Some of the biggest moves in technology this year have been from the new giants in the industry. Apple Inc. (NASDAQ: AAPL) has almost doubled, and there were big moves in the software as a service (SaaS) and cloud computing stocks. So the real question for investors is where the good values are after such a red-hot year.
The answer may lie with the old-school, “legacy” technology stocks, as some of them, while solid this year, certainly haven’t doubled in price. We screened the Merrill Lynch technology research universe for legacy technology leaders that have solid upside potential for 2020. We found five that look like great additions to aggressive growth portfolios, and are all rated Buy at Merrill Lynch.
Shares of this high-profile old-school software company have backed up in price and are offering the best entry point in quite some time. Adobe Systems Inc. (NASDAQ: ADBE) operates in three segments: Digital Media, Digital Marketing and Print and Publishing. 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.
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 analysts anticipate that earnings may increase a solid 30% or more in the coming year.
The company recently hosted its MAX analyst day. The fiscal year 2020 revenue guide implies about 18% growth, in-line with Wall Street estimates. In addition, while Adobe typically reiterates the fiscal fourth-quarter guidance, it surprised to the upside and raised Digital Media net new annual recurring revenue by $25 million to $475 million.
The Merrill Lynch price target for the shares is $323, and the Wall Street consensus target is $316.76. The shares closed Thursday’s trading at $305.96 apiece, but they popped to $315.60 in Friday’s premarket after an earnings report with strong revenue growth.
Cybersecurity is a growing silo for this long-time networking mega-cap tech leader. 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.
Cisco cybersecurity products give clients the scope, scale and capabilities to keep up with the complexity and volume of threats. Putting security above everything helps corporations innovate while keeping their assets safe.
Cisco shareholders receive a 3.10% dividend. Merrill Lynch has a target price of $56, while the posted consensus target was last seen at $55.58. The stock closed at $45.67 a share on Thursday.