Insight Enterprises, Inc (NSIT, $94.25): “Providing Some Insight”
By: Max Kruszeski, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
• Insight Enterprises, Inc. (NYSE:NSIT) Insight Enterprises, Inc. is
a global provider of information technology, services, and cloud solutions to institutions
worldwide. These institutions include K-12 schools, colleges and universities, federal,
state, and local governments, and healthcare organizations. The company
specializes and operates in four solution categories, including supply chain
optimization, cloud and data center transformation, digital innovation, and
connected workforce. Within these four solution categories live three business segments,
Hardware (61%), Software (25%), and Services (14%), which generate revenue in
North America, Europe, the Middle East, and Asia-Pacific.
• NSIT currently trades at $94.25
(as of EOD 10/24), a near 57.45% increase since its addition to the portfolio.
• On October 18th,
2021, Joyce Mullen was elected as the new President and Chief Executive Officer
of the Company (effective January 1st 2022). This, as most large administrative
changes do, could put pressure on the stock price. Secondly, ValueAct recently engaged
in an Activism Campaign with NSIT in which conversations were held regarding
the composition of the board and whether a ValueAct employee should be on it. Both
of these events are things to watch heading into the future.
•June 2021 LTM Sales were
recorded as $8.65 Billion, which is $310 Million or 3.7% higher than 2020’s
full-year Sales value. Net Income and EBIT also increased against the 2020 full
year figure, increasing 14.4% and 4.1% respectively. This is most likely due to
pandemic recovery efforts as well as added strength from their recent integration
of acquisitions PCM and vNext.
• NSIT could be heading to match
or to break 52-week highs on the back of drivers such as Digital Expansion, Consumer
Demand, and Commercial Market Acceleration and whether they can hold up into the
future.
Key
points:
Insight
Enterprise, Inc. was added to the portfolio in September of 2020 at around
$59.86 per share. Since then, it has grown 57.45% and currently trades at
$94.25 a share. However, this large increase came from hitting its 52-week low
of $52.63 a share in October of 2020. Following this 12.08% drop, the stock
quickly rebounded and grew rather consistently until it hit its 52-week high of
$107.27 a share. With this growth, and, since it hit its 52-week high on June
15th, NSIT has gone down 10.59%. This can largely be attributed to
the Federal Reserve increasing its inflation forecasts for the rest of 2021,
2022, and 2023. The Fed expects the core personal consumption expenditure index
to be higher than forecasted in all three years. This hit the technology
industry pretty hard, as inflation typically drives an increase in interest
rates from central banks. This causes investors to hesitate more when
considering riskier tech stocks. Supply chain constraints leading to longer
lead times required for orders could be seen as a potential candidate, however,
the company has increased its sales through the first two quarters in 2021, so
this seems unlikely.
As the
world continues to make a push forward into the era of cloud computing and the IoT,
demand for a company like Insight Enterprise, Inc. is high. Companies,
especially after the COVID-19 pandemic, need more effective tools to gain a competitive
edge over competitors. The Cloud, the Internet of Things, and Artificial
Intelligence are no longer considered “wants”; they are needs that companies must
fulfill in order to keep succeeding in an economy that’s focusing more and more
on big data and its power. NSIT goes beyond just managing the software that’s needed
for these applications, managing a client’s entire cloud and edge ecosystem,
uniting cloud and data strategy, software development, team support, pricing
and lifecycle flexibility are just a few of many tasks that make demand for
this company high, this shift is a key driver for NSIT, and it doesn’t appear
to be changing anytime soon.
Joyce
Mullen, Insight’s 1-year North American president, is set to take over CEO and
president on January 1st following Ken Lamneck’s retirement after serving
this role since 2010. Mullen worked for 21 years at Dell Technologies where she
served as the president of Global Channel and Embedded & Edge Solutions.
Her leadership and future plans for the company will be something to watch out
for when she makes the transition.
What
has the stock done lately?
Since being added to the portfolio
NSIT has grown 57.45%, however, this number could have been higher had the
stock not taken a hit in September of 2020. As I mentioned above, the tech
industry as a whole took a hit as a product of the Fed announcing higher than
expected inflation rates. Recently the stock has decreased 6.12% over the last six
months, but is fighting to bounce back in October, posting a 4.91% increase
this month alone. The stock needs a positive catalyst and with Q3 earnings being
released on November 4th and with Joyce Mullen set to take over at
the start of 2022, they may find that here.
Past
Year Performance: NSIT has increased 52.40% in value over the past
year, however, a majority of this growth came in the first six months of this year.
Since then, the stock has struggled to maintain its success in the ladder part
of 2021. NSIT hit its 52-week high of $107.27 in June 2021 before declining to its
current levels.
Source: FactSet
My
Takeaway
The ongoing shift toward an
economy that fully utilizes cloud computing, the IoT, and Artificial
Intelligence is a driver of Insight Enterprise, Inc. that simply cannot be
ignored. NSIT is continuously finding ways to better their products and services
to cater to their customers and allow for top-performance. This, along with the
successful integration of recent acquisitions, PMC and vNext, can be the framework
for a catalyst that reinvigorates a struggling stock as of late. With Q3
earnings set to release soon and a new ready-to-go CEO serve as reasoning for
NSIT to continue to be held in the AIM portfolio.
1
Month Stock Chart
Source: FactSet
