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PC Connection (CNXN)
NASDAQ:CNXN

PC Connection (CNXN) AI Stock Analysis

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PC Connection

(NASDAQ:CNXN)

Rating:78Outperform
Price Target:
$75.00
▲(16.41%Upside)
PC Connection has a strong financial foundation with consistent revenue growth and profitability. Technical indicators show moderate momentum, and valuation metrics suggest the stock is fairly priced. Positive aspects from the latest earnings call, such as revenue growth and strategic initiatives, are balanced by challenges like margin declines and cash flow issues. Overall, the stock presents a stable investment with some growth potential.

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

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 primarily through the sale of IT products, which includes hardware, such as computers and peripherals, and software solutions. The company operates through three primary segments: Business Solutions, Enterprise Solutions, and Public Sector Solutions, each targeting different customer bases. Revenue is driven by a combination of direct sales to end-users, as well as through service contracts where Connection provides technology solutions, managed services, and technical support. Key revenue streams include product sales, professional services, and solutions integration. Strategic partnerships with major technology vendors enhance its offerings, allowing Connection to provide customized solutions and maintain competitive pricing, which are critical factors in its earnings.

PC Connection Earnings Call Summary

Earnings Call Date:Apr 30, 2025
(Q1-2025)
|
% Change Since: 4.07%|
Next Earnings Date:Jul 31, 2025
Earnings Call Sentiment Neutral
The earnings call presented a mixed picture. While there were strong revenue growth and positive developments in certain segments and markets, there were also challenges such as declining gross margins and operational cash flow issues. The company showed resilience and strategic initiatives to manage these challenges, but the presence of significant lowlights alongside the highlights results in a balanced outlook.
Q1-2025 Updates
Positive Updates
Revenue Growth
Consolidated net sales increased by 10.9% to $701 million in the first quarter of fiscal year 2025.
Public Sector Sales Increase
Public Sector Solutions net sales increased by 54.7% year-over-year, with significant contributions from federal government sales.
Adjusted Earnings Per Share
Adjusted diluted earnings per share increased by 20% to $0.60 compared to Q1 2024.
Share Buyback Program
The company repurchased 697,000 shares, reducing outstanding shares by 2.7% and announced an additional $50 million for share repurchases.
Vertical Market Success
Financial Services net sales increased by 32% and healthcare net sales grew by 13% year-over-year.
Negative Updates
Gross Margin Decline
Gross margins decreased slightly to 18.2%, down 50 basis points from the previous year.
Operating Income Challenges
Operating income as a percentage of sales remained flat at 2.1% year-over-year, and gross margin for the Enterprise segment decreased by 90 basis points.
Cash Flow Issues
Cash flow used in operations was $52.4 million, primarily due to an increase in inventory and a decrease in accounts payable.
Interest Income Decrease
Interest income decreased by $664,000 compared to the previous year.
Company Guidance
During the first quarter of fiscal year 2025, Connection reported consolidated net sales of $701 million, marking a 10.9% increase compared to the same period in 2024. Gross profit rose by nearly 8% to $127.3 million, although gross margins slightly decreased to 18.2%. Operating income reached $14.5 million, reflecting a 7.9% growth, with operating income excluding severance expenses up by 29.6% to $17.5 million. Net income was $13.5 million, a 2.5% rise from the previous year, and diluted earnings per share increased by 2% to $0.51, while adjusted diluted earnings per share surged by 20% to $0.60. Notebooks and desktops net sales saw a significant uptick of 21% year-over-year. Despite a dynamic macroeconomic environment, including tariff concerns, Connection maintained its momentum in advanced technologies and integrated solutions, with a 7% increase in revenue driven by software and server storage solutions. The company also noted its highest backlog in nearly two years and projected to outperform the U.S. IT market growth by 200 basis points for the year.

