Analyst Sees Select Technology Stocks Outperforming the Market
In our review of the top stock picks for 2014, technology was a sector picked by almost every firm on Wall Street we cover to outperform the overall market in 2014. Usually when Wall Street all piles on one specific sector, it is a recipe for disaster. In the case of the technology pick for 2014, Wall Street may be on to something. Technology is one of only three sectors that are up so far year to date. The other two are health care and utilities.
The technology team at Stifel is on board with the Wall Street sector call. They are also very positive on the overall prospects for technology names in 2014. While they certainly do not go way off the grid in their stock selections, they do have names that could be poised to excel in what could be a very volatile market this year. Look for earnings reports to help generate even more interest in their top stocks to buy.
Apple Inc. (NASDAQ: AAPL) remains a top tech stock to buy for 2014 at Stifel. With a newly signed deal with China Mobile rolling out, the smartphone and tablet giant is gaining exposure to a gigantic potential consumer market in China. This deal could be the best thing to happen to shareholders as it would provide Apple with potential access to more than 700 million customers in the world’s second-largest economy. This market has more than doubled in size in the past two years and still has a low penetration rate. Many think Apple earnings are poise to go substantially higher, and activist Carl Icahn is pushing for more stock repurchasing and dividend increases. Despite posting solid fourth-quarter numbers, the stock was hit hard after the close Monday. Investors are paid a 2.2% dividend, which may go higher in 2014. The Stifel price target is set at $650. The Thomson/First Call price target for the stock is $598.88. Apple closed Monday at $550.50.
Cisco Systems Inc. (NASDAQ: CSCO) is the networking leader and may be poised to have a monster 2014. In addition, the company has been looking to protect its core business from new competition. It recently bought out the remainder of its majority-owned data center technology start up called Insieme in a deal that could cost up to $863 million. Despite a downgrade to an Underperform at J.P. Morgan, many firms remain positive. Investors are paid a 3.1% dividend. The Stifel price target for the stock is $25. The consensus estimate is at $23.57. Cisco closed Monday at $22.
CommVault Systems Inc. (NASDAQ: CVLT) announced last year the industry’s first virtual machine (VM) intelligent archiving capability to help enterprises and service providers eliminate VM sprawl and regain control of virtual infrastructure resources. VM sprawl results from pervasive deployment and growth of virtual machines, some of which then sit unutilized long after their useful lives. The Stifel price target for this intriguing mid cap is $95. The consensus target is $88.88. The stock closed Monday at $72.4.
EMC Corp. (NYSE: EMC) may be an investor’s perfect tech stock for 2014. Combining its gigantic lead in large-scale storage with the majority ownership of cloud software giant VMware makes the stock a solid double threat play for investors. VMware alone contributes almost 24% of EMC’s total revenue. The company is the leading provider of virtualization software, which lets companies run multiple software operating systems and apps on one server to reduce hardware costs, and appears poised for more robust growth after a management change, a spin-off and a perception of threats from rivals. This makes for a great one-two punch for EMC. Investors receive a 1.6% dividend. The Stifel price target is set at $30, and the consensus is at $29.60. EMC closed Monday at $25.35.
International Business Machines Corp. (NYSE: IBM) may also be another solid tech name for investors looking past near-term issues. Disappointing third- and fourth-quarter earnings letdowns have knocked the stock way down from last year’s highs. Any increase in capital spending this year could quickly fire up the earnings engine again for the services giant. Investors are paid a 2.1% dividend. Stifel has a $220 price target for Big Blue. The consensus price target is posted at $193. IBM closed Monday at $177.90.
Nimble Storage Inc. (NYSE: NMBL) may be one of the most intriguing names on the Stifel list. The company focuses on providing a hybrid storage system, combining features of both flash and disk drives. It offers high-speed flash speed with an ordinary disk for storing data. This allows faster loading of applications and reduces costs of the storage system. The stock had a recent initial public offering (IPO) and has been red hot. The Stifel price target is posted at $53, and the consensus is at $48. Nimble closed Monday at $44.43.
Western Digital Corp. (NYSE: WDC) wraps up the Stifel list of top stocks to buy. Western Digital’s market share in the total addressable hard disk drive market increased from 44.9% in the previous quarter to 45.1%. Moreover, market share expanded from 44.9% reported in the year-ago quarter. One of its major competitors, Seagate Technology was taken private in 2000 in a huge $19 billion deal and returned as a solid IPO. Investors are paid a 1.4% dividend. The Stifel price target for the stock is set at $105, and the consensus is at $96.83. Western Digital closed Monday at $84.59.
Any serious backup in the prices of these top technology names will make a solid entry point for investors. The advantage to owning big cap tech is that it remains a safer way to play what can be a volatile sector. Institutional money has already started moving towards the top names, and they should continue as the year unfolds.