Technology as a whole has been on fire in 2017, and with numerous tailwinds for next year, there is every reason to believe that the strength in the sector can continue. While the semiconductor arena was the hottest, software was right in the mix, and with the need for large-scale analytics, big data, cloud computing and much more, there is every reason to think that the top companies can drive big earnings in 2018.
In new research report from Kash Rangan, the outstanding software analyst at Merrill Lynch, he and his team introduce a new 2018 acronym for their software coverage universe: CLaMR or cloud growth and mean reversion. Within this specter, they are looking to identify software companies in which the narrative may be changing.
These 10 stocks are the top picks, and all are rated Buy at Merrill Lynch.
This high-profile old-school software company has posted outstanding earnings. Adobe Systems Inc. (NASDAQ: ADBE) operates in three segments. The Digital Media segment provides tools and solutions that enable individuals, small and medium businesses, and enterprises to create, publish, promote and monetize their digital content. The other segments are Digital Marketing and Print and Publishing.
Top Wall Street analysts see the company benefiting from artificial intelligence, predictive analytics, automation bots, speech recognition and natural language processing and image recognition. Some on Wall Street see earnings per share increasing a solid 30% or more for 2018.
The Merrill Lynch price target for the shares is $220, and the Wall Street consensus target is $196.77. The stock closed Tuesday at $174.97 per share.
This top company reported solid fiscal 2018 second-quarter results as billings drastically improved, and it is on the Merrill Lynch US 1 list. Salesforce.com Inc. (NYSE: CRM) provides enterprise cloud computing solutions, with a focus on customer relationship management to various businesses and industries worldwide.
It offers enterprise cloud computing applications and platform services, including Sales Cloud that enables companies to store data, monitor leads and progress, forecast opportunities, gain insights through relationship intelligence and collaborate around sales on desktop and mobile devices.
The company also provides Service Cloud, which enables companies to deliver personalized customer service and support, as well as connect their service agents with customers on various devices; and Marketing Cloud, which enables companies to plan, personalize and optimize customer interactions.
Merrill Lynch has a $125 price target, while the consensus price objective is $121.76. Shares closed trading on Tuesday at $104.26.
This top software stock was hit hard recently and is offering a very good entry point. Oracle Corp. (NYSE: ORCL) develops, manufactures, markets, sells, hosts and supports database and middleware software, application software, cloud infrastructure, hardware systems and related services worldwide.
The company licenses its Oracle Database software to customers, which is designed to enable reliable and secure storage, retrieval and manipulation of various forms of data. Its Oracle Fusion Middleware software aims to build, deploy, secure, access and integrate business applications, as well as automate their business processes.
Shareholders receive a 1.59% dividend. Merrill Lynch has set its price target at $62. The consensus target is $55.83, and shares closed Tuesday at $47.82.
This top technology company has a history of making very selective accretive acquisitions. SAP S.E. (NYSE: SAP) provides application and analytics software and software-related services for enterprises worldwide. It offers solutions covering various lines of businesses, including asset management, commerce, finance, human resources, manufacturing, marketing, sales, service, sourcing and procurement, supply chain and sustainability, as well as research and development and engineering. And it provides enterprise application software to various industries, including consumer, discrete manufacturing, energy and natural resources, financial services, public services and services.
The company also offers SAP Business Suite, as well as software-as-a-service, such as SAP SuccessFactors solutions; and SAP cloud-based solutions, such as temporary workforce sourcing, procuring and managing external workforce and travel and business travel expense management systems. Additionally, the company provides analytic solutions, such as trusted data discovery and agile visualization, advanced analytics, and corporate performance management solutions; and support, custom software development, consulting, training, messaging and payment services.
Shareholders receive a 0.85% dividend. The $129 Merrill Lynch price target compares with the $125.64 consensus estimate. Shares ended Tuesday at $115.20 apiece.