Technology

3 Out-of-Favor Tech Stocks to Buy With Huge Upside Potential

Sometimes the best time to buy top stocks of all varieties is when they are out of favor on Wall Street and Main Street. This is especially true in the technology sector as trends and new applications can change so fast. In a new research note, Jefferies is bullish on three top companies that are residing in the woodshed now.

If you think buying tech stocks that are down doesn’t make sense, just talk to people bought shares of Apple in 2009 at $15. All it takes is one change or one innovation, and the tables can turn, and turn fast. The Jefferies team is high on three technology stocks that have the potential for explosive gains when their fortunes turn around.

Hewlett-Packard

This old-school tech stock has been sold off all year as investors feel that the personal computer sales slowdown could continue to hurt earnings. Hewlett-Packard Co. (NYSE: HPQ) stock is down a whopping 25% year to date and trades at a very low 8.2 times 2015 estimated earnings. Some Wall Street analysts feel that weak PC demand could continue to have a negative impact on its revenue and free cash flow. The company again posted so-so earnings recently. Profits declined 13% in the quarter, further promoting a company split in order to reduce costs. HP’s net income dwindled to $900 million from $1 billion in the same quarter last year. Total sales for the company decreased 8% to $25.3 billion.

The company is focused on splitting into two entities, a move that the Jefferies analysts feel will be a very positive catalyst event for the company. One company, to be named Hewlett Packard Enterprise, will focus on selling technology like servers and data center gear to businesses. The other, to be called HP, will sell printers and personal computers. Jefferies feels that the company has among the least downside risk of the large IT hardware companies and suggests investors buy stock before the split.

HP investors are paid a 2.60% dividend. Jefferies has a very solid $40.50 price target for the stock. The Thomson/First Call consensus target is $36.88 Shares closed Friday at $26.54.
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