Technology

SunTrust Out With High-Conviction Technology Picks for Q4

The analysts said this about the company:

We believe that GoDaddy continues to be opportunistic with respect to tuck-in mergers and acquisitions while remaining on the lookout for larger deals that fit the bill (operationally, strategically and financially). Given the declining leverage, a growing cash pile and conclusion of the CEO search, we’d not be surprised to see a more active use of cash for share repurchases.

The SunTrust price objective of $90 compares to the consensus target price of $83.81. The shares last traded on Wednesday at $62.62, almost 40% below the SunTrust target.

Nvidia

This sector leader made a huge purchase in the spring. Nvidia Corp. (NASDAQ: NVDA), a company that rarely has grown through acquisitions, bought Mellanox and paid $6.9 billion in cash. In what actually was somewhat of a duel, Nvidia knocked out Intel in its bid to buy the chipmaker, and the deal will help Nvidia boost its business of making data center chips that help power cloud computing.

Mellanox’s BlueField intelligent network adapters are another version of data center co-processing acceleration. Top Wall Street analysts see the combination of Nvidia and Mellanox as a definite threat to Intel’s data center CPU dominance of workloads. This indirect competition could ultimately be a problem for Intel shareholders.

Nvidia also announced in the summer that Minecraft will now support raytracing with the introduction of real-time DXR raytracing for Windows 10. Minecraft is being refitted with path tracing that allows for life-like lighting, reflections and shadows. Overall, the announcement is a notable positive for the future of the RTX platform, as one of the bear-thesis items surrounding raytracing was the lack of titles. The addition of Minecraft (one of the most popular games) should help quell fears surrounding adoption from other high-quality titles in the future.

The report notes the past struggles:

The company severely under performed peers and the broader S&P in late 2018 when the company’s Data Center end market slowed. More recently, the stock has begun to outperform as management’s optimism for a recovery is becoming more believable. More important to us, our industry contacts indicate two large cloud service provider customers are in the early stages of placing new orders that will cause an inflection in this segment’s growth trajectory over the coming quarters.

The SunTrust price target is $216, well above the $182.72 consensus target. The stock closed most recently at $173.04 per share.

Square

This is another stock that came out with big fanfare, but it has seen some serious selling since the summer. Square Inc. (NYSE: SQ) develops and provides payment processing, point-of-sale, financial, and marketing services worldwide. It provides Square Register, a point-of-sale software application for iOS and Android, which enables sellers across a range of business types to itemize products or services for faster checkout.

Its Square Analytics shows sellers how their businesses are performing, and the Instant Deposit service sends funds from a sale immediately to a seller’s bank account. Square Reader is for magnetic stripe cards, EMV chip cards and NFC, which connects wirelessly to mobile devices.

The company also provides Square Capital, a financial service product, which provides merchant cash advances to prequalified sellers, as well as Square Customer Engagement, a marketing service product, and Caviar, a food delivery service. The analysts said this in their coverage of Square:

The company’s leading technology and growing Cash App ecosystem offer superior functionality and value to growing businesses, in our opinion. As a result, we view the company as positioned to take meaningful share in the $7 trillion domestic Electronic Payments market,

The SunTrust price objective is $80. The posted consensus target is $78, and shares closed Wednesday at $60.08 apiece.

These four top technology companies all have solid franchises that are built for success now and well into the future. All make good sense for aggressive growth accounts looking to add quality companies at a good entry price. Again, with the potential for continued selling, it makes sense to nibble now and see how things play out.

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