After absolutely dominating the market this year, the technology sector took a mighty hit this week. Over the past five trading sessions, the S&P Technology sector was down 2.2%, underperforming the S&P 500 by 0.6%. There is no question that some of the leaders have been the victim of end-of-the-year profit taking and, in some cases, tax-loss selling. The real question for many investors is simple: Is the tech party over?
A new research report from the Information Technology and Hardware analysts at UBS tracks the stocks that are the most overbought and oversold on a relative strength basis. Needless to say, this week’s volatility has skewed numbers for the stocks that were oversold even more. One caveat that was in the report, and one for investors to be mindful of, the UBS team said that many of the stocks in their coverage universe were fairly valued at this time.
Here are five high-profile technology stocks that showed up on the UBS oversold screen.
Salesforce.com Inc. (NYSE: CRM) has been the momentum stock trader’s dream over the past few years. Many analysts on Wall Street feel that while the stock trades in line with its fast organic SaaS peer group, they believe the company should trade at a premium to the group owing to its dominant positioning in the powerful cloud, mobile and social computing waves, larger revenue run-rate compared to the group average, stronger cash generation and its TAM, which is substantially larger than the peer group average.
The Thomson/First Call consensus price target for the stock is $70.41. Shares closed on Thursday at $55.48.
Citrix Systems Inc. (NASDAQ: CTXS) is a top-rated stock to buy at almost every Wall Street firm that we cover. IBM’s software unit missed earnings badly last year and Citrix is poised to grab business in this arena. By reason, some investors could consider that Big Blue may be keeping an eye on the company, looking to strengthen existing business, while eliminating a very formidable contender in the space.
The consensus price target is $68, and the stock closed Thursday at $62.31.
3D Systems Corp. (NYSE: DDD) has been an incredibly volatile stock, and now may be a good time for investors to revisit it. Its 3D printers convert data input from computer-aided design-generated software format or 3D scanning and sculpting devices to printed parts. 3D printing was a super-hot segment last year, and the top stocks were absolutely eviscerated in the early spring sell-off, and again in October. Hot and fast money loves to be long and short this top stock, so entry points are critical. The top Wall Street analysts that cover the stock feel that the company’s product line is strong enough, but that they will be forced to lower prices to remain competitive and stay in the race.
3D shareholders are paid a small 0.6% dividend. The consensus price target is $45.10. 3D systems closed Thursday at $30.59.
Nuance Communications Inc. (NASDAQ: NUAN) has been one of the targets of activist investors Carl Icahn over the past year. Icahn now has two members of his team on Nuance’s board, and he owns more than 19% of Nuance stock. While the company is perhaps the most advanced speech recognition company, investors may want to watch this pullback for a good spot to buy stock.
The consensus price target is posted at $18. Nuance closed Thursday at $14.07 a share.
VMware Inc. (NYSE: VMW) was a top stock to buy on Wall Street until back-to-back mediocre earnings releases hit the shares, and short sellers have sold almost 14% of the float. The company is still a leader in cloud storage software, and its cloud computing service is a new offering for its customers. Its vCloud Hybrid Service has not been designed or marketed as a standalone public cloud as of yet. Many Wall Street analysts believe that on a pricing basis it is one of the more expensive offerings. The ability to tie its software solutions in with public cloud service may be a huge winner in the future.
The consensus price target for the stock is $102, and VMware closed Thursday at $78.13.
The solid thing for patient aggressive investors is that all these stocks are decent buys on just their own merits. With portfolio managers having to clean house for 2014, they may go even lower. Add in the possibility that the short sellers may have to buy the stock to cover a trade, and the upside could be even brighter, especially for 2015.