PC Connection Financial Statement Overview

Summary
PC Connection is performing well overall with solid financial health across the board. The income statement highlights strong profitability and operational efficiency. The balance sheet reveals a low leverage and a strong equity position, while the cash flow statement shows a good cash generation capability despite some recent declines. The company's financial position is stable, although attention should be given to maintaining growth momentum and addressing the recent slowing of cash flow generation.
Income Statement
85
Very Positive
PC Connection's income statement reveals consistent revenue growth, with a TTM revenue increase to $2.87 billion from $2.80 billion in the previous year. The gross profit margin remains robust at around 18.3%, reflecting efficient cost management. Net profit margin has slightly improved, reaching 3.04% for the TTM. EBIT and EBITDA margins are stable, indicating strong operational efficiency. However, the revenue growth rate has slowed compared to previous years, suggesting potential market saturation or increased competition.
Balance Sheet
80
Positive
The balance sheet is strong, with a low debt-to-equity ratio of 0.0012, indicating minimal reliance on debt financing. The equity ratio stands at a healthy 70.3%, reflecting a solid financial foundation. Return on Equity (ROE) is stable at 9.97%, showcasing efficient use of shareholder funds. The company has increased cash reserves, providing a cushion for future investments or downturns. However, the slight decline in equity between the latest TTM and the previous annual period suggests some challenges in retaining earnings.
Cash Flow
75
Positive
PC Connection demonstrates a strong cash flow position with a positive free cash flow of $56.5 million in the TTM. The operating cash flow to net income ratio is favorable at 0.73, indicating effective cash generation from operations. However, the free cash flow growth rate has slowed compared to previous periods, and there is a notable decline in operating cash flow from $173.9 million in the previous annual period to $64.2 million in the TTM. This could signal potential pressures on future liquidity.
Breakdown
TTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
2.87B2.80B2.85B3.12B2.89B2.59B
Gross Profit
525.76M519.79M511.74M526.18M464.58M418.81M
EBIT
98.53M97.06M105.84M120.55M96.52M72.07M
EBITDA
108.31M110.49M118.22M132.53M108.72M86.67M
Net Income Common Stockholders
87.42M87.09M83.27M89.22M69.91M55.77M
Balance SheetCash, Cash Equivalents and Short-Term Investments
351.95M442.61M297.19M122.93M108.31M95.66M
Total Assets
1.16B1.30B1.19B1.10B1.08B1.02B
Total Debt
4.61M3.36M4.91M8.16M6.79M9.63M
Net Debt
-142.97M-174.96M-140.04M-114.77M-101.52M-86.02M
Total Liabilities
308.39M388.36M347.61M333.65M401.69M379.05M
Stockholders Equity
852.67M910.99M840.77M766.17M682.47M636.33M
Cash FlowFree Cash Flow
56.52M166.29M188.36M25.81M47.45M25.07M
Operating Cash Flow
64.20M173.87M197.95M34.89M57.75M36.10M
Investing Cash Flow
41.02M-115.29M-160.20M-9.08M-8.73M-11.03M
Financing Cash Flow
-70.33M-25.22M-15.73M-11.19M-36.37M-19.47M

PC Connection Technical Analysis

Technical Analysis Sentiment
Negative
Last Price64.43
Price Trends
50DMA
64.07
Positive
100DMA
65.33
Negative
200DMA
68.36
Negative
Market Momentum
MACD
0.25
Positive
RSI
41.98
Neutral
STOCH
12.10
Positive
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 64.43 is below the 20-day moving average (MA) of 67.85, above the 50-day MA of 64.07, and below the 200-day MA of 68.36, indicating a neutral trend. The MACD of 0.25 indicates Positive momentum. The RSI at 41.98 is Neutral, neither overbought nor oversold. The STOCH value of 12.10 is Positive, 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 (61)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
78
Outperform
$1.66B19.7910.11%0.76%4.21%6.38%
ARARW
71
Outperform
$6.14B16.306.68%-11.13%-43.00%
AVAVT
69
Neutral
$4.17B13.956.42%2.60%-10.52%-42.40%
68
Neutral
$4.11B25.7511.37%-8.73%-35.37%
67
Neutral
$912.41M14.567.32%-14.07%-9.65%
61
Neutral
$11.56B10.44-6.88%2.93%7.49%-8.97%
VSVSH
55
Neutral
$1.91B26.74-3.14%2.84%-11.31%-127.88%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
CNXN
PC Connection
64.43
-2.60
-3.88%
ARW
Arrow Electronics
117.51
-12.27
-9.45%
AVT
Avnet
49.76
-2.67
-5.09%
NSIT
Insight Enterprises
128.66
-66.35
-34.02%
SCSC
ScanSource
40.02
-7.28
-15.39%
VSH
Vishay Intertechnology
13.94
-8.47
-37.80%

PC Connection Corporate Events

Executive/Board ChangesShareholder MeetingsBusiness Operations and Strategy
PC Connection Approves Key Proposals at Annual Meeting
Neutral
May 14, 2025

On May 14, 2025, PC Connection, Inc. held its Annual Meeting of Stockholders, where several key proposals were voted on and approved. These included the election of six directors, approval of executive compensation, amendments to stock plans, and the ratification of Deloitte & Touche LLP as the independent auditor for 2025. The meeting outcomes reflect the company’s ongoing governance and operational strategies, potentially impacting its market position and stakeholder relations.

Stock BuybackDividendsFinancial Disclosures
PC Connection Reports Strong Q1 2025 Financial Results
Positive
Apr 30, 2025

On April 30, 2025, Connection reported its first quarter 2025 financial results, highlighting a 10.9% increase in net sales to $701 million and a 2.5% rise in net income to $13.5 million. The company announced a quarterly dividend of $0.15 per share and a $50 million increase in its share repurchase program, bringing the total authorization to $170 million. The results reflect strong demand for digital workplace solutions and datacenter modernization, contributing to a 20% growth in adjusted earnings per share. The Public Sector Solutions segment saw significant growth, with a 54.7% increase in net sales, driven by a 228% rise in federal government sales.

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.