While 2015 has been generally a frustrating year for investors, with all the indexes down except the Nasdaq, one good aspect is that the sideways-to-down trading has made stock prices more palatable at current levels. One area that held its own is information technology, networking and wireless. A new Deutsche Bank report sizes up this group and presents some top ideas for next year.
Deutsche Bank is focused on what it refers to as the “major IT spending dislocations” in 2016. The firm sees significant spending shifts that they feel will benefit some companies more than others. They analysts cite five top-pick stocks they feel will work the best in 2016.
This stock has been hit hard since October and may be offering investors a very good entry point. Akamai Technologies Inc. (NASDAQ: AKAM) is the self-described global leader in content delivery network (CDN) services, making the Internet fast, reliable and secure for its customers. Its advanced Web performance, mobile performance, cloud security and media delivery solutions are revolutionizing how businesses optimize consumer, enterprise and entertainment experiences for any device, anywhere.
Deutsche Bank has made the stock its top large cap idea for 2016. The analysts point to huge financial opportunity in what they term over-the-top linear and on-demand TV as the media companies generate the next 10% of Internet video traffic. They point out this is above and beyond the 37% of Internet traffic volumes generated by Netflix. Also, trading at just seven times 2017 estimated EBITDA, the stock is dirt cheap.
The Deutsche Bank price target for the stock is $80, and the Thomson/First Call consensus target is $70.53. The shares closed Thursday at $53.70.
This is a top mega-cap technology stock pick on Wall Street, and perhaps a surprising defensive pick for volatile markets like we have witnessed. Cisco Systems Inc. (NASDAQ: CSCO) posted disappointing earnings in November, and many on Wall Street have lowered their price targets for the networking giant significantly. Cisco is also one of the 24/7 Wall St. top 10 stocks to own for the next decade.
Cisco earlier this year 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.
Analysts across Wall Street point to an estimated double-digit bookings momentum for Cisco’s Meraki Cloud Services. Deutsche Bank thinks that Meraki is likely to be a $1 billion plus run-rate business this year, with an incredible 50% to 70% compounded annual growth rate. A jump from 40 GE to 100 GE data center switching and next generation security are also adding to the total sales profile and product mix.
Cisco investors are paid a very solid 3.14% dividend. Deutsche Bank has a $35 price target, and the consensus target is $30.36. The shares closed most recently at $26.77.