Despite Wednesday’s massive sell-off, which looks to continue on Thursday, one thing that most Wall Street strategists still agree on is that technology is going to be a leading sector in 2015, and perhaps beyond. Most of the firms covered by 24/7 Wall St. would agree that while technology is a solid way to go, there are certain subsectors in technology that could be poised to be leaders.
Two new reports from the technology team at RBC focus on stocks in storage and networking that could ready to move higher as demand and fundamentals are solid. The four stocks are: Ciena Corp. (NYSE: CIEN), Finisar Corp. (NASDAQ: FNSR), Micron Technology Inc. (NASDAQ: MU) and SanDisk Corp. (NASDAQ: SNDK).
This leading maker of fiber optic networking equipment sold to telecom carriers is expected to get a large chunk of Verizon 100 G network build-out, with some analysts thinking the company could see as much as 30% of the total. The RBC team feels that Verizon could end up being as much as a 10% customer next year.
In addition to the Verizon deal, Other Wall Street analysts have pointed out in recent reports that a majority of enterprise and Web/cloud data centers are in the process of running high-speed 40/100 G optical interconnects between their data centers. This could also mean added business for Ciena.
The RBC team has the stock rated at Sector Perform, but they raised their price target from $18 to $21. The Thomson/First Call consensus price target is much higher at $24.74. Shares closed on Wednesday at $20.21.
The stock of this leading provider of optical subsystems and components for telecom and data communication applications has had a nice run since a monster sell-off last spring almost cut the stock in half. The rebound has come as the market appreciates the strong secular demand for optical equipment (driven by the build-out of high-speed LTE networks) coupled with a compelling market share gain story. A large carrier like Verizon may be interested in buying the company to add product and capability.
The company recently announced new 100 G/200 G optical modules and has pointed to growth in data-center applications with 100 G Ethernet. This is a very similar and positive theme that the company shares with Ciena. The RBC team has mentioned that a Finisar-Ciena combination may be a good strategy down the road.
The RBC price target is raised from $23 to $25, and the stock is rated Outperform. The consensus target is posted at $23.95. Shares closed lower Wednesday at $20.93, down over 5%.
Micron is a global leader in advanced semiconductor systems, and its broad portfolio of high-performance memory technologies — including DRAM, NAND and NOR flash — is the basis for solid state drives, modules, multichip packages and other system solutions. The company’s memory chip solutions enable the world’s most innovative computing, consumer, enterprise storage, networking, mobile, embedded and automotive applications.
The DRAM market is always in a supply and demand tug-of-war, and Micron has learned to balance inventory and production much better than in years past. This stock has pulled back, but incidentally soared to the mid $30s back in December.
The RBC price target is $40, and the firm has an Outperform rating on it. The consensus target is even higher at $41.88. Micron closed Wednesday at $26.57 down over 5%.
SanDisk is a supplier of quality, state-of-the-art solutions that are at the heart of many of the world’s largest data centers and embedded in advanced smart phones, tablets and PCs. While some have speculated the slowing sales at Samsung are the reason for 2015 revenue revisions, many top Wall Street analysts think that the soft fourth-quarter earnings reports could be a one-off correction, and this continues to give investors an excellent entry point for this top stock.
The indication from the report is that it may now be a good time to nibble at the stock, as the company lowered sales views for the first quarter and is trading off almost 10% in the premarket.
SanDisk investors are paid a 1.5% dividend. The RBC price target is $96, and the consensus target is lower at $91.94. Shares closed trading on Wednesday at $81.17.
Focusing on the hot subsectors in technology of networking and storage makes sense for aggressive investors. Continued demand is expected to stay linear for years, and these stocks are the ones that could benefit. Also, these companies and others in their sector could be part of mergers and acquisitions activity ahead.