Merrill Lynch Has 4 Specialty Tech Stocks With Huge Upside Potential

Pure Storage

This looks to be offering investors a big upside in flash storage. Pure Storage Inc. (NYSE: PSTG) offers customers disruptive, software-driven storage technology combined with a customer-friendly business model drives business and IT transformation for customers through dramatic increases in performance and efficiency at lower costs.

Pure Storage FlashArray//m is simpler, faster and more elegant than any other technology in the data center. FlashArray//m is ideal for the move toward big data and for performance-intensive workloads such as cloud computing, database systems, desktop virtualization, real-time analytics and server virtualization.

The company reported earnings for the first time as a public company with its fiscal third quarter that ended on Oct. 31. Revenue of $131.4 million was up a spectacular 167% from the year-earlier period, and an operating loss of $55.6 million, or -0.18 per share, beat consensus of $107.3 million, -$0.31 per share.

Merrill Lynch has a whopping $22 price target, and the consensus target is $20.53. Shares closed at $13.27.

Rackspace Hosting

This stock has been almost cut in half from highs posted last year, and investors may have an awesome entry point at current levels. Rackspace Hosting Inc. (NYSE: RAX) is the self-described number one managed cloud company, helping businesses tap the power of the cloud without the challenge and expense of managing complex IT infrastructure and application platforms on their own. Its engineers deliver specialized expertise on top of leading technologies developed by AWS, Microsoft, OpenStack, VMware and others, through a results-obsessed service known as Fanatical Support.

Rackspace reported very solid third-quarter results, including revenue and EBITDA that beat Wall Street expectations. The solid numbers were largely driven by some previously announced enterprise business that was pushed into the third quarter and slightly higher seasonal growth within its public cloud business. The company also reaffirmed 2015 EBITDA margin guidance, but it did narrow fourth-quarter revenue growth guidance due to the better-than-expected numbers in the third quarter.

The Merrill Lynch $38 price target is near the consensus target of $38.22. The shares closed Thursday at $18.31.

All these companies have established franchises and strong product lines. They have all been battered in the sell-off and are offering aggressive investors not only solid entry points, but are priced at levels at which more shares can be bought, to add to upside potential.