With the holidays now long over and fourth-quarter earnings reports ready to start rolling out fast and furious, many of the top companies we follow on Wall Street are making some changes to the lists of their high-conviction stock picks for clients for 2018. With the market continuing to trade near all-time highs, it makes sense to examine the lists and make some changes as the rest of the year could have additional volatility as the political and world landscape looks to remain unsettled.
A comprehensive new report from Baird features the firm’s Best Ideas for 2018:
Our list of Best Ideas for 2018 features high-conviction recommendations from our team, which has been recognized consistently for quality and trustworthiness since 2004. Our best ideas are organized by growth or value and by sector. Growth ideas lead with a clearly identifiable catalyst we see unfolding soon, while value ideas take a longer view.
We screened the Growth and Value groups specifically for Technology and Services stocks and found five top plays for 2018. All have outstanding upside potential.
After years of frustrating performance, Advanced Micro Devices Inc. (NYSE: AMD) appears to have turned the corner and is a hot commodity on Wall Street. It is one of the largest suppliers of PC microprocessors and graphics processors worldwide to computing original equipment manufacturers. The company’s main product lines include desktop, notebook and graphics processors, and embedded/semi-custom chips.
Last year the company released its first major offering in five years, the Ryzen chipset, which many feel is uniquely positioned to compete with the big players like Intel and NVIDIA in the $50 billion total addressable market for personal computers, gaming, artificial intelligence and servers. Baird noted this in the report:
Ryzen is shipping into PCs and represents another meaningful incremental growth opportunity for AMD. We think both PC and data center customers have an incentive to let AMD in, in order to gain pricing leverage, and we think multiple new product ramps will occur in the first half of 2018.
Electric car giant Tesla is working with AMD to refine an AI chip for autonomous driving tasks in its cars. Many think the unconfirmed partnership would make sense, and though most would not expect the shipment of AMD chips to Tesla to have a material impact near term, it would constitute a critical win for AMD and support the thesis that the company is a primary beneficiary of the shift to parallel processing graphics processing units.
The Baird price target for the shares is $20, and the Wall Street consensus price objective is $14.28. The shares closed Tuesday at $11.82.
This top mega-cap technology stock pick on Wall Street makes good sense for investors seeking tech exposure in 2018. Cisco Systems Inc. (NASDAQ: CSCO) designs, manufactures and sells internet protocol (IP) based networking products and services related to the communications and information technology industry worldwide.
It provides switching products, including fixed-configuration and modular switches, and storage products that provide connectivity to end users, workstations, IP phones, wireless access points and servers, as well as next-generation network routing products that interconnect public and private wireline and mobile networks for mobile, data, voice and video applications.
Baird loves the company’s stellar balance sheet, and the ability for the company’s gross margins to move close to the 65% range on a consistent basis as it moves away from the legacy products sold for switching and routing, which will still generate monster revenue. Cisco also could benefit from the tax being lowered on overseas money as it has a whopping $70 billion in cash, 90% of which is overseas.
Shareholders receive a 2.92% dividend. Baird has a $41 target price, and the consensus target is $39.23. Shares closed trading on Tuesday at $39.69.