The current rotation by investors out of pandemic winners and into outdoor-activity-oriented stocks, coupled with antitrust allegations faced by some trillion-dollar companies, has overshadowed several mid-cap technology companies that possess robust growth potential. Synnex (SNX) and Xperi (XPER) are two such stocks. We think they hold solid upside potential.

Technology companies that dominated the stock markets amid the COVID-19 pandemic last year because of the widespread adoption of remote lifestyles are gradually losing momentum with the global economy slowly returning to the pre-pandemic levels.

However, the continuation of the pandemic-driven trends even after the public health crisis is beaten is expected to help  tech companies thrive in the long-run. The global information technology market hit $7.85 trillion in 2020 and is expected to reach $11.87 trillion in 2025, growing at a CAGR of 9%. With most industries having a heavy reliance on technology, the ongoing investor rotation into non-tech, “outdoor” stocks is expected to be short lived.

Indeed, we think the current tech sell-off provides perfect entry points to some future winners. Because large-cap tech companies are currently under federal scrutiny and have yet to decline to reasonable valuations, mid-cap companies are expected to perform better as  demand for the  trillion-dollar names potentially rolls over to to mid-range names.

Two undervalued mid-cap stocks, Synnex Corporation (SNX - Get Rating) and Xperi Holding Corporation (XPER - Get Rating), have been introducing new features, which could translate into significant returns in future. So, we think it could be wise to bet on them now.

Synnex Corporation (SNX - Get Rating)

Headquartered in Fremont, California SNX delivers  a range of distribution, logistics and integration services for the technology industry and provides outsourced services focused on customer engagement strategies. The company operates through the Technology Solutions segment, and distributes peripherals, information technology (IT) systems, consumer electronics and complementary products. In addition, SNXoffers marketing services, serving  resellers, system integrators, and retailers.

On March 16, SNX was  named Samsung 2020 Mobile Distribution Partner of the Year during Samsung’s Virtual Experience: Business Reimagined, based on its total sales volume. The company also announced this month that its HPE GreenLake cloud services are now available through the SYNNEX Stellr Marketplace.

SNX  is scheduled to release its fiscal 2021 first quarter financial results on March 22,after the market closes. For the fourth quarter (ended November 30, 2020), SNX’s total revenue increased 12.7% year-over-year to $7.41 billion. Its gross profit has increased 3.6% year-over-year to $823.36 million. And its  non-GAAP operating income came in at $388.25 million, which represents a 14.7% rise year-over-year. Also,  the company’s non-GAAP EPS increased 22.3% year-over-year to $5.21.

Analysts expect SNX’s EPS to improve 5.5% year-over-year for the next quarter, ending May 31, to $1.93. SNX surpassed the Street’s EPS estimates in each of the trailing four quarters. In terms of forward non-GAAP price/earnings, SNX is currently trading at 13.39x, which is 48.3% lower than the industry average25.88x. In terms of its forward enterprise value/ebitda, the stock is currently trading at 10.87x, 35.1% lower than the industry average  16.75x. The stock has gained nearly 57% over the past year and closed yesterday’s trading session at $103.56.

SNX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings assesses stocks by 118 different factors, each with its own weighting.

The stock has an A grade for Value and a B grade for Sentiment. We have also graded SNX for Growth, Stability, Momentum and Sentiment. Click here to access all SNX’s ratings.

SNX is ranked #13 of 81 stocks in the Technology – Services industry.

Xperi Holding Corporation (XPER - Get Rating)

XPER is a consumer and entertainment product/solutions licensing company.  It operates worldwide through two segments — Product and Intellectual Property Licensing. It  develops and delivers various technologies under its brands — Digital Theater Systems (DTS), Hybrid Digital Radio, IMAX Enhanced, Invensas, TiVo, and Perceive.

DTS, XPER’s wholly owned subsidiary recently announced the integration of radiko into DTS AutoStage, XPER’s global hybrid radio solution. It  also announced Loewe as its newest partner this month.  It will join the DTS Play-Fi whole-home audio ecosystem. Hisense also joined the DTS Play-Fi ecosystem on March 3.

The company’s total revenue increased 379.4% year-over-year to $433.93 million for the fourth quarter, ended December 31, 2020. Its operating income came in at $189.78 million for the quarter, compared to an operating loss of $4.87 million in the fourth quarter of 2019. XPER’s net income was $179.79 million, compared to a net loss of $16.01 million in the prior year period.

XPER surpassed the consensus EPS estimates in three of the trailing four quarters. Moreover, its consensus revenue estimate of $225.42 million for the current quarter, ending March 31, 2021 represents a 99.9% rise on a year-over-year basis. In terms of forward non-GAAP price/earnings, the stock is currently trading at 12.16x, which is significantly lower than the industry average  25.88x. In terms of its forward enterprise value/ebitda, XPER is currently trading at 11.41x, which is 31.9% lower than the industry average  16.75x. The stock has  rallied 125.7% over the past year to close yesterday’s trading session at $24.04.

XPER’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system.

The stock has an A grade for Value and a B grade for Quality and Sentiment. In addition to the POWR Ratings grades I’ve just highlighted, one can see XPER’s ratings for Growth, Stability and Momentum here.

XPER is ranked #26 of 99 stocks in the B-rated Semiconductor & Wireless Chip industry.

The POWR Ratings assesses stocks by 118 different factors, each with its own weighting.

SNX shares were trading at $103.20 per share on Friday afternoon, down $0.36 (-0.35%). Year-to-date, SNX has gained 27.00%, versus a 4.17% rise in the benchmark S&P 500 index during the same period.