Altaba Inc (NASDAQ:AABA), is a US$61.82B large-cap, which operates in the software industry based in United States. Technology has become a vital component of every industry, bringing unprecedented opportunities for growth, along with challenges and competition from traditional and emerging areas. Innovations such as augmented and virtual reality, blockchain, machine learning and autonomous vehicles are paving the way for tech sector growth and branching out into new applications. Tech analysts are forecasting for the entire software tech industry, a relatively muted growth of 9.99% in the upcoming year , and a whopping growth of 34.20% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. An interesting question to explore is whether we can we benefit from entering into the tech sector right now. In this article, I’ll take you through the tech sector growth expectations, as well as evaluate whether Altaba is lagging or leading its competitors in the industry. View our latest analysis for Altaba
What’s the catalyst for Altaba’s sector growth?
Despite all the opportunities, tech companies still face a host of challenges, including coping with an increasingly burdensome global regulation. Since the regulatory environment is unlikely to become less complex, organizations will need to address the constantly evolving rules for governing privacy, security and handling of data, as well as cybersecurity issues. In the previous year, the industry saw growth in the teens, beating the US market growth of 11.54%. Altaba lags the pack with its which indicates the company will be growing at a slower pace than its software peers. As an industry laggard, Altaba may be a cheaper stock relative to its peers.
Is Altaba and the sector relatively cheap?
Software tech companies are typically trading at a PE of 26.73x, higher than the rest of the US stock market PE of 18.25x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a similar 11.45% on equities compared to the market’s 10.60%. On the stock-level, Altaba is trading at a lower PE ratio of 2.63x, making it cheaper than the average tech stock. In terms of returns, Altaba generated 35.43% in the past year, which is 23.98% over the tech sector.
Next Steps:Altaba is an tech industry laggard in terms of its future growth outlook. This is possibly reflected in the PE ratio, with the stock trading below its peers. If the stock has been on your watchlist for a while, now may be the time to dig deeper. Although the market is expecting lower growth for the company relative to its peers, Altaba is also trading at a discount, meaning that there could be some value from a potential mispricing. However, before you make a decision on the stock, I suggest you look at Altaba’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has AABA’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Altaba? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!