Despite the big, but short-lived technology sell-off recently, many of the top firms we cover on Wall Street remain very positive on the technology sector, especially when it comes to growth in cloud computing, data storage and big data analytics. In fact, despite the sell-off, the telecom and networking equipment/information technology hardware stocks slightly outperformed the broad market over the past month.

In a new research report, JPMorgan continues to remain positive on the sector, and it ranked the 24 such stocks in its coverage universe. With some changes in the firm’s top five picks, and expectations for positive catalysts for the rest of 2017, tech investors may want to consider adding the top picks to aggressive growth portfolios. All the top five picks are rated Overweight at JPMorgan.

Ciena

This company has had a very up and down 52 weeks, has frequently been the subject of takeover rumors, and it is the new top pick at JPMorgan. Ciena Corp. (NASDAQ: CIEN) is a vendor for high-capacity optical transport and Ethernet switching equipment to carriers, enterprises, cable operators and governments. It specializes in transitioning legacy communications networks to converged, next-generation architectures capable of efficiently delivering a broader mix of high bandwidth services.

The company’s Converged Packet Optical segment offers networking solutions optimized for the convergence of coherent optical transport, Optical Transport Network (OTN) switching and packet switching. Its products comprise the 6500 Packet-Optical Platform, 5430 Reconfigurable Switching System, CoreDirector Multiservice Optical Switches and OTN configuration for the 5410 Reconfigurable Switching System.

The JPMorgan report noted:

Ciena remains a top pick due to an expected multi-year ramp in 100G optical spending which should continue to accelerate in 2017. We also see good traction on major deals like Jio in India that should act as a tailwind in 2017.

The JPMorgan price target for the stock is $34, and the Wall Street consensus target is $30.89. The shares closed Wednesday at $25.44.

Western Digital

This long-time innovator in the storage industry is a leader in the total addressable HDD market, and it is ranked number two at JPMorgan up from number six. Western Digital Corp. (NASDAQ: WDC) is an industry-leading developer and manufacturer of storage solutions that help to create, manage, experience and preserve digital content.

The company is responding to changing market needs by providing a full portfolio of compelling, high-quality storage products with effective technology deployment, high efficiency, flexibility and speed. Its products are marketed under the HGST and WD brands to original equipment manufacturers, distributors, resellers, cloud infrastructure providers and consumers.

Western Digital reported quarterly earnings that beat on the top and bottom lines as did its second-quarter outlook, sending the stock up big. The analysts recently noted this:

We remain positive on Western Digital as we believe the company should be able to assert its rights in the Toshiba JV to participate in a fair deal for increased NAND exposure.

Western Digital shareholders receive a 2.28% dividend. JPMorgan has a $125 price target, and the consensus price objective is $111.77. Shares closed Wednesday at $87.80.

Qualcomm

This top technology stock was hit hard earlier this year and is still offering investors a great entry point. The stock jumps to number three from the 12th spot at JPMorgan. Qualcomm Inc. (NASDAQ: QCOM) designs, develops and supplies semiconductors and collects royalties on wireless handheld devices and infrastructure based on its dominant position in CDMA and other related technology patents.

In addition, Qualcomm provides systems software and components to wireless handset vendors and promotes applications and services that run on high-speed wireless networks. The company operates primarily through two segments: CDMA Technologies and Technology Licensing.

The analysts remain bullish on the company’s acquisition of NXP Semiconductors, which Qualcomm is buying in an all-cash deal at $110 per share. The deal is expected to close at the end of 2017 and should be immediately accretive to earnings. The merger brings together complementary products for mobile, automotive, Internet of Things and networking applications. The JPMorgan report noted:

Now that Apple has stopped making royalty payments we think one of the worst pieces of news is past. We see the stock as inexpensive but would also note the possibility of further news driven volatility

Shareholders receive a 4.0% dividend. The $68 JPMorgan price target compares with the consensus target of $64.99. Shares closed Wednesday at $57.01.

Lumentum

This top company looks to benefit big-time from the Facebook Voyager project, but the stock drops to number four from number two, primarily due to a big run in the stock price. Lumentum Holdings Inc. (NASDAQ: LITE) manufactures and sells optical and photonic products in the Americas, the Asia-Pacific, Europe, the Middle East, and Africa.

The company operates in two segments. The Optical Communications segment offers components, modules and subsystems that enable the transmission and transport of video, audio and text data over high-capacity fiber optic cables.

The Commercial Lasers segment offers diode, direct-diode, diode-pumped solid-state, fiber and gas lasers. This segment serves customers in markets and applications such as manufacturing, biotechnology, graphics and imaging, and remote sensing, as well as in precision machining, including drilling in printed circuit boards, wafer singulation, and solar cell scribing. Its lasers products are used in various original equipment manufacturer applications.

The analysts noted:

Lumentum should benefit from increasing 100G order volumes in the US and recovering demand in China. We also expect material earnings benefit from 3D sensing in the new iPhone.

JPMorgan has set its price target at $68. The consensus target is $58.31, and shares closed Wednesday at $62.15.

Viavi Solutions

This is a smaller capitalization company with solid upside potential, though it fell to the fifth slot from number one on the list. Viavi Solutions Inc. (NASDAQ: VIAV) is a global provider of network test, monitoring and assurance solutions to communications service providers, enterprises and their ecosystems, supported by a worldwide channel community including Viavi Velocity Solution Partners.

The company delivers end-to-end visibility across physical, virtual and hybrid networks, enabling customers to optimize connectivity, quality of experience and profitability. Viavi is also a leader in high-performance thin film optical coatings, providing light management solutions to anticounterfeiting, consumer electronics, automotive, defense and instrumentation markets.

The analysts noted:

We continue to see material upside to Viavi’s earnings from 3D sensing in the new iPhone as well as ongoing restructuring. We also believe accretive consolidation
deals are a possibility.

The JPMorgan price target is $12.50. The posted consensus target is at $11.61, and shares closed Wednesday at $11.05.

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These five stocks are very solid picks in a market that is pretty rich. Investors may want to buy partial positions in front of second-quarter earnings, just in case there is some selling on the news.

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