We recently published a list of 10 Best Tech Stocks to Invest In On the Dip. In this article, we are going to take a look at where Concentrix Corporation (NASDAQ:CNXC) stands against other best tech stocks to invest in on the dip.
How’s The Tech Sector Performing in Q3 2024?
Dan Romanoff, a senior equity research analyst at Morningstar provided insights into the current state of the technology sector, on October 1st, 2024. His analysis highlights significant challenges and opportunities for the industry. Romanoff mentioned that after a robust start to 2024, the tech sector experienced a slump in the third quarter. Despite this downturn, software and services companies have continued to report solid quarterly results, even as their stock prices have remained relatively flat. Semiconductor firms, while showing potential for recovery, are currently dragging down overall sector performance.
While discussing the sector-wise ranking of the US stock market based on the Q3 earning season, Romanoff pointed out that the technology sector has been the second-best-performing sector over the past year but ranks as the second-worst performer in the most recent quarter. Romanoff emphasizes that despite these fluctuations, there are positive long-term trends that could benefit the industry. He expressed confidence in several long-term growth drivers within technology, including cloud computing, artificial intelligence, and the expansion of semiconductor demand. He mentioned that these factors are expected to sustain growth in the sector even amidst short-term challenges.
Moreover, according to Romanoff, the Morningstar US Technology Index has risen by 32% over the past twelve months, outperforming the broader US equity market’s 24% gain. He notes that while the median US technology stock is fairly valued with a modest margin of safety, the sector trades at a slight premium on a market-weighted basis. He identifies semiconductors and hardware as being overvalued compared to software, which appears more attractive at present.
READ ALSO: 10 Best Small-Cap Stocks Ready To Explode and 10 Cheap NASDAQ Stocks To Invest In Now.
Romanoff also pointed out that generative AI is a significant force within technology. Companies are increasingly integrating next-generation AI capabilities into their products and services. This trend is particularly evident among cloud providers and semiconductor manufacturers. Despite some recent stock pullbacks for Nvidia, Romanoff believes there are still substantial investment opportunities in generative AI beyond just major players. He mentioned that he sees 34% growth in Gen AI Networking equipment spending through 2028. Romanoff also pointed out that the usage of chips and networking gear has grown together from 2022 to 2024 and he expects the trend to continue till 2028.
Our Methodology
To curate the list of the 10 best tech stocks to invest in on the dip, we used the Finviz stock screener and CNN. Using the screener we shortlisted technology stocks that were down at least 25% on a year-t0-date basis, but analysts see a more than 25% upside. Once we had an aggregated list of the tech stocks fitting our criteria, next we cross-checked their analyst upside potential from CNN. Lastly, we ranked these stocks in the ascending order of the analyst upside potential. Please note that the data was collected on November 25, 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A digital dashboard detailing customer experience/user experience data.
Concentrix Corporation (NASDAQ:CNXC)
Share Price: $44.14
Year-To-Date Performance: -54.81%
Analyst Upside Potential: 58.66%
Concentrix Corporation (NASDAQ:CNXC) is a technology company that specializes in improving customer experiences for businesses. The company also uses data to understand customer behavior and feedback. For instance, the Voice of Customer service of the company involves gathering and analyzing customer feedback to understand their needs better.
The company, on September 25th, announced the launch of its new product called iX Hello, which is an intelligent experience technology suite designed to enhance business productivity through generative AI. The product is a fully customizable, AI-powered virtual assistant that can be tailored to fit the specific needs of any business. It can be deployed quickly without requiring complex coding, making it accessible to various teams within an organization.
Concentrix Corporation (NASDAQ:CNXC) has been doing great in terms of revenue generation. For the third quarter of fiscal 2024, the company generated $2.39 billion in revenue, up 46.2% year-over-year. As per the management, revenue growth for the quarter was driven by 8% year-over-year growth in retail, travel, and e-commerce verticals.
It is one of the best tech stocks to invest in on the dip and analysts’ 12-month median price target is pointing towards a 59% upside from current levels.
FPA Queens Road Small Cap Value Fund stated the following regarding Concentrix Corporation (NASDAQ:CNXC) in its Q3 2024 investor letter:
“Concentrix Corporation (NASDAQ:CNXC) is one of two top customer experience (CX) vendors globally. The company began by managing call centers but has since evolved into a high-tech business process outsourcer (BPO) that also designs and runs customer-facing websites and apps, integrates the data, and optimizes a client’s customer interactions. The company was spun out from TD Synnex, another of the Fund’s core holdings, and we have always been impressed with CNXC’s innovation and growth. CX is a relatively new business model, and Concentrix has been rolling up smaller competitors. In March, 2023 they bought WebHelp, a leading European CX player, for $4.8B in cash and stock. 22 We believe the WebHelp acquisition will help consolidate an industry where Concentrix and Teleperformance are the largest players.
The market is currently concerned about the potential of artificial intelligence to disrupt Concentrix’ core call center business – all CX companies’ shares are down badly over the last two years.23 On Sep. 25, 2024 CNXC stock got hit again when they released fiscal 2024 Q3 results and took down revenue guidance – fiscal 2024 organic revenue is now expected to come in between -.5% and 1.5%. 24 Concentrix has a debt to EBITDA ratio of 3x from the Webhelp deal which will be a problem if earnings deteriorate quickly. But Concentrix now trades at less than five times adjusted EPS and is highly cash generative. We think, but don’t know, that Concentrix’ domain knowledge and integration into customers’ work flows make for meaningful switching costs and that clients will be reluctant to let AI manage the relationships with their customers. We have held on to Concentrix shares but have not added to the position.”
Overall, CNXC ranks 6th on our list of best tech stocks to invest in on the dip. While we acknowledge the potential of CNXC to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CNXC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
