Merrill Lynch Raises Price Targets on 4 Top Tech Stocks

July 12, 2016 by 247lee

Smartphone Intel
Source: courtesy of Intel Corp.
With the market busting through a top that has been in place since February of 2015, some of the more bullish voices on Wall Street think it’s possible we could see a big breakout. While that is indeed possible, earnings have to start coming in strong, not only for the second quarter, but for the rest of the year. In addition, guidance from companies will need to be very positive to keep the current momentum in place.

In a recent research report, Merrill Lynch does what many of the top firms will be forced to do in a rising market. The firm is raising the price targets on some of the top stocks it covers, as the recent rally has pushed some right up near current price target levels. This week the firm raised the price targets on four top technology companies, all of which are outstanding buys for aggressive accounts.

Intel

This leader in semiconductors is working hard to scale away from dependence on personal computers. Intel Corp. (NASDAQ: INTC) designs, manufactures and sells integrated digital technology platforms worldwide. The company’s platforms are used in various computing applications comprising notebooks, two-in-one systems, desktops, servers, tablets, smartphones, wireless and wired connectivity products, wearables, retail devices and manufacturing devices, as well as for retail, transportation, industrial, buildings, home use and other market segments.

The company also provides communication and connectivity offerings, such as baseband processors, radio frequency transceivers and power management integrated circuits, and tablet, phone and Internet of Things solutions, which include multimode 4G LTE modems, Bluetooth technology and GPS receivers, software solutions and interoperability tests, as well as home gateway and set-top box components.

Intel reported an inline first quarter, and lowered the forward outlook. Merrill Lynch stays positive on the company and believes there is solid upside potential for the stock. Some analysts think the restructuring can ultimately translate to $0.23 in annual earnings-per-share savings.

Intel investors receive a 3.03% dividend. The Merrill Lynch price target rises to $40 from $36. The Thomson/First Call consensus price target for the stock is $35.20. Shares closed most recently at $34.38.

Intuit

This company has been on a roll this year and hits all the metrics in the sector. Intuit Inc. (NASDAQ: INTU) loves income tax time as its TurboTax product is one of the most widely used, and sales are expected to be very solid once again this year. It is also well-known for the QuickBooks line of accounting software, which is used by firms big and small. Intuit announced earlier this year it is launching QuickBooks Online Self-Employed, a new product that makes it easy for the rapidly expanding population of freelancers and independent contractors to handle small business accounting. The company estimates 43% of workers will be self-employed by 2020.

Intuit has served small businesses and accountants with QuickBooks for more than 20 years. It was an early innovator in cloud accounting when it first launched QuickBooks Online in 2001. The company recently announced that QuickBooks Online has more than a million paying subscribers, cementing its market leadership as small businesses shift to the cloud.

Intuit investors are paid a 1.05% dividend. The Merrill Lynch price target goes from $108 to $128, and the consensus target is $108.94. The stock closed Monday at $115.63.

NVIDIA

This is a top chip stock that has reported strong earnings this year. NVIDIA Corp. (NASDAQ: NVDA) is one of the leaders when it comes to supplying graphics processing technology for the 3D graphics market, including desktop graphics processors and gaming consoles.

NVIDIA is also moving into visual computing chips for cars, mobile devices and supercomputers. The company has a technology partnership with electric car maker Tesla Motors. It has been able to use its ability to leverage past investments, with a more controlled spending structure ahead on unified, which enables strong cash flow that is allowing a focus on capital return, which is currently estimated to be $1 billion next year.

Top Wall Street analysts feel the stock is maturing to a platform company from a pure chip company, and many see the stock continuing to benefit from four secular trends: virtual reality, PC gaming, chips in the automobile industry and graphic processing units (GPUs) in the cloud.

Merrill Lynch likes the company’s long-term prospects in its core markets, which is offset to some degree by some legacy declines. Some on Wall Street do note the ongoing litigation with Qualcomm and Samsung as a potential negative, as well as the uncertainty surrounding Intel royalties, but they view the company as transforming and growing.

NVIDIA investors are paid a 0.9% dividend. The new Merrill Lynch price objective is $55, up from $50, and the consensus target is lower at $40.89. The stock closed Monday at $52.02.

Qorvo

This is the company that was formed after the merger of RF Micro Devices and Triquint Semiconductor. Qorvo Inc. (NASDAQ: QRVO) is a leading provider of core technologies and RF solutions for mobile, infrastructure and aerospace/defense applications. Qorvo has more than 7,000 global employees dedicated to delivering solutions for everything that connects the world.

The company has among the industry’s broadest portfolio of products and core technologies. The Merrill Lynch analysts are convinced that the higher RF content in new smartphones should offset quarterly unit volatility. They also think strategic mergers and acquisitions could help diversify the company away from mobile dependence and add longer life business cycle products.

The Merrill Lynch price target was lifted to $70 from $60, and the consensus target is set at $58.32. The stock closed Monday at $57.73, up over 3% on the day.

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While higher target are always a positive sign, investors want to make sure they aren’t chasing stocks at these levels. It may make sense to buy partial positions now and see how earnings season goes.