Technology

Merrill Lynch Has 4 Low-Priced Tech Stocks With Big Upside Potential

ON Semiconductor

This is another smaller cap play that aggressive accounts may want to look at. ON Semiconductor Corp. (NASDAQ: ON) is a vendor of analog power management, analog signal conditioning, standard logic integrated circuits (ICs) and discrete chips into the automotive, communications, computing, consumer, industrial and medical applications.

The company is in the midst of a transformation from a seller of commodity discrete chips into higher value added analog ICs both through organic growth and acquisitions.

The company has not historically had a meaningful exposure to Apple. However, most believe that its content is likely rising at Apple’s in next-generation devices. Specifically, it is gaining content in the company’s fast charging solution, which could mean that Apple adds about 5% to ON sales in 2017.

Merrill Lynch recently raised its price objective and feels that sales growth could be in the 3% to 6% range, versus its current 3% target and Wall Street’s 2% forecast.

The new Merrill Lynch price target is $23. The consensus price objective is $19.25, and shares closed Wednesday at $18.15.

Pure Storage

This 2015 IPO could be offering investors big upside in flash storage. Pure Storage Inc. (NYSE: PSTG) is a leading vendor in the all-flash array market that addresses the larger $12 billion tier-1 storage area network market, as well as the $6 billion NAS market. All-flash arrays are disrupting hard disk drives, given better performance, better durability, higher reliability, lower power consumption and a smaller footprint. The company disrupts traditional selling models by allowing customers to use the same hardware for up to 10 years, offering free upgrades every three years for a service fee.

The company made a big change in management back in the summer, and Merrill Lynch noted:

The CEO change from Scott Dietzen to Charles Giancarlo should be seamless. We are not expecting financial milestones to change. Pure reported a strong quarter with a revenue/gross margins/earnings per share beat, and raised the low end of revenue guidance for the year. We view Pure’s ability to hit its $1 billion revenue goal in 2018 with increased confidence, Flash Blade product to strongly ramp.

The $18 Merrill Lynch price objective compares with the consensus target price of $15.75. The shares closed most recently at $16.15.

Four top tech stocks rated Buy that are priced under $20 — the lower price gives investors the chance to own a larger positions and the ability to add shares without taking out a second mortgage.

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