As people and businesses grow more reliant on technology, tech companies are widening their bases and expanding their offerings to capitalize on the growing demand. Furthermore, with widespread digitalization across nearly every industry, and the increasing deployment of the 5G networks, investors are becoming evermore bullish about the industry. This is evidenced by the iShares U.S. Technology ETF’s (IYW) 20.5% return over the past six months.
Because the Fed has declared that it will keep benchmark interest rates near zero for now, with no plans to raise them in the soon, small-cap companies have much scope to grow by taking advantage of the ‘cheap money’ environment. In fact, with mega-cap tech shares experiencing a sell-off on investors’ expectations of a market correction due to the COVID-19 resurgence, small-cap tech stocks could be safer bets now.
As such, Wall Street Analysts expect fundamentally sound small-cap technology stocks Impinj Inc. (PI) and Zix Corporation (ZIXI) to rally by more than 50% over the next 12 months.
Impinj Inc. (PI)
PI is a RAIN radio frequency identification (RFID) solution provider that is based in Seattle, Wash. The company provides a platform that comprises endpoint integrated circuits (ICs), reader ICs, readers, and gateways that enable wireless connectivity to everyday items and applications. It offers its services to the healthcare, industrial, aviation, and automotive sectors.
Last month, PI unveiled its three next-generation RAIN RFID reader chips. This should allow the company to help IoT device makers fulfill the growing demand for item connectivity in the retail, supply chain and logistics, consumer electronics, and other sectors.
During the second quarter, ended June 30, 2021, PI’s revenue increased 78.7% year-over-year to $47.27 million. Its adjusted EBITDA came in at $3.30 million for this period, versus a negative $5.19 million adjusted EBITDA in 2020. Its net cash from operating activities grew 77.3% year-over-year to $4.98 million. Also, the company’s gross profit surged 91.2% year-over-year to $24.78 million over this period.
The $0.25 consensus EPS estimate for the next year represents a 308.3% improvement year-over-year. The $174.38 million consensus revenue estimate for its fiscal year 2021 represents a 25.5% increase from the same period last year. The stock has gained 68.5% year-to-date and 61.2% over the past nine months.
All four Wall Street analysts that have provided ratings for the stock have rated it Buy. Closing yesterday’s trading session at $44.55, the $68 average analyst price target represents a potential 52.6% upside.
Zix Corporation (ZIXI)
ZIXI provides e-mail encryption, data loss prevention (DLP), threat protection, and bring-your-own-device (BYOD) security to fulfill businesses’ data protection and compliance demands. The Dallas, Tex.-based company provides services to organizations in the healthcare, financial services, insurance, and government sectors.
In May, ZIXI expanded its global partner program into Germany and the United Kingdom, enabling German partners to benefit from localized product solutions, such as Advanced Threat Protection, Secure File Share, and a dedicated Partner Portal. Also, in the U.K., existing and new partners will be able to add ZIXI’s Data Archive Residency to their product portfolios. This should help the company expand its global footprint and strengthen its position in the industry.
During its fiscal first quarter, ended March 31, 2021, ZIXI’s revenue increased 14.5% year-over-year to $60.01 million. Its gross margin grew 2% year-over-year to $26.88 million. Its net cash from operating activities surged 142.2% from the prior-year quarter to $10.67 million, while cash and cash equivalents increased 45.7% year-over-year to $23.75 million over this period.
The company’s EPS is expected to grow 19% year-over-year to $0.69 next year. Analysts expect ZIXI’s revenue to increase 14.1% year-over-year to $249.24 million in its fiscal year 2021. ZIXI’s stock has gained 10.3% over the past year and 13.6% over the past nine months.
Both Wall Street analysts that provided ratings for the stock have rated it Buy. The $11.25 price target represents a 51.6% potential gain from its $7.42 last closing price.
PI shares were trading at $44.94 per share on Friday afternoon, up $0.39 (+0.88%). Year-to-date, PI has gained 7.33%, versus a 18.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More…
