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.
Barracuda Networks
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.
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