Positive S&P 500 performance in 2012 took many market participants by surprise. Stock analysts were not excluded from the out-performance. The S&P 500 is up around 8% year-to-date, but still below the Nasdaq, which is up around 13% in the same period:
(Image source: Yahoo Finance)
The gap percentage between the 1-year target price from analysts and the average price was published in a list by Bloomberg. Netflix (NASDAQ:NFLX) and Computer Sciences Corporation (NYSE:CSC) topped the list with a gap percent of 20.0% and 16.8% respectively. The 5 most actively traded technology stocks and trading well-above analyst targets are:
# of Analysts
1 -yr Target
Netflix, Inc. (NFLX)
Computer Sciences Corp. (CSC)
First Solar, Inc. (NASDAQ:FSLR)
Juniper Networks (NYSE:JNPR)
Advanced Micro Devices, Inc. (NASDAQ:AMD)
1. Netflix - Buy
Netflix is up 75.86% for the year but