Wow, Thursday sure felt good for suffering stock investors, and Friday may even be better. The question is if we are indeed out of the woods, or is this just some massive short covering prior to the next leg down. One thing that volatility provides aggressive accounts with dry powder is the chance to hop in and snag stocks on sale that could have big upside when the market resumes an upward trend.
We screened the Merrill Lynch research database looking for some specialized tech stocks that were on sale. We found four companies that have outstanding franchises, cutting edge products or services, a very reasonable entry point and, of course, are rated Buy at Merrill Lynch. It is important to note that these are only suitable very risk-tolerant accounts.
This small-cap play could have outstanding upside for aggressive accounts. Barracuda Networks Inc. (NYSE: CUDA) provides cloud-connected security and storage solutions that simplify IT. These powerful, easy-to-use and affordable solutions are trusted by more than 150,000 organizations worldwide and are delivered in appliance, virtual appliance, cloud and hybrid deployments. Barracuda’s customer-centric business model focuses on delivering high-value, subscription-based IT solutions that provide end-to-end network and data security.
The stock was absolutely crushed after Barracuda reported third-quarter numbers that badly missed analyst estimates. Some analysts’ biggest concern is that customers are moving to the public cloud, and that could be the greatest threat to the company as many of applications are provided by public cloud providers as part of the service contracts.
Merrill Lynch sees the company as disruptive as it provides low-cost, easy to use technology, has a consumer-like marketing strategy and a direct sales process, and lastly a subscription business model that translated to significant recurring revenues. The company is also a very viable takeover candidate.
The Merrill Lynch price target for the stock is $20, and the Thomson/First Call consensus target $19.38. The stock closed most recently at $10.32.
This company had one of the hottest IPOs of 2015, but the stock has been hammered. Fitbit Inc. (NYSE: FIT) is leading a worldwide movement toward healthier, more active lives by empowering people with data, inspiration and guidance to reach their goals.
The Fitbit platform combines connected health and fitness devices with software and services, including an online dashboard and mobile apps, data analytics, motivational and social tools, personalized insights and virtual coaching through customized fitness plans and interactive workouts. The platform helps people become more active, exercise more, sleep better, eat smarter and manage their weight. Fitbit appeals to a large, mainstream health and fitness market by addressing these key needs with advanced technology embedded in simple-to-use products and services.
The company has already sold over 20.8 million devices since inception. Merrill Lynch remains very positive on the stock and thinks the connected health/fitness market is in the early growth stages and the company is rapidly gaining share. Some Wall Street analysts see the company increasing unit and average-selling-price growth with a platform approach. In addition, a deeper international push, combined with corporate wellness adoption, should help grow revenues an estimated 83% this year and conservatively almost 30% next year.
The $36 Merrill Lynch price target is lower than the consensus estimate of $40.25. The stock closed Thursday at $18.19.