Investing

Red-Hot Energy and Technology Companies Are Top Picks at Jefferies

Lee Jackson
Electronic Arts

This leading video game developer should benefit from not only the continuing rise in new console sales but the rising trend of mobile gaming. Electronic Arts Inc. (NASDAQ: EA) produces top-selling games and related content and services under the EA brand in various categories, including action-adventure, role-playing, racing and first-person shooter games.

Electronic Arts is realizing a greater percentage of revenues from digital platforms, which may enhance margins and lead to more sustainable revenue growth. Key franchises for the company include Madden, FIFA, Need for Speed, Battlefield, Star Wars Battlefront, Mass Effect, Dragon’s Age and The Sims.

The company reported outstanding results, and the analysts noted this:

Electronic Arts is now the third straight US video game publisher to post strong results despite Fortnite strength, suggesting Fortnite is more about expanding the market than cannibalizing it. The company’s guidance seems conservative and the fiscal 2019 setup seems very strong with the release slate anchored by FIFA and Battlefield, which are the company’s two biggest franchises. Over time, we believe games will become ubiquitous across all platforms and devices and cloud based services will increase the addressable market by four times.

The $150 Jefferies price target compares with the $138.00 consensus target. The stock closed Monday at $132.53.

Microchip Technology

This company is a huge Internet of Things benefactor. Microchip Technology Inc. (NASDAQ: MCHP) is a leading provider of microcontroller, mixed-signal, analog and flash-IP solutions, providing low-risk product development, lower total system cost and faster time to market for thousands of diverse customer applications worldwide.

The company recently received a receipt of antitrust clearance in the United States for the proposed acquisition of Microsemi. The company now expects to complete the acquisition of the company in June of this year.

The company was a top idea going into the Jefferies technology conference and the analysts came back with new data and noted this:

Microchip Technology highlighted its success in gaining market share across the 8/16/32-bit MicroController Unit markets. Management reviewed its Microchip 2.0 model, which emphasizes system solutions that are smart, connected and secure. The company maintains that the Microsemi combined earnings per share of the combined company will be $8 in the next three years. The company plans to return capital via dividends and de-lever its balance sheet

Investors receive a 1.55% dividend. Jefferies has a $110 price target. The consensus price objective is $111.56, and shares closed Monday at $93.46.

These four incredible companies have solid earnings and a clear path higher for the second quarter, perhaps the rest of 2018. They hold a higher risk potential, so should be added to accounts with a commiserate risk tolerance.