3 Electronics Stocks to Buy From a Prospering Industry

The Zacks Electronics – Miscellaneous Products industry players like Daktronics DAKT, Kimball Electronics KE and Hayward Holdings HAYW are benefiting from higher spending on AI infrastructure, data center, cloud computing, augmented reality (AR), virtual reality (VR) and intelligent climate solutions. Continuing investments in data centers, high-performance computing and 5G end markets are the key catalysts. Fab (foundry) expansion in the United States, South Korea, Taiwan and China, as well as higher spending on memory equipment, is expected to drive growth in 2025 and beyond. However, the industry has been suffering from challenging macroeconomic conditions due to higher tariffs, trade restrictions and project deferrals in automotive and energy end-markets. The global economic turmoil is expected to keep the semiconductor capex in check, which does not bode well for industry participants in the near term. 

Industry Description

The Zacks Electronics – Miscellaneous Products industry includes a number of original equipment manufacturers of power products, drivetrains, green energy solutions, remote-control systems, GPS navigation, home automation systems, healthcare devices, industry/factory automation, robotics, semiconductor and optical applications, and energy management solutions. The industry is evolving on digital transformation and the growing demand for silicon across multiple markets. The increasing cost of manufacturing bodes well for equipment suppliers, while the growing demand for silicon is positive for semiconductor companies. Apart from the United States, companies in this industry are based in Japan, Germany, the Netherlands and Switzerland. These companies either have manufacturing operations in China and Southeast Asia or generate significant revenues from these regions.

3 Trends Shaping the Future of the Industry

Solid Capital Spending Drives Prospects: Ongoing technology transition due to rapid deployment of artificial intelligence (AI) is driving product complexities, which is raising the demand for solutions provided by industry participants. More complex designs, accelerating product cycles and high-value wafer volumes are growing the demand for advanced packaging. Increasing investment in expanding manufacturing capacity by semiconductor companies is a key catalyst in the long run. Since semiconductor companies are major customers of miscellaneous electronics product manufacturers, the trend bodes well for industry participants. In addition, rising spending on advanced nodes — 7 nm, 5 nm and 3 nm processes from logic and foundry customers — favors industry participants. Logic and foundry spending is anticipated to be healthy this year. 

Strong Demand for AI, Data Center and Cloud Computing Solutions: Industry participants are riding on strong demand for AI infrastructure, data center and cloud computing solutions. Wearables and AR and VR-supported display systems in defense, industrial, consumer applications and healthcare end markets are another prospect.

Challenging Macroeconomic Condition Acts as Headwind: Industry participants are suffering from challenging macroeconomic conditions globally, with enterprises in automotive, industrial and energy end-markets showing reluctance in committing to multi-year deals. Higher tariffs and persistent inflation do not bode well for industry participants. 

Zacks Industry Rank

The Zacks Electronics – Miscellaneous Products industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #94, which places it in the top 38% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all member stocks, indicates bullish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of the positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. Since June 30, 2025, earnings estimates for the industry for the current year have moved north by 3.8%.

Given the bullish prospects, there are many stocks worth buying in the industry. But before we present those stocks, let us take a look at the industry’s recent stock-market performance and valuation picture.

Industry Lags S&P 500, Broader Sector

The Zacks Electronics – Miscellaneous Products industry has underperformed the S&P 500 and the broader Zacks Computer and Technology sector in the past year.

The industry has climbed 8.2% during this period against the S&P 500 composite’s return of 18.4% and the broader sector’s appreciation of 29.9%.

One-Year Price Performance

Industry's Current Valuation

On the basis of the forward 12-month P/E, which is a commonly used multiple for valuing Electronics-Miscellaneous products companies, we see that the industry is currently trading at 25.46X compared with the S&P 500’s 23.42X and the sector’s forward-12-month P/E of 26.91X.

Over the last five years, the industry has traded as high as 24.61X and as low as 17.53X, with the median being 20.39X, as the charts below show.

Forward 12-Month Price-to-Earnings (P/E) Ratio

 

3 Stocks to Buy Right Now

Daktronics: This Zacks Rank #1 (Strong Buy) company’s shares have appreciated 34.9% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.

Daktronics benefits from a growing backlog. Orders grew 35% year over year in the first quarter of fiscal 2026. The company’s High School Park and Recreation business saw record order growth. Gross margin expansion is driven by cost control as well as a business and digital transformation plan. DAKT expects continued growth in the live events business for both in-bowl applications and outside the bowl as more emphasis is placed on entertaining and informing fans through digital technology throughout the venue.

The Zacks Consensus Estimate for Daktronics’ fiscal 2026 earnings has climbed 7 cents to $1.09 per share over the past 30 days.

Price and Consensus: DAKT

 

Kimball Electronics: Another Zacks Rank #1 stock, KE, is benefiting from an improving balance sheet. Kimball’s current manufacturing includes medical disposables, single-use surgical instruments and selected drug delivery devices such as auto-injectors. The company is planning to expand applications in areas such as cardiology, orthopedics, minimally invasive surgery and surgical instruments and packaging. This is expected to drive top-line growth in the long term.

The Zacks Consensus Estimate for KE’s fiscal 2026 earnings has been steady at $1.25 per share over the past 30 days. Kimball shares have appreciated 76.9% year to date.

Price and Consensus: KE

 

Hayward Holdings: This Zacks Rank #2 (Buy) company expects net sales to increase approximately 2% to 5% in 2025, and adjusted EBITDA is expected between $280 million and $290 million. Hayward is expected to benefit from improving end-market demand. 

Hayward shares have inched up 0.2% year to date. The consensus mark for HAYW’s fiscal 2025 earnings has been unchanged at 73 cents per share over the past 30 days.

Price and Consensus: HAYW
 

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Daktronics, Inc. (DAKT): Free Stock Analysis Report
 
Kimball Electronics, Inc. (KE): Free Stock Analysis Report
 
Hayward Holdings, Inc. (HAYW): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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