These 10 Channel Stocks Point to Optimism for Partners
We looked at some stock prices of companies that make their living in the channel.
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Nippon Telegraph and Telephone (NTT) hit its highest stock price of all time on May 22 of this year at $29.20. The stock actually trended upward in September, held steady in October and dropped to its low point of 2022 at $25.60 on Nov. 15.
Executives said in their latest quarterly earnings call that its value-added data center services are offsetting disappointing equipment sales.
As of Wednesday afternoon, a share of NTT cost just under $28.
Cisco recently named NTT its Global Managed Services Partner of the Year.
Even with the stock selloff on Sept. 23, AvePoint’s stock didn’t fluctuate significantly. It dipped slightly during the month of October, but rose again toward the end of the month. The month of November saw another slight dip at the beginning of the month, but has risen significantly in recent weeks, hitting highs not seen since August 2022.
As of Wednesday afternoon, a share of AvePoint cost $4.78.
AvePoint is an independent software vendor (ISV) that performs data migrations and management for Microsoft Office 365.
Information Services Group (ISG) is not a pure technology advisor in the way Channel Futures uses the term as a synonym for agents/brokers. The company’s advisory services expand well beyond the cloud and carrier offerings most agents deliver.
However, the company states that it sources more than $15 billion in as-a-service offerings annually and does dabble in the agent channel.
The company drove $69 million in revenues in the third quarter, down from $71 million a year prior. However, it decreased its expenses enough to grow its profit to $5.6 million. Moreover, its network and software advisory services grew in revenue, compared to shrinking automation service revenues.
The company’s stock price in in September dropped to $4.70, its lowest point of the year. The stock had hit a high point of $7.70 earlier this year. The stock rallied slightly in October and as of Wednesday afternoon, sits at $5.28.
The company reached its highest value in November 2021 at $9.50.
Insight Enterprises‘ stock, likely along with the majority of other companies, fell due to the September stock selloff, bottoming out on the 26th of that month at $82.10.
However, the stock price has gone on to rise significantly since. It has gone above 100 and appears to be rising. As of Wednesday afternoon, the price stood at $104.10.
That’s not as high as Insight’s all-time high of $109.40, which it struck back in March. However, shareholders seem to feel confident about the MSP 501 winner’s value.
Accenture, the systems integrator and consultancy, hit its highest stock price of alltime at $414.50 in December 2021.
The stock price was sitting at $320.80 in August before declining to $256.30 on Sept. 27 before jumping up to $274.30 on Oct. 4. The stock then hit its lowest number of the year on Oct. 12 and has been growing since.
As of Wednesday afternoon, a share of Accenture cost $295.50.
The company earned $15.4 billion in revenues its last reported quarter, an increase of 15%. Moreover, its tech services experienced double-digit growth, according to chief financial officer KC McClure.
CEO Julie Sweet pointed to a trend observed in other earnings call: that enterprise demand for digital transformation increased in mid-to-late 2022.
“While it is still early stages, there are leading companies that have begun systematically transforming multiple parts of their enterprise from moving to the cloud and adopting new ways of working to digitizing manufacturing, to reimagining shared services to creating entirely new business models,” Sweet told analysts in September.
Radizeski told Channel Futures that digital transformation projects often result in cost savings.
“For example, legacy systems and employees can be retired. AI, ML, RPA and other automation eliminate jobs in favor of faster customer service. There are just so many factors and elements that need to be examined, planned for and plotted in order to be successful with a transformation project,” he said.
He added that customers are much more likely find succeed in theose projects when they engage with a partner rather than directly with a single vendor.
ePlus, like so many other channel organizations, hit its alltime high ($60.50) in late 2021. The company experienced a sharp 16% decline on Aug. 4 following its quarterly earnings call.
The losses seem to stem from a year-over-year decline in net sales for its financing segment. CEO Mark Marron attributed the decrease to “several large transactions” it obtained a year prior.
ePlus then hit its lowest stock price of 2022 on Sept. 26, at $40.70. However, the stock has been rising back to where it stood in the summer.
ePlus’ services revenue grew 7.1% in its latest quarterly earnings, with executives citing strong managed services growth. ePlus is also seeing growth on the security side.
And what are ePlus executives saying about the recession? Marron said the organization has been hiring in 2022, including many people in customer-facing roles. He pointed to strong overall customer demand. He said open orders have increased 42% over the previous year.
“Despite increasing economic uncertainty over the past several months, the outlook for IT spending is solid across most market segments. While ePlus is not recession-proof, our business is recession-resilient, supported by our financial strength and the nature of the mission critical technology we sell and support,” Marron told analysts and investors.
As of Wednesday afternoon, an ePlus stock share was worth just under $52.
