million. The company's gross profit came in at $2.09 million. Additionally, the company's net income attributable to common stockholders came in at $50.66 thousand and $0.01 per share, respectively.
The consensus EPS estimate of $0.17 for the fiscal year 2024 represents a 112.5% improvement year-over-year. The consensus revenue estimate of $25.50 million for the same year represents a 6.7% year-over-year rise.
The stock has gained 28% year-to-date and 8.3% over the past month to close the last trading session at $1.90.
DTST's robust outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has an A grade for Sentiment and a B for Value and Quality. It is ranked #6 in the 66-stock Internet industry.
To see the other ratings of DTST for Growth, Momentum, and Stability, click here.
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DT shares were trading at $50.62 per share on Thursday morning, down $0.37 (-0.73%). Year-to-date, DT has gained 32.17%, versus a 9.72% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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