7 Key Tech Stock Upgrades for Big Implied Upside

May 28, 2016 by Jon C. Ogg

Technology
Source: Thinkstock
This past week marked one of the stronger weeks in the stock market. Many technology stocks also participated in the gains. So much for “sell in May and go away,” and so much for worrying about declining earnings and excessive valuations.

24/7 Wall St. reviews dozens of analyst research reports each morning of the week. This ends up being hundreds of analyst research reports during each week. The goal is to find new investing and trading ideas for our readers. Some of these analyst reports cover stocks to buy, and other reports feature stocks to sell or avoid.

After reviewing these on a sector by sector basis, there were seven stocks where research stood out handily in the technology sector. There were of course other calls, but these stood above the rest.

As a reminder, analysts tend to have more Buy ratings than they do Sell or Hold ratings. Analysts also often have no more known information than any of the more sophisticated investors. And of course, sometimes analysts are just wrong.

These were the seven technology analyst upgrades and initiations seen with big upside targets made during the week ending May 27.

Infosys

Goldman Sachs raised Infosys Ltd. (NYSE: INFY) to Buy from Neutral on May 26. The upgrade was based on Infosys having an advantage over peers with a talented Indian workforce and cost advantages that will shine ahead. The stock closed at $18.81 before the call, and its shares closed up at $19.48 on Friday. Its consensus analyst price target of $19.97 from before the call went up to $20.37 afterward, and Infosys has a 52-week trading range of $15.30 to $20.47.

Microsoft

On May 24, Microsoft Corp. (NASDAQ: MSFT) was raised to Outperform from Market Perform at Cowen, which sees the sell-off as overdone and expects strong Office 2017 sales. Additionally, the Azure cloud platform is viewed as well. Shares closed at $50.03 before the call, and they were up at $51.35 shortly after the call. Microsoft shares were trading at $52.32 at Friday’s closing bell. The stock has a consensus analyst target of $57.66 and a 52-week range of $39.72 to $56.85.

Nokia

On May 25, CLSA raised Nokia Corp. (NYSE: NOK) to Outperform from Underperform. The stock closed up 2.7% at $5.36 the prior day, and the American depositary shares were up at $5.60 as Friday trading came to a close in New York. Just the prior week, Nokia was upgraded to Buy from Hold at Canaccord Genuity, along with a $7 price target. Its consensus analyst target of $6.81 rose to $6.91 after this call. Nokia has a 52-week range of $5.08 to $7.63.

Stratasys

As part of a positive call this week for 3D printing, Stratasys Ltd. (NASDAQ: SSYS) was given a brighter view than was offered up for its competitors. The stock was started as Outperform and assigned a price target of $29 at FBR Capital Markets on May 24. The prior close was $20.46. The consensus price target was $24.46 going into that call, and that target was up at $24.79 at the end of the week. The 52-week range is $14.48 to $39.45.

Universal Display

Universal Display Corp. (NASDAQ: OLED) saw two calls this week. It was raised to Buy from Neutral with a $76 price target at Goldman Sachs on May 23. Then on May 25, it was reiterated as Buy at Needham, but the price target was raised to $69 from $62. The share price was $64.39 before the second call, and shares closed at $67.78 on Friday afternoon. What matters here is that Universal Display traded at $56.41 the previous Friday, with more hope of winning from Apple (something we have spoken of before).

Western Digital

After earnings, with guidance that was deemed conservative, Western Digital Corp. (NASDAQ: WDC) traded up marginally. It received calls ahead of and after earnings. Jefferies maintained it as Buy on May 24, but the price target was cut to $50 from $56, versus a $40.46 prior close. Then Jefferies raised that target back up to $54 after the earnings on Friday. Cowen raised its rating to Outperform from Market Perform with a $50 price target. On May 25, the stock was raised to Overweight from Equal Weight at Barclays. For a call on the other side: Morgan Stanley trimmed its target to $48 in its call.

Western Digital’s guidance was updated for its SanDisk acquisition. The company said:

Western Digital now expects its fourth quarter revenue in the range of $3.35 billion to $3.45 billion compared to its earlier forecast of $2.6 billion to $2.7 billion. The company now expects its fourth quarter EPS on a non-GAAP basis to be between $0.65 to $0.70, compared with its earlier forecast of $1.00 to $1.10 per share. The new guidance includes total interest costs of approximately $220 million, which includes interest expense on newly issued debt of approximately $185 million and amortization of debt issuance costs of approximately $30 million. Interest expense on the newly issued debt includes approximately $50 million incurred prior to the deal closing date. Due to the impact of the interest expense, the company estimates a non-GAAP tax benefit of approximately $15 million for the quarter. Diluted share count for the quarter, including shares issued to SanDisk shareholders as of May 12, 2016, is expected to be 266 million, equivalent to 290 million shares on a full quarter basis.

Western Digital shares were trading at $44.99 on Friday’s close. Its consensus analyst target is $59.26, and the 52-week range is $34.99 to $99.76.

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Instructure

Instructure Inc. (NYSE: INST) provides cloud-based learning management platform for academic institutions. It was reiterated as Outperform with a $27 price target (versus a $16.99 close) at Oppenheimer on May 25. Investors liked what they heard here, because the stock coincidentally rose by 6% to $18.25 shortly afterward. The stock closed at $17.45 on Friday, and its post-IPO range was $13.21 to $23.63.