Stop us if you’ve heard this story before. Wipro hit an alltime high ($9.90) in late 2021. The stock gradually fell throughout 2022, hitting a low point ($4.40) on Oct. 14.
A share of Wipro stock cost $4.80 as of Wednesday afternoon.
The consultancy and systems integrator drove revenues of $2.8 billion in its quarter that ended on Sept. 30. That was 14% growth over the previous year. However, costs did significantly increased in the quarter, leading to a gross profit of $757 million.
Wipro continues to land large enterprise deals. The partner signed 11 deals exceeding $725 million in its latest quarter. Large deal bookings grew 42% year-over-year.
Radizeski said partners are landing more enterprise deals.
“Several vendors have been bringing partners into enterprise deals (or approving the partner to chase that account) in order to land it and satisfy the customer. I can’t think of any enterprise deal that wouldn’t require project management, migration and other elements that the vendors just don’t want to do. They would rather the partner handle the whole project, which in some cases, is going to be multi-vendor and wide,” Radizeski said.
Wipro CEO Thierry Delaporte acknowledged that macroeconomic conditions may impact Wipro’s deal size mix. He cited inflation, geopolitics, rising interest rates and energy costs as factors cutting into customer optimism. However, he said demand for Wipro’s services will remain strong.
“We know that technology in good times like and bad has become the underlying success factor for any business. Regardless of what the problem is, increasingly technology is the solution. And I believe we are better positioned than ever before to help our clients tap into the true power of technology, whether that’s to drive growth and transformation, or manage cost or build a sustainable future,” Delaporte said.
TD Synnex hit its all-time high stock price ($129.50) in June 2021 and then embarked on a gradual decline. It plummented in a particularly sharp manner in September down to $81.20, its lowest price in two years. However, the stock has made its way back to $103 as of Wednesday afternoon.
Investment banking firm Raymond James continued to label the distributor as a “strong buy.”
Although Raymond James pointed to concerns about EMEA and PC exposure that could create headwinds in the upcoming year, TD Synnex’s recent earning belayed some of those worries.
“Counter to macro fears, Europe performed better than anticipated, and we wonder whether this could be customers buying ahead of potential FX/inflation-related price increases,” Adam Tindle wrote.
Tindle also spoke positively of the combination of Synnex and Tech Data, which he said will drive around $60 billion in annual revenue, $10 billion more than that of Ingram Micro.
“In the past, we have witnessed diligent execution from both companies on the integration of significant acquisitions … that ultimately experienced upside on synergy targets. This has begun to materialize with year-one synergy of $140 million vs. $100 million target, and should continue into year two,” Tindle said.
CDW, perhaps the world’s most visible reseller of IT offerings, is on the uptick stockwise after challenges in September. The company hit its all-time high ($204.80) in December of last year. The price fell back to the $150’s in late September and early October. But as of Wednesday afternoon, one share is worth $188.30.
Raymond James rated CDW as “outperform,” citing mixed yet solid third-quarter results. Adam Tindle said profitibatility was strong while revenue was soft.
“Revenue in line/below is generally uncharacteristic for CDW (evidence of demand softening), while profitability was ahead due partially to arguably unsustainable healthy pricing on commoditized items like PCs. Forward indicators suggest PC moderation is likely to continue/steepen, and this volume decline will come alongside gross margin pressure (arguably a worse down cycle than priors),” Tindle wrote.
On the other hand, Tindle noted that “investors don’t own CDW for PC cycles. He added that CDW remains an attractive “U.S-centric, services-focused business.”
“While backlog remains elevated and should decline gradually throughout the coming quarters and macro uncertainty can weigh on results, we believe guidance shows confidence in higher margin mix from netted-down revenue expanding as other areas like PCs show weakening demand,” Tindle said.
ScanSource, historically known as a distrubitor of POS, barcode and payments hardware, has evolved in the last two decades, with its acquisition of services distributor Intelisys propelling its charge into cloud and recurring revenue.
ScanSource reached its highest share price ($43.90) in October 2017, but that dwindled to $18.30 in March 2020 at the start of the pandemic. The hybrid distributor has been making gains ever since, weighing in at $40.40 in May 2022. The stock bottomed out at $25.90 on Sept. 26 and has been climbing back. It stood at $31.10 as of Wednesday afternoon.
The company in its latest quarterly earnings reaffirmed its 2023 outlook of at least 5.5% net sales growth and at least $174 million in adjusted EBITDA.
Intelisys, which ScanSource bought six years ago, continues to receive shout-outs in ScanSource earnings calls. Intelisys increased its net revenue 7% year-over-year in its latest quarter, with commissions growing in double digits. The pillars behind that growth are UCaaS (20% growth) and CCaaS (60%).
Those two cloud communications categories are offsetting speedily declining on-prem communications hardware revenues. Chief financial officer Stephen Jones told analysts that on-prem communications hardware accounts for less than 15% of the total modern communications segment at ScanSource.
