Is CDW Corporation (NASDAQ:CDW) A Good Hardware Stock To Buy According To Goldman Sachs?

We recently compiled the list of the 15 Best Hardware Stocks According To Goldman Sachs using the latest sentiment data. In this article, we are going to take a look at where CDW Corporation (NASDAQ:CDW) stands against the other hardware stocks.

The soaring popularity of artificial intelligence for consumer and business applications has injected fresh life into the computing industry. If we're to rewind the hands of time and go back to 2022, the stock market environment was considerably different from what it is now. All major technology stocks, including those that are responsible for making chips that power AI workloads were down by double digit percentages in the wake of breakneck inflation and rising interest rates.

Fast forward to 2024 and the rise in valuations seems to have no end in sight. One bank that's quite optimistic about artificial intelligence is Goldman. Goldman's analyst teams are among the best in the world, and they spend countless hours analyzing stocks and industries for the right set of picks that could disrupt the industry.

On this front, Goldman came out with a note recently that outlined a new beginning for the computer hardware industry. According to the bank, the introduction of AI has necessitated a global shift to new hardware that can support the technology. In its note, the bank's analysts shared:

During the pandemic, the tech hardware industry peaked as the majority of work-from-home employees purchased equipment. The space currently has fully unwind this cycle and we notice stocks like HPQ trading at 9x their 2025 earnings estimates.

Most PCs purchased during the pandemic are expected to be replaced soon. We expect discernable new features of AI, enhanced security, and stronger computational power in upcoming PC and mobile device models, incentivizing the US consumer to spend more on newer equipment than historically, creating an unusually stronger cycle.

Goldman also created a basket of stocks where the highest weighted stock has an 8% weight and there are 20 stocks in the basket. According to Goldman analyst Faris Mourad:

The basket is composed of technology hardware stocks that may benefit from PC and mobile device renovations that could include AI features. The basket can trade up to $250m in one day with no name exceeding 10% of ADV.

Considering this optimism, we decided to take a look at the top Goldman's top 15 hardware stock picks.

Our Methodology

To make our list of the top Goldman Sachs hardware stocks, we used the top holdings of the bank's PC & Mobile Device AI Upgrades basket (GSXUPCAI).

For these hardware stocks, we also mentioned hedge fund investors. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Hardware

15. CDW Corporation (NASDAQ:CDW)

Number of Hedge Fund Shareholders In Q1 2024: 31

CDW Corporation (NASDAQ:CDW) sells hardware products such as notebooks, personal computers, and data center products. It marks a strong start to our list of best hardware stocks as the average of ten one year analyst ratings is Strong Buy and the average share price target is $251.66. Citi cut CDW Corporation (NASDAQ:CDW)'s share price target to $260 from $295 in May 2024 and kept the rating at Buy. While CDW Corporation (NASDAQ:CDW)'s recent earnings performance was disappointing, Citi noted that the firm has strengths on the financial and market fronts. On the latter, CDW Corporation (NASDAQ:CDW)'s cash flows and stable debt management impressed the firm, and on the latter, it shared that a well diversified portfolio can capture the AI market.

CDW Corporation (NASDAQ:CDW)'s forward P/E of 22.08 is nearly in line with the market's 21. This implies that investors expect it to grow in line with benchmark indexes. Wedgewood Partners mentioned the firm in its Q1 2024 investor letter where it shared:

CDW was a positive relative performer. The Company generated nearly flat gross profit growth in 2023 off difficult 2022 (+31%) comparisons (partially from M&A). The Company has done a remarkable job helping its small and medium-sized customers shift from hardware-centric IT layouts to hybrid and software-based implementations. CDW's core customer typically has constraints in both IT department staffing and related resources, making it difficult for large enterprise-focused IT vendors to reach those customers. As a result, there are plenty of proven technologies that have been adopted by larger businesses, often long ago, that will eventually find their way into small and medium-sized businesses with the help of CDW. CDW is agnostic to the consumption models or form factors of technologies, which is why the Company has been able to maintain superior returns over many different technology cycles and innovation trends. We think helping small and medium-sized businesses setup and run their IT departments is more important than any specific technology that happens to enable those departments and should help the Company continue to grow and take share of IT budgets over time.

Overall, CDW ranks in 15th place among the 15 best hardware stocks to buy according to famed investment bank. You can visit the 15 Best Hardware Stocks According To Goldman to see the other hardware stocks. While we acknowledge the potential of CDW as an AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CDW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

 

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Disclosure: None. The article was originally published at Insider Monkey.