With the first-quarter earnings reporting for the most part over, 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. With the market rallying back strong from the correction sell-off, 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.
In a recent Merrill Lynch research note, the analysts make a big move by adding a top technology company, NetApp Inc. (NASDAQ: NTAP), to the firm’s well-respected US 1 list of stocks to buy, which is a portfolio of the Merrill Lynch highest conviction ideas.
NetApp’s stock has been on a big run since last fall. The company provides software, systems and services to manage and store computer data worldwide. It offers flash; flash arrays that support data management; hybrid arrays to deploy the speed of flash storage; hybrid cloud; ONTAP cloud storage data management service; NetApp cloud sync hybrid data management software as a service; NetApp private storage for cloud; and AltaVault cloud-integrated solutions.
Merrill Lynch has seen some strong reports from the company and noted this when adding the stock to the US 1 list:
We are adding NetApp to US 1 list following our recent upgrade. The company gained significant share both in overall external storage and in the fast growing All Flash Array market. The April analyst day should drive clarity around cloud opportunity, quantify dividend increase and additional share repurchases.
NetApp shareholders are paid a 1.26% dividend. The Merrill Lynch price objective for the shares is $74, and the Wall Street consensus target price is $63.27. The stock closed trading Wednesday at $63.35 a share.
In addition, here are three additional tech companies on the US 1 list with big upside potential.
This is one of the largest capitalization companies in the data center sector. Equinix Inc. (NASDAQ: EQIX) provides data center services to protect and connect the information assets for the enterprises, financial services companies, and content and network providers primarily in the Americas, Europe, the Middle East, Africa and the Asia-Pacific.
The company provides colocation services and related offerings, including operations space, storage space, cabinets and power for customers colocation needs; interconnection services, comprising physical cross connect/direct interconnections, Equinix Internet Exchange, Equinix Cloud Exchange, Equinix Metro Connect and Internet connectivity services; and managed IT infrastructure services, including installation of customer equipment and cabling, as well as equipment rebooting and power cycling, card swapping and emergency equipment replacement services.
Equinix investors are paid a 1.9% distribution. The Merrill Lynch target price is $520. The posted consensus price objective is $507.23, and shares closed Wednesday at $391.38.
The huge social media leader has continued to post gigantic numbers and is one of the two other pure tech plays in the US 1 list. Facebook Inc. (NASDAQ: FB) operates the largest social network, with over 2.0 billion monthly active users and over 1.4 billion daily active users. The company generates revenue from advertising and from payments, with over 95% of revenue from advertising. It generates close to 50% of revenues in the United States and Canada and is expanding rapidly in international markets.
Its solutions also include Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends; Messenger, a messaging application for mobile and web on various platforms and devices, which enable people to reach others instantly, as well as enable businesses to engage with customers; and WhatsApp Messenger, a mobile messaging application.
Merrill Lynch has a $265 price target, which compares with a consensus price target of $222.81. The shares closed trading on Wednesday at $183.71.
This top company reported solid fiscal 2018 second-quarter results as billings drastically improved. 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.
Historically Salesforce tends to outperform in the first quarter of a calendar year, and with over a month remaining in the quarter for 2018, the stock would be a great pickup on another steep reversal.
The $147 Merrill Lynch price target is higher than the $136.05 consensus price objective. The shares closed on Wednesday at $125.33.
One new member joins the US 1 list and three additional companies in technology and tech-related areas that all make good additions to growth portfolios that have higher risk tolerance.