RBC Has 5 Top 2018 Technology Stock Pick Ideas

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Despite an outstanding 2017 for the technology sector, which was up a massive 36.9% for the year, many that believe the incredible technology revolution that started with the advent of the smartphone in 2007 is still in its infancy, and with good reason.

The tech sector is being driven by innovation in every field, from artificial intelligence to autonomous driving to bitcoin mining and a host of other new and exciting areas.

In a new research report, the technology team at RBC sees three big silos driving the tech sector forward:

  • Research and development spending for semiconductors
  • Ethernet switching
  • Data center growth

They also believe that tax reform and the argument this year about value versus growth are important factors in stock selection.

The report highlights five companies as favorites for 2018, including one that is the analysts’ top pick. All five are rated Outperform.

Arista Networks

The analysts see this as an outstanding growth play for 2018. Arista Networks Inc. (NYSE: ANET) develops high-performance cloud networking solutions, including switches, an advanced software defined networking (SDN) operating system and SDN applications. The company’s low latency switches lower networking costs for high-frequency trading platforms, large internet companies and cloud service providers.

The company posted strong growth momentum and excellent execution in a challenging market in 2017. Arista worked through softening cloud trends seen at competitors, with 51% year-over-year revenue growth and 141% year-over-year international growth in third quarter.

The RBC team sees the company as one of the benefactors in the Ethernet switching market and also cites the solid third-quarter growth as a positive for the fourth quarter and 2018.

The RBC price target for the shares is just $234, while the consensus estimate on Wall Street is $227.17. The shares closed above both levels on Thursday a $232.69.

Arris International

This stock has been an RBC favorite for some time and the firm sees it as a top value play in 2018. Arris International PLC (NASDAQ: ARRS) provides media entertainment and data communications solutions in the United States and internationally. It operates through two segments.

The Customer Premises Equipment segment offers various product solutions, including set-top boxes, gateways, digital subscriber lines and cable modems, and embedded multimedia terminal adapters and voice/data modems that enable service providers to offer voice, video and high-speed data services to residential and business subscribers.

The Network & Cloud segment provides cable modem termination system, converged cable access platform, multichannel video programming distributors, programmer equipment, ad insertion technologies and equipment in the ground or on transmission poles, as well as equipment used to initiate the distribution of content-carrying signals.

RBC has a $33 price objective for the shares. The consensus target price is $34.56, and shares closed most recently at $25.97.