Technology

Merrill Lynch Out With Top Software Stock Picks for 2018

VMware

This still may be one of the best stocks to own, and it has been on a tear this year. VMware Inc. (NYSE: VMW) provides virtualization infrastructure solutions in the United States and internationally. Its virtualization infrastructure solutions include a suite of products designed to deliver a software-defined data center run on industry-standard desktop computers and servers, and support a range of operating system and application environments, as well as networking and storage infrastructures. Its solutions enable organizations to aggregate multiple servers, storage infrastructure and networks together into shared pools of capacity.

The Merrill Lynch price target is $148. The consensus target is $132.32, and shares closed Tuesday at $128.14.

Workday

This top company also looks to benefit from increased IT spending and has had a very solid year for investors. Workday Inc. (NYSE: WDAY) is a leading provider of enterprise cloud applications for finance and human resources. It delivers financial management, human capital management and analytics applications designed for the world’s largest companies, educational institutions and government agencies.

In the fall, Workday hosted a very upbeat and positive analysts day, and many feel that the company is transforming into a platform story, customer growth is reaching an inflection point and the module attach rate is very strong. Long-term operating margins are being increased, as many analysts feel that big picture of the company’s operating leverage is not fully reflected in the stock price.

Merrill Lynch has a $134 price objective, well above consensus target of $108.49. Shares closed on Tuesday at $102.93.

HubSpot

This stock has had a solid run since selling off late last year. HubSpot Inc. (NYSE: HUBS) is a cloud-based provider of inbound marketing tools such as website content management, blogging tools, email campaign, search engine optimization, social media monitoring and management, customer relationship management and others for small businesses and midsize companies.

The company’s tools provide a single console for marketing professionals to generate new customer leads, convert leads to customers and customers to repeat customers.

The $102 Merrill Lynch price target compares with the consensus target of $92.47. The stock closed Tuesday at $92.80.

Tableau Software

This was a red-hot stock that has also been a rumored takeover target for some time. Tableau Software Inc. (NASDAQ: DATA) provides business analytics software products in the United States, Canada and elsewhere. It offers Tableau Desktop, a self-service analytics environment that empowers people to access and analyze data independently, and Tableau Server and Tableau Public, a free cloud-based platform for analyzing and sharing public data.

The Merrill Lynch price target is $90, but the consensus target was last seen at $76.19. The stock closed on Tuesday at $70.68.

Splunk

This remains one of the top picks on Wall Street. Splunk Inc. (NASDAQ: SPLK) provides a software platform for collecting, storing, indexing, searching and analyzing machine generated data, such as log files and configuration files, which are prevalent in every type of IT system, device and application.

Splunk technology is potentially applicable and disruptive in several market segments, including IT operations, security and compliance, and business intelligence. These market segments are collectively worth $28 billion today.

The massive $95 Merrill Lynch price target is higher than the $85.97 consensus price objective and the most recent close at $84.21 a share.

RingCentral

This is a smaller cap name that Merrill Lynch is positive on for 2018. RingCentral Inc. (NYSE: RNG) offers a cloud-based solution for business communications that replaces legacy and expensive on-premise communications systems. It is delivered as an application that follows the user regardless of device (office phone, smartphone, desktop, tablet). Features include voice, text, fax, audio conferencing and integration with document and customer relationship management systems.

Merrill Lynch has noted that over the past year several factors have come together to propel the company’s business model. RingCentral is seeing enterprise traction, channel is driving enterprise deals and the Avaya install base is an opportunity.

The Merrill Lynch price target is $57. The consensus target is $49.57, and shares closed Tuesday at $47.70.

These 10 top software plays for 2018 range from large cap giants to nimble small-cap up-and-comers. All these top picks make good sense for aggressive growth accounts with a higher risk tolerance level.