By Simon Avery
Following an earlier post on Canaccord Genuity’s six tech stocks to avoid in 2012, here are the firm’s top picks for the sector.
“Our team remains positively inclined on the technology sector in general, with noted caution around PC growth trends and near-term supply constraints. Secular trends are most favourable in mobile, cloud-based services and new media,” Canaccord says in the preamble to its 2012 Technology Outlook.
Analyst Bobby Burleson likes Analog Devices Inc. (ADI) and Integrated Device Technology (IDTI). Analog Devices designs and manufactures integrated circuits for the industrial, automotive, consumer, and communications sectors. Similarly, IDT designs and makes integrated circuits for the communications, computing, and consumer industries. Both companies should see improved gross margins in 2012 and both have limited exposure to the PC sector that has proved weak this year, he says.
Apple is expected to continue to dominate the smartphone space. Vancouver-based Sierra Wireless makes gear for connecting mobile devices to the Internet, such as USB modems and PC express cards. Mr. Walkley expects the company will benefit from phone companies upgrading to the next generation of wireless technology (4G LTE) in 2012. Qualcomm is a top pick for next year thanks to its leadership position in integrated chipset market for smartphones and tablets, he says.
In the area of new media and location technology, analyst Jeff Rath believes cable companies will roll out more innovative products and features to try to stay competitive. In addition, the GPS market will see more opportunity as the use of location services expands in fields as varied as agriculture and emergency response. He also sees greater percentages of advertising budgets being directed to serving the mobile market.
In this environment, Mr. Rath likes Trimble Navigation Ltd. (TRMB), Velti PLC (VELT), KIT Digital Inc. (KITD) and Rovi Corp. (ROVI) Trimble’s technology gathers, analyzes and manages mobile data. Velti sells marketing and advertising technology to wireless operators, KIT’s technology helps companies manage their video assets and Rovi’s technology helps customers search and manage digital entertainment files.
Among business software players, Richard Davis likes company’s with cloud-based technologies. He names Salesforce.com (CRM) and Nuance Communications (NUAN) as top picks. “Barring horrific economic headwinds, the ‘revolutionaries’ on which we focus our coverage are very likely to gain market share at the expense of legacy competitors,” he writes.
Among Internet companies, Michael Graham chooses market leaders Google (GOOG) and Zillow Inc. (Z) Zillow operates an online real estate information marketplace. “We believe the underlying drivers will be growth in online advertising, e-commerce, mobile commerce, and social networking adoption,” he writes.