The Wall Street firms we follow here at 24/7 Wall St. keep lists for institutional and retail clients of high-conviction stock picks. These are generally the companies they not only like on a longer term basis, but those that usually have stocks with solid upside to the assigned target price. Since the start of the second half, many firms have tweaked their lists to account for potential changes in 2020.
Analysts who contribute to the well-respected Raymond James Analyst Current Favorites list of stocks to Buy provide one stock from their coverage space for inclusion in the list. Hence, each is considered a favorite choice.
We screened the list for technology ideas that still have room to move substantially higher. Mega-cap favorites Facebook, Apple, Amazon, Microsoft and Google have run extremely hard, and with the group very crowded, taking a little profit and rotating to the following stocks could make sense. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Analysts see this as a sleeper in the huge technology supply arena, and it could be poised for a big move. Avnet Inc. (NYSE: AVT) is a global distributor of electronic components (e.g., semiconductors, passives, connectors). The company ships over 117 billion electronic components annually from more than 1,400 suppliers to upward of 2 million customers. Customers include original equipment manufacturers and electronics manufacturing service companies and original design manufacturers.
Avnet has two operating segments: Electronics Marketing and Premier Farnell. The catalog business (Farnell) can see lower margins as component lead times compress, but if a V-shaped recovery renews product purchasing, the company could fire right back up. Trading at very reasonable multiples, this is an excellent pick for accounts now.
The Raymond James price target is $35, and the Wall Street consensus target is $31.25. Avnet stock closed Thursday’s trading at $27.45 a share.
This company is probably the most well known for constructing websites. GoDaddy Inc. (NYSE: GDDY) is a technology provider to small businesses, web design professionals and individuals. It delivers cloud-based products and personalized customer care. The company operates a domain marketplace, where its customers can find the digital real estate that matches their idea. It provides website building, hosting and security tools to help customers construct and protect their online presence.
GoDaddy provides applications that enable connecting to customers and managing businesses. It also provides search, discovery and recommendation tools, as well as a selection of domain name for ventures. It provides productivity tools, such as domain-specific email, online storage, invoicing, bookkeeping and payment solutions to run ventures, as well as marketing products.
Note that the consensus earnings estimate for the third quarter, ending September 30, 2020, has increased to $0.29 per share from $0.15. However, next year’s estimate has been reduced to $1.44 per share from the previous $1.45.
Raymond James has a $96 price target, well above the $89.46 consensus target. Go Daddy stock closed at $83.32 on Thursday.
This is another company investors may not be familiar with, but its shares have huge upside potential. Rapid 7 Inc. (NASDAQ: RPD) engages in the provision of cybersecurity analytics and automation services. Its products include an insight platform, which offers InsightVM, InsightIDR, InsightAppSec and InsightConnect.
Rapid 7 is advancing security with visibility, analytics and automation delivered through its Insight cloud. The solutions simplify the complex, allowing security teams to work more effectively with IT and development to reduce vulnerabilities, monitor for malicious behavior, investigate and shut down attacks, and automate routine tasks. 8,400 customers rely on Rapid7 technology, services and research to improve security outcomes and securely advance their organizations.
The $70 Raymond James price target is slightly less than the $71.20 consensus target. Rapid 7 stock closed at $63.98 a share.
This small-cap company could be a great takeover target. 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.
Second-quarter results beat across the board, and the size of the subscriber revenue and total annual recurring revenue beats were larger than in the first quarter. The company’s updated revenue guidance also was strong, as new subscription revenue guidance was increased by 1.8%, or $18.5 million, more than the $12.5 million beat in the second quarter.
Raymond James recently raised its price target to $355. The consensus target is $341.54, and RingCentral stock closed at $285.70.
These four Raymond James analyst favorite technology stock picks have substantial upside potential to the price targets. While more suited for growth investors with higher risk tolerance, they all make good portfolio additions at current price levels.