3 Tech Stocks With Plans for the Future
Nihar is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
It is extremely difficult to find stocks for cutting-edge emerging technologies. Most of them are private, and the skunkworks operations of the major companies will not define earnings into the future. Guess you have to be extremely wealthy and be part of a venture fund to enjoy searching for those companies. Instead I found companies with possibly interesting technologies, but all of the companies will find a place for itself in the future.
1. Everything is about bigger, better, and in 3D
I hate 3D movies for the most part. Not everything needs to be in 3D. Avatar was great in 3D, but yet another Texas Chainsaw movie does not need to exist just because of 3D. That goes double for re-releasing Titanic in 3D. Editorializing aside, I do like huge screens with fantastic sound. IMAX (NYSE: IMAX) is rapidly becoming the standard in theaters. It used to be relegated to a choice few, but now I see every multiplex in the area sporting one of the huge screens.
The company is expanding overseas as well, though Chinese censorship is always a problem for a company involved in entertainment that might facilitate the dissemination of radical ideas. There were some concerns about China voiced in the Q3 2012 earnings call, though overall the company was positive. India is also a lucrative market, and I know that Indians love their cinema. I know people who live there that watch a ton more movies in theaters than someone in the U.S. would. Growth around the world will help drive revenues, but the company will need another product to offer than a large cinema experience.
IMAX is not as big of a company as its seemingly ubiquitous nature for the U.S. cinemas. The company does have some impressive growth numbers and nice margins. The PE is a bit high, but considering the revenue IMAX probably fits into the growth category. The growth of my nemesis 3D, and the company's nice growth does warrant it on a short list of potential long investments, and it has no debt. This is my first foray into most of these companies.
2. Cloud meet mobile
Synchronoss Technologies (NASDAQ: SNCR) is a company that provides numerous cloud services to companies like AT&T and Verizon. They also have a global presence with deals from Telefonica, which were announced in the last earnings call. For such a wide reach it really is a new company for me. I am still not sure what they offer specifically. I see a lot of talk about cloud capabilities so I guess the company just creates the framework for a multitude of cloud services and helps maintain and upgrade them.
SNCR has some low margins for a company that provides the services it does. I mean if it was just selling hardware margins might be extremely low, but providing maintenance and support should boost margins. Gross margins are fine, but I usually look at net. Considering gross margins there is room for improvement though. Even allowing for expansion expenses that number should be above 10%. Revenue and earnings growth are really impressive, and considering my positive stance on mobile data through carriers and hardware providers SNCR moves to the top of my list. Most of the fundamentals look fantastic so I would just be hunting for a trade. I definitely want to look into this company on an ongoing basis though.
3. Willow glass, window to the future
Everyone knows all about Gorilla Glass. It was so successful after having been mothballed that Corning (NYSE: GLW) made Gorilla Glass 2, and now with Gorilla Glass 3. All I can say to that is yawn. Sure it will be a good product, and I am sure plenty of phones and devices will use it. The heavy damage resistance makes me wish some other things were made of it. I am more interested in Willow Glass. It is flexible, strong, and thin.
I have wanted to be able to curve electronic devices forever. Angling it a bit to avoid some glare or otherwise. Willow Glass opens up those possibilities. There are flexible electronic circuits, and there have been prototypes of curved displays. Nothing uses willow glass yet, but it presents a whole new line of capabilities. Gorilla Glass will progress to the point where tanks are made out of them, but Willow Glass is an alternative path. Two paths are better than one and Willow Glass will not replace Gorilla Glass.
Corning has some impressive margins. I was expected them to be a lot lower. Gross margins are around 43% and net margins are around 25%. Corning supplies a component and since companies using them want their margins high they might negotiate a low price for the products. That would hurt Corning's margins. Now I know selling glass to device makers is not all GLW does. There is intense price competition that is hurting the LCD branch, but take the margins from wherever they come from. Corning is a company making a profit with low debt and innovative products with multiple customers. Certain parts of the business are weakening and certain parts are strengthening. Plenty of phones and tablets are still being sold from Apple and others. Despite all this seemingly good news Corning trades below its book value of $14.70 per share. Corning seems like a buy. Earnings will give me some more clarity, not the numbers but the call.
The companies on this list are mostly new to me except Corning. Initially there were five, but I tend to be too talkative. IMAX is something everyone can go and experience for themselves, but Synchronoss has the cooler name and has a ton of major customers. Synchronoss is a company I want to write about as new developments present themselves. I am undecided on IMAX for now, but I am intrigued by its global potential. Corning is trading a bit lower than I think it should. Being below book makes me wonder if something is wrong, but I think its the market being the market.
TheArchivist has no position in any stocks mentioned. The Motley Fool recommends Corning and Imax. The Motley Fool owns shares of Corning and Imax. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!