Forget Microchip (MCHP), Usher in 2024 With These 4 Top-Ranked Techs
Microchip MCHP is suffering from a slowdown in business across most end markets due to a challenging macroeconomic environment and heightened inventory level with end customers. MCHP has noted that it continues to accommodate customer requests to delay delivery schedules for products that were very far through the manufacturing process in the second quarter of fiscal 2024.
Persistent inflation and high interest rates have been contributing to the weak macro environment. This has been detrimental to the company’s prospects. Microchip has paused internal capacity expansion that is expected to lower capital expenditure spending in the fiscal 2024 and 2025, due to the weakening demand and challenging macroeconomic environment.
Microchip has been striving to lower lead times, which it believes is the best way to help customers during a period of macro weakness and growing uncertainty. However, shorter lead times are resulting in lower bookings and reduced short-term visibility.
Microchip currently expects third-quarter fiscal 2024 (December-end) revenues to decline between 15% and 20% sequentially. It also expects fourth-quarter fiscal 2024 (March-end quarter) to decline sequentially.
Shares of this Zacks Rank #5 (Strong Sell) company have gained 27.9% year to date, underperforming the Zacks Computer & Technology sector’s return of 49.8%. The Zacks Consensus Estimate for fiscal 2024 earnings has declined 11.2% over the past 60 days to $5.39 per share.
4 Better Bets Than Microchip for 2024
Though Microchip’s prospects may not appear appealing for 2024, there are some technology stocks that offer good investment opportunities. These stocks have a favorable combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Per the Zacks proprietary methodology, stocks with this favorable combination offer good investment opportunities.
Year-to-Date Performance
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Vertiv VRT is benefiting from strong demand for its solutions in the data center, cloud hyperscale and colocation end-markets. Geographically, VRT benefits from strong growth in India, Malaysia, the Philippines and Southeast Asia.
Orders in third-quarter 2023 increased 11% year over year and 16% sequentially. Vertiv expects order activity to be positive on a year-over-year basis in the fourth quarter.
Vertiv currently sports a Zacks Rank #1 and has a Growth Score of A. The Zacks Consensus Estimate for 2024 earnings has improved 12.2% over the past 30 days to $2.21 per share.
Dropbox DBX is riding on an expanding AI powered product portfolio, which is helping it win new customers and drive top-line growth. DBX’s bullish prospect is primarily backed by the company’s strategy of leveraging AI to develop products that organize all cloud content.
Its Dropbox Dash (launched in June), a standalone universal search product that leverages AI and machine learning has been a noteworthy offering. Dropbox is also benefiting from a strong partner base that includes the likes of Google, Adobe and Microsoft.
Dropbox flaunts a Zacks Rank #1 at present and has a Growth Score of B. The consensus mark for 2024 earnings has increased by a nickel to $2.05 per share over the past 60 days.
Okta OKTA is benefiting from the increased use cases of identity solutions. Okta Identity Cloud’s capability to consolidate and easily integrate existing applications without compromising security or stability is attracting customers. Okta products’ ability to automate processes, secure data and reduce costs has been an upside.
Okta ended the third quarter of fiscal 2024 with 18,800 customers, adding 400 customers during the quarter despite the challenging macroeconomic environment. Customers with more than $100K in Annual Contract Value increased 17% year over year.
Okta currently carries a Zacks Rank #2 and has a Growth Score A. The Zacks Consensus Estimate for fiscal 2025 earnings has improved 27% over the past 30 days to $1.93 per share.
NVIDIA NVDA is benefiting from growing investments in generative AI. The generative AI revolution is likely to create huge demand for its next-generation high computing powerful chips. Considering surging AI investments across the data center end market, NVDA expects its fourth-quarter fiscal 2024 revenues to reach $20 billion from $6.05 billion in the year-ago quarter.
NVIDIA is dominating the market for AI chips. The company’s GPUs are already being applied in AI models. This is expanding NVDA’s footprint in untapped markets like automotive, healthcare and manufacturing. Collaborations with Mercedes-Benz and Audi are likely to advance NVIDIA’s presence in autonomous vehicles and other automotive electronics space.
NVIDIA has a Zacks Rank #2 at present and a Growth Score of A. The consensus mark for 2024 earnings has jumped 21.4% over the past 60 days to $19.85 per share.
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NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Microchip Technology Incorporated (MCHP) : Free Stock Analysis Report
Okta, Inc. (OKTA) : Free Stock Analysis Report
Dropbox, Inc. (DBX) : Free Stock Analysis Report
Vertiv Holdings Co. (VRT) : Free Stock Analysis Report
