This smaller cap company could be a great takeover target, and it is a member of the Jefferies Franchise Picks list. 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.

For some time, Jefferies has believed the company has multiple catalysts, including continued traction with mid/enterprise customers, increased partner traction, international expansion and continued dislocation in the industry from legacy PBX/UC vendors.

Last year, Avaya entered into a strategic partnership with RingCentral in which it will introduce a new unified communications as a service (UCaaS) solution. Under the agreement, RingCentral will contribute $500 million to the deal and will be Avaya’s exclusive provider of UCaaS solutions.

Jefferies feels the potential for growth is high:

RingCentral is one of the biggest beneficiaries of the migration from on-prem to cloud-based unified communications solutions. Its products are best-in-class and its competitive advantages will allow it to grow faster and for a longer duration than the market appreciates. One key competitive advantage is its carefully crafted partner-led go-to-market strategy. The company’s partnership with Avaya changed the landscape of the industry and structurally advantages RingCentral versus other UCaaS providers.

The $245 Jefferies price target was recently raised to $290. The consensus target is $277.14, and RingCentral stock closed at $274.96, after climbing 6.4% on Wednesday.

Texas Instruments

This old-school legacy semiconductor tech company offers solid value at current levels and is a great pick for more conservative investors. Texas Instruments Inc. (NASDAQ: TXN) is a broad-based supplier of semiconductor components, ranging from digital signal processors to high-performance analog components, to digital light-processing technology and calculators.

Some 65% of the company’s sales are exposed to the well-diversified, business-to-business industrial, automotive, communications infrastructure and enterprise markets. While business from those sectors, especially automotive, could suffer in the near term, the analyst feels the solid dividend should support the shares.

The company is also a big Apple supplier, so the long-term outlook for this venerable leader makes it a safer bet for accounts with less risk tolerance. Jefferies has remained positive on the shares for years and said this:

We consider Texas Instruments to be the premier IoT play in our “Analog Renaissance” thesis, which argues that analog companies will see higher growth over the next 5 years versrs the previous 5 due to their position as critical component players in the IoT side of the “4th Tectonic Shift in Computing” to an IoT and Parallel Processing model. The company is the analog market share leader, and continues to gain share, which supports our view that it will be the first company in the analog sector to capture 40-50% share and the lion’s share of the profits in the industry.

Investors receive a 2.72% dividend. Jefferies has set a $136 price target. The consensus target is $117.22, and Texas Instruments stock was last seen trading at $131.40.

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Note that technology has been off-the-charts hot and the sector could be ready to consolidate some after printing all-time highs. With the Nasdaq possibly headed much higher than the 10,000 level, it may make sense to scale buy shares over a two- or three-month period and hope to catch a sector reversal and buy some stock lower than current levels.