The tech sector seems to be getting its share of upgrades recently and also has seen some increased M&A activity culminating this morning with Applied Materials (AMAT) announcing it will merge with Tokyo Electron in an all-stock combination that values the combined firm at $29B.
Valuations in the sector are significantly lower than the overall market as well. The sector looks like a good bet to outperform the overall market in the months ahead. Here are three tech stocks currently moving up on positive analyst comments.
Apple (AAPL) is being buoyed by comments from Chris Caso at Susquehanna who reverses his previous pessimism to move his price target from $440 a share to $625 and places a "Buy" on the stock as initial iPhone sales blow through estimates. Echoing my article early Monday, Mr. Caso notes "Apple didn't need to sacrifice margins, current shortages mean a healthy backlog entering CQ4, and a China Mobile launch may be about to come."
I will bet my lunch money for the week that this is not the last upgrade/price target upward revision we see on the giant from Cupertino by the end of the month by analysts. Also look for forward revenue and earnings estimates to be taken up as well in short order. At ~8x forward earnings once subtracting the company's huge cash holdings, Apple is cheap given it looks like it is jump starting revenue and earnings growth again. With over $40B to buy back stock in the medium term and a highly probable upcoming China Mobile (CHL) deal, the shares are not going to stay below $500 a share for long. BUY
Cbeyond (CBEY) gets upgraded at Raymond James which goes to "Outperform" from "Market Perform". The analyst firm slaps a $7.50 a share price target on the shares, ~25% above the company's current stock price. The stock is trading near its 52 week lows. Cbeyond provides managed information technology and communications services to small and mid-sized businesses in the United States.
This is a small cap (under $200mm market capitalization) tech play as the company is currently posting losses. However the stock is selling at just 4% over book value and has some $12mm in net cash on the balance sheet. The median analyst price target of the 9 analysts that cover the shares is $8 a share and the stock was over the $10 level within the last year. Despite posting losses, the company is significantly operating cash flow positive (mainly due to substantial depreciation expenses). The stock is also priced at less than 40% of annual revenues. CBEY might be worth a small speculative equity play or by buying some cheap call options.
Google (GOOG) receives some love from SunTrust this week. Analyst Robert Peck believes the stock could join Priceline (PCLN) in crossing the $1,000 a share barrier as he slaps a $1,125 a share price on the stock. He notes the "still healthy growth of Google's more mature core advertising markets and products in addition to the early stage growth of its extended markets and ancillary businesses."
The company continues to rack up impressive revenue increases. It is tracking to ~40% sales growth this fiscal year and analysts believe at least another 15% revenue gain is in store in FY2014. The company has over $40B of net cash on its balance sheet and hopefully one day will follow Microsoft (MSFT), Apple and other tech giants in issuing a dividend. The stock is selling at ~17x forward earnings, right near its five year historical average. ACCUMULATE