The network industry has flourished during the COVID-19 pandemic, owing to its extensive usage in the ballooning remote work culture. This trend will likely continue because the rapid digitization of virtually every sector and global 5G rollout are expected to boost data usage tremendously over the long run. Despite the global tech sector’s current underperformance, due to, among other factors, the fear of looming interest rate hikes, the network industry is expected to deliver solid returns over the coming quarters.
In a highly complex data-driven world with rapid digitization, this segment is set to deliver solid returns to its investors. Furthermore, the Biden Administration's infrastructure bill, passed last fall, is expected to support innovations in the networking industry. According to Statista, revenue in the Network Infrastructure segment is slated to reach $197.39 billion in 2022.
Given this backdrop, we think it wise to bet on quality yet cheap networking stocks Gilat Satellite Networks Ltd. (GILT) and PCTEL, Inc. (PCTI), which are currently trading under $10.
Gilat Satellite Networks Ltd. (GILT)
Headquartered in Petah Tikva, Israel, GILT, together with its subsidiaries, provides satellite-based broadband communication solutions and services in Israel and internationally. It operates through Fixed Networks; Mobility Solutions; and Terrestrial Infrastructure Projects segments.
On Feb. 8, 2022, GILT announced the expansion of its strategic partnership with SES. SES has selected Gilat’s SkyEdge IV platform to operate its SES-17 satellite. Amir Yafe, VP of Mobility & Global Accounts, GILT, said, “We are excited and proud to work with our partner, SES, to support their multi-orbit network, including the O3b mPOWER constellation, SES-17, and other satellites as they are launched. The integration of SkyEdge IV with SES’ ARC system ensures space and ground coordination and unified operation, forming a resilient and secure network.”
GILT’s revenues increased 57.8% year-over-year to $67.27 million for the fourth quarter, ended Dec. 31, 2021. Its non-GAAP net income came in at $5.89 million, compared to a $1.91 million loss in the prior period. Also, its non-GAAP EPS came in at $0.10, compared to a $0.03 loss per share in the previous period.
The stock’s 1.55x and 1.86x respective forward EV/S and P/S are lower than the 3.65x and 3.47x industry averages.
Analysts expect GILT’s revenue to be $64.80 million for the period ended June 2022, representing a 13.9% year-over-year rise. Over the past month, the stock has gained 10.4% to close the trading session at $8.52.
Under the POWR Ratings, GILT has a B grade for Sentiment. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Within the B-Rated Technology - Communication/Networking industry, GILT is ranked #28 of 56 stocks. Click here to see the additional ratings for Growth, Value, Momentum, Stability, and Quality for GILT.
PCTEL, Inc. (PCTI)
PCTI, together with its subsidiaries, provides industrial Internet of Things (IoT) devices, antenna systems, and test and measurement solutions worldwide. It operates in three segments: Enterprise Wireless, Intelligent Transportation, and Industrial IoT.
On Nov. 4, 2021, David Neumann, PCTI’s CEO, said, “Demand for our products remains strong, as evidenced by another sequential increase in orders. We continue to invest in exciting new 5G products, including the Gflex ™ scanning receiver, new 5G/IoT antenna platforms, and industrial IoT devices.”
PCTI’s revenues increased 18.4% year-over-year to $22.41 million for its fiscal third quarter, ended Sept. 30, 2021. The company’s gross profit came in at $10.25 million, up 7.1% year-over-year. Its cash and cash equivalents were $9.77 million for the period ended Sept. 30, 2021, compared to $5.76 million for the period ended Dec. 31, 2020.
The stock’s 0.75x and 1.08x respective forward EV/S and P/S are lower than the 3.65x and 3.47 industry averages.
Analysts expect PCTI’s revenue to increase 12.7% year-over-year to $96.7 million in its fiscal 2022. Its EPS is also estimated to grow 10% per annum for the next five years. It surpassed the EPS estimates in three of the trailing four quarters. It closed the last trading session at $5.16.
PCTI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system.
PCTI has an A grade for Value and Sentiment. Within the Technology - Communication/Networking industry, it is ranked #6 of 55 stocks. Click here to see the additional POWR Ratings for Growth, Momentum, Stability, and Quality for PCTI.
GILT shares were trading at $8.31 per share on Tuesday morning, down $0.21 (-2.46%). Year-to-date, GILT has gained 17.54%, versus a -9.11% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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