“On-prem communication hardware is being replaced with cloud technologies,” ScanSource president John Eldh told Channel Futures earlier this month. “The good news for us is, we actually get to participate on both sides.”
ScanSource executives want to build on its footholds in UCaaS and CCaaS by bring its large base of VARs into that portfolio. Much of the company’s hybrid distribution strategy revolves around resellers attaching cloud and software offerings to the hardware they sell in order to increase deal size.
ScanSource, historically known as a distrubitor of POS, barcode and payments hardware, has evolved in the last two decades, with its acquisition of services distributor Intelisys propelling its charge into cloud and recurring revenue.
ScanSource reached its highest share price ($43.90) in October 2017, but that dwindled to $18.30 in March 2020 at the start of the pandemic. The hybrid distributor has been making gains ever since, weighing in at $40.40 in May 2022. The stock bottomed out at $25.90 on Sept. 26 and has been climbing back. It stood at $31.10 as of Wednesday afternoon.
The company in its latest quarterly earnings reaffirmed its 2023 outlook of at least 5.5% net sales growth and at least $174 million in adjusted EBITDA.
Intelisys, which ScanSource bought six years ago, continues to receive shout-outs in ScanSource earnings calls. Intelisys increased its net revenue 7% year-over-year in its latest quarter, with commissions growing in double digits. The pillars behind that growth are UCaaS (20% growth) and CCaaS (60%).
Those two cloud communications categories are offsetting speedily declining on-prem communications hardware revenues. Chief financial officer Stephen Jones told analysts that on-prem communications hardware accounts for less than 15% of the total modern communications segment at ScanSource.
“On-prem communication hardware is being replaced with cloud technologies,” ScanSource president John Eldh told Channel Futures earlier this month. “The good news for us is, we actually get to participate on both sides.”
ScanSource executives want to build on its footholds in UCaaS and CCaaS by bring its large base of VARs into that portfolio. Much of the company’s hybrid distribution strategy revolves around resellers attaching cloud and software offerings to the hardware they sell in order to increase deal size.
Large swaths of the American workforce enter Thanksgiving feeling economic headwinds of all kinds, but do channel businesses and their investors feel similarly?
Stockholders across the board have been averting their eyes from red font on their investment portfolios in recent months. The NASDAQ Composite Index fell to its lowest of the year on Nov. 3 at 10,343, its lowest since the summer of 2020. The S&P Dow Jones Indices declared the S&P 500 a bear market on June 13. That hadn’t occurred since March 2020 when the you-know-what kicked off in full-force.
Peter Radizeski, president of Rad-Info, said many public companies have been lowering their guidance in the last two quarters and attributing the change to “macro environment” trends, including exchange rates, inflation and the war in Ukraine war. Many of them have conceded publicly that their enterprise deals will take longer to close as a result, Radizeski said.
Rad-Info’s Peter Radizeski
And technology companies have not been spared.
The NASDAQ-100 Technology Sector Index peaked at 9,840 on Nov. 18, 2021. It has gradually fallen since then. The index made some gains in the summer before plummeting in August and then again in September and October, hitting 5,350 on Oct. 14. Now the Nasdaq’s tech index stands at 6,072, an improvement from a month ago but still a paltry comparison where it stood earlier this year.
The index includes popular consumer brands like Apple, Match Group and Meta, as well as giants in enterprise technology like Microsoft, Zoom and Palo Alto.
At the same time, layoffs are hitting the tech sector hard, with HP, Intel and other big names announcing bloodletting. Layoffs have hit the telecom sector in addition to the IT sector, with RingCentral shedding 10% of its workforce. Moreover, one of the largest carriers that transacts through agents has cut part of its enterprise sales team, sources tell Channel Futures.
The Partner Impact
But those are vendors that sell through the channel. How are the actual channel partners faring? Partners have been suffering through economic challenges all year long, the foremost being that damn supply chain.
Channel Futures analyzed a list of 10 publicly traded channel partners to see how their stocks have been performing. The list attempts to include all types of channel partners including VAR-MSP hybrids, ISVs, distributors and systems integrators. We’ve also got a research firm that dabbles in the agent space as well as technology services distributor Intelisys, which has helped propel its parent company ScanSource into the agent space.
An exploration of these businesses and their stocks shows that investors haven’t lost confidence in the channel. Channel partners saw their share prices suffer in the fall, but most have rebounded and are working their way back up to the high points they enjoyed in late 2021 and early 2022. A further analysis of their earnings reports indicates that executives still see strong demand from their customers for their technology sourcing and services.
Scroll through the 10 images above to learn about how these channel companies have been faring on the stock market.
Allison Francis contributed to this report.
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