Many investors sense it and can almost feel it. A looming sell-off could be right around the corner, and nobody wants to be holding momentum stocks, because the old Wall Street adage “Stocks go up like an escalator, but down like an elevator” was never more true with momentum stocks. In a new research report, Deutsche Bank highlights three tech stocks that make good sense for investors now.
Three top tech stocks look especially attractive now, and with the market expensive on a trailing earnings basis and yields lifting, the more cautious tech investors are, the better they will fare when the inevitable sell-off comes our way.
This stock trades at a very low 13.4 times estimated 2015 earnings. Cisco Systems Inc. (NASDAQ: CSCO) boasts an outstanding 7.44 free cash flow yield. The networking giant also seems to have fought through numerous headwinds, including up and down demand from telecom carriers, weakness in emerging markets and threats to its very lucrative switching business, and it delivered another solid quarter of earnings last week. The company also stands to benefit from a better corporate spending environment in Europe, as well as continued growth here at home.
Cisco recently won an important contract for the Verizon build out of the company’s next-generation 100G metro network. While Cisco’s optical business is small as a part of total revenue, this win is seen by Wall Street as a significant endorsement of the investments Cisco has made into its optics business.
After 20 year of leading the Silicon Valley giant, John Chambers recently announced that Chuck Robbins will become the next chief executive of the world’s biggest networking equipment company when he steps down as CEO, a move that should keep things going smoothly. The Deutsche Bank team notes that two other senior management employees will be leaving in late July. Many believe this could pave the way for new blood and a fresh direction at Cisco, which was also one of our 10 top stocks to own for the next decade.
Cisco shareholders are paid a 2.88% dividend. The Deutsche Bank price target for the stock is $33, and the Thomson Reuters consensus target is $31.03. Shares closed Tuesday at $29.08.