Technology

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

Oracle

This is another mega-cap software company for investors to look at following less the stellar earnings for the second quarter in a row. Oracle Corp. (NYSE: ORCL) stock trades at 15.4 times estimated 2015 earnings and sports a 7.03 free cash flow yield. Combined sales in Oracle’s cloud software, infrastructure and platform-as-a-service businesses were solid, and Jefferies feels that this business has room to grow.

Co-Chief Executive Officer Mark Hurd has maintained that Oracle plans to make almost all of its services available via the Internet by mid-October, as the database-software company changes its business model to fit a new competitive landscape. Around 65% of Oracle’s products are available on the cloud today, and that will climb to 95% by the time the company holds its annual Oracle OpenWorld conference in October.

Jefferies also feels that the company should report decent fiscal first-quarter results as expectations for the company are very modest. However currency headwinds are persistent, and seasonal trends may be a hindrance to current license estimates.

Oracle investors are paid a 1.6% dividend. The Jefferies price target is $50, and the consensus target is at $36.88. Shares closed Friday at $36.38.

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Twitter

The stock was hammered again after second quarter-earnings and user numbers came in below expectations. Twitter Inc. (NASDAQ: TWTR) is either a total value tech buy or caught in a death spiral, depending on who on Wall Street you ask. High multiple valuations, issues with the current search for a new CEO and overall terrible negative market sentiment has trampled the stock and made it a favorite target of short sellers.

The Jefferies team has remained positive on the stock and cite the fact that monetization remains strong, and last quarter revenues were better than some estimates. The problem is the company added only 2 million core monthly active users (MAU), and many do not expect to see meaningful growth in MAUs for a considerable time. That brought the market hammer. The analysts are bullish on long-term users and what they call “engagement improvement.” It is also important to remember that the Google traffic partnership is a catalyst that still lies in front of the stock.

The analysts also cite a positive new deal with Bloomberg with the aim of enhancing financially relevant information on Twitter for Bloomberg Terminal users. Real-time information from Twitter will be incorporated into Bloomberg user workflows, a continuation of Bloomberg’s social media offering. In April 2013, Bloomberg became the first financial information platform to integrate tweets.

The Jefferies price target is a whopping $56, and the consensus target is much lower at $39.29. The stock closed on Friday at $27.96, down over 40% from the high in late April.

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While these stocks are only appropriate for very aggressive growth accounts, they could offer investors big gains once they get things back on track. Those who are willing to be patient and take a shot may see dramatic gains.