PC Connection (CNXN) AI Stock Analysis

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PC Connection

(NASDAQ:CNXN)

68Neutral

PC Connection's stock is supported by strong financial fundamentals and a stable balance sheet, though technical indicators suggest bearish momentum. Valuation appears fair with a reasonable P/E ratio, and while the earnings call highlights challenges, it also provides optimism for future growth. The absence of impactful corporate events means the overall score reflects internal performance and market conditions.

PC Connection (CNXN) vs. S&P 500 (SPY)

Market Cap

$1.52B

Dividend Yield0.75%

Average Volume (3M)157.27K

Price to Earnings (P/E)17.9

Beta (1Y)0.86

Revenue Growth-1.70%

EPS Growth4.45%

CountryUS

Employees2,580

SectorTechnology

Sector Strength44

IndustryTechnology Distributors

Share Statistics

EPS (TTM)3.29

Shares Outstanding25,874,512

10 Day Avg. Volume146,438

30 Day Avg. Volume157,270

Financial Highlights & Ratios

PEG Ratio4.03

Price to Book (P/B)N/A

Price to Sales (P/S)0.58

Price to Cash Flow (P/CF)16.00

P/FCF Ratio16.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price TargetN/A

Price Target UpsideN/A

Rating ConsensusN/A

Number of Analyst Covering0

PC Connection Business Overview & Revenue Model

Company DescriptionPC Connection, Inc., together with its subsidiaries, provides various information technology (IT) solutions. The company operates through three segments: Business Solutions, Enterprise Solutions, and Public Sector Solutions. It offers IT products, including computer systems, data center solutions, software and peripheral equipment, networking communications, and other products and accessories, as well as provides services related to design, configuration, and implementation of IT solutions. The company markets its products and services through its websites comprising connection.com, connection.com/enterprise, connection.com/publicsector, and macconnection.com. It serves small to medium-sized businesses (SMBs) that include small office/home office customers; government and educational institutions; and medium-to-large corporate accounts through outbound telemarketing and field sales, and marketing programs targeted to specific customer populations, as well as through digital, web, and print media advertising. The company was founded in 1982 and is headquartered in Merrimack, New Hampshire.

How the Company Makes MoneyPC Connection generates revenue through the sale of a wide array of IT products and services. The company's primary revenue streams include the sale of computer systems, software, and peripheral equipment. Additionally, PC Connection earns from offering professional services such as consulting, design, installation, and support services. Significant partnerships with leading technology manufacturers, such as Apple, Microsoft, and Cisco, contribute to its earnings by enabling access to the latest technology solutions. The company's revenue model is enhanced by its ability to provide customized IT solutions, effectively addressing the unique requirements of its diverse customer base across multiple industries.

PC Connection Financial Statement Overview

Summary

PC Connection showcases strong financial fundamentals with effective profitability, a solid balance sheet, and robust cash flow generation. Despite a dip in revenue, the company maintains strong margins and low leverage, suggesting resilience and stability. Continued focus on revenue growth and cash management could enhance future financial performance.

Income Statement

Positive

PC Connection shows consistent profitability with a stable gross profit margin of 18.3% in TTM (Trailing-Twelve-Months). The net profit margin rose slightly to 3.1%, indicating efficient cost management. However, revenue has seen a decline from the previous year, which may signal a need for growth strategies. EBIT and EBITDA margins remain stable, suggesting strong operational efficiency.

Balance Sheet

Very Positive

The company maintains a robust balance sheet with a low debt-to-equity ratio of 0.002, reflecting minimal leverage and strong financial health. The equity ratio is high at 70.1%, indicating solid asset backing by equity. Return on equity is steady, enhancing investor confidence. The liquidity position is strong with substantial cash reserves, supporting operational flexibility.

Cash Flow

Positive

PC Connection's cash flow is strong with a free cash flow to net income ratio of 1.94, indicating effective cash generation relative to profit. Operating cash flow to net income is 2.00, demonstrating efficient cash conversion. However, there is a slight decline in free cash flow growth rate, suggesting a need for improved cash management in the future.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
2.80B	2.85B	3.12B	2.89B	2.59B
	Gross Profit
519.79M	511.74M	526.18M	464.58M	418.81M
	EBIT
97.06M	105.84M	120.55M	96.52M	72.07M
	EBITDA
97.06M	118.22M	132.53M	108.72M	86.67M
	Net Income Common Stockholders
87.09M	83.27M	89.22M	69.91M	55.77M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
442.61M	297.19M	122.93M	108.31M	95.66M
	Total Assets
1.30B	1.19B	1.10B	1.08B	1.02B
	Total Debt
3.36M	4.91M	8.16M	6.79M	9.63M
	Net Debt
-174.96M	-140.04M	-114.77M	-101.52M	-86.02M
	Total Liabilities
388.36M	347.61M	333.65M	401.69M	379.05M
	Stockholders Equity
910.99M	840.77M	766.17M	682.47M	636.33M
Cash Flow		Free Cash Flow
173.87M	188.36M	25.81M	47.45M	25.07M
	Operating Cash Flow
173.87M	197.95M	34.89M	57.75M	36.10M
	Investing Cash Flow
-115.29M	-160.20M	-9.08M	-8.73M	-11.03M
	Financing Cash Flow
-25.22M	-15.73M	-11.19M	-36.37M	-19.47M

PC Connection Technical Analysis

Technical Analysis Sentiment

Negative

Last Price58.90

Price Trends

50DMA

62.47

Negative

100DMA

66.93

Negative

200DMA

68.56

Negative

Market Momentum

MACD

-0.92

Positive

RSI

43.36

Neutral

STOCH

36.15

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CNXN, the sentiment is Negative. The current price of 58.9 is below the 20-day moving average (MA) of 61.03, below the 50-day MA of 62.47, and below the 200-day MA of 68.56, indicating a bearish trend. The MACD of -0.92 indicates Positive momentum. The RSI at 43.36 is Neutral, neither overbought nor oversold. The STOCH value of 36.15 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for CNXN.

PC Connection Risk Analysis

PC Connection disclosed 28 risk factors in its most recent earnings report. PC Connection reported the most risks in the “Tech & Innovation” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

PC Connection Peers Comparison

Overall Rating

UnderperformOutperform

Sector (58)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SCSC	71 Outperform	$732.53M	12.30	6.79%	―	-15.92%	-25.15%
AVT	69 Neutral	$4.06B	13.30	6.45%	2.75%	-12.21%	-51.31%
CNXN	68 Neutral	$1.52B	17.93	9.94%	0.75%	-1.70%	4.45%
ARW	67 Neutral	$5.30B	14.05	6.78%	―	-15.66%	-54.03%
NSIT	61 Neutral	$4.21B	20.24	14.24%	―	-5.17%	-9.73%
Sector *	58 Neutral	$9.82B	10.00	-6.63%	3.09%	7.49%	-11.58%
VSH	49 Neutral	$1.50B	26.74	-1.47%	3.56%	-13.65%	-110.03%

* Technology Sector Average

Performance Comparison

CNXN

PC Connection

59.92

-4.68

-7.24%

ARW

Arrow Electronics

102.21

-22.81

-18.25%

AVT

Avnet

48.45

1.19

2.52%

NSIT

Insight Enterprises

132.08

-54.19

-29.09%

SCSC

ScanSource

31.49

-12.96

-29.16%

VSH

Vishay Intertechnology

11.18

-9.95

-47.09%

PC Connection Earnings Call Summary

Earnings Call Date: Feb 5, 2025 | % Change Since: -17.69% | Next Earnings Date: Apr 30, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed picture. While there were notable achievements such as a record gross margin, significant growth in Public Sector Solutions, and a strong cash position, the company faced challenges with overall revenue decline, decreased operating income, and significant declines in segments like Enterprise Solutions. The increase in dividend and recognition in the AI sector provide optimism, but the balance of achievements and challenges suggests a cautious outlook.

Highlights

Public Sector Solutions Growth

Q4 net sales for Public Sector Solutions were $143.7 million, 42.9% higher than a year ago, with significant increases in sales to federal and state/local governments.

Record Gross Margin

For the full year, gross margin was a record 18.6%, growing 60 basis points compared to the prior year.

Dividend Increase

The board of directors declared a 50% increase in the quarterly dividend to $0.15 per share.

Strong Cash Position

Ended Q4 with $442.6 million in cash, cash equivalents, and short-term investments.

Recognition in AI Sector

Received a first-place award in the Naval Information Warfare Center's challenge for AI environment applications, affirming expertise in AI technologies.

Lowlights

Overall Revenue Decline

Full year revenue was $2.8 billion, a decrease of 1.7% compared to the prior year, with a continued slow recovery in IT spending.

Decreased Operating Income

Q4 operating income was $22.6 million, a decrease of 19% compared to Q4 2023.

Net Income Decline

Q4 net income was $20.7 million, a decrease of 12.9% from $23.8 million in the prior year quarter.

Enterprise Solutions Segment Challenges

Q4 net sales for the Enterprise Solutions segment were $302.7 million, 6.4% lower than a year ago, with a 28% decrease in advanced technologies sales.

SG&A and Cost Increases

SG&A increased by 5.2% in Q4, primarily due to investments in resources, leading to higher expenses relative to sales.

Company Guidance

During the fourth quarter 2024 earnings call, Connection provided guidance on its fiscal performance and strategic outlook. The company reported full-year revenue of $2.8 billion, a slight decrease of 1.7% compared to the previous year, while gross profit increased by 1.6% to $519.8 million, with a record gross margin of 18.6%. For Q4, consolidated net sales rose by 1.8% to $708.9 million, although gross margins declined by 30 basis points to 18.3%. Operating income for the quarter was $22.6 million, down 19% from Q4 2023, and net income decreased by 12.9% to $20.7 million, with diluted earnings per share at $0.78. The company highlighted growth in notebook mobility and desktop revenue by 14% but faced challenges in advanced technologies. SG&A expenses increased by 4% for the year and 5.2% in Q4, attributed to investments in sales and technical capabilities. Connection announced a 50% increase in its quarterly dividend to $0.15 per share and maintained $59.7 million for stock repurchases. Looking ahead to 2025, the company expressed optimism about growth opportunities driven by data center projects, AI, and device refresh trends, aiming to outperform the US IT market growth rate by 200 basis points.

PC Connection Corporate Events

DividendsFinancial Disclosures

PC Connection Reports Mixed 2024 Financial Results

Neutral

Feb 5, 2025

On February 5, 2025, Connection announced its financial results for the fourth quarter and full year of 2024, showing mixed performance. Despite a 1.8% increase in net sales in the fourth quarter, net income decreased by 12.9% compared to the previous year. The full year results revealed a net income increase of 4.6%, driven by record gross margins from sales of advanced technologies such as cloud, software, and security solutions. The company declared a quarterly dividend of $0.15 per share, highlighting its confidence in long-term growth, despite challenges faced in certain segments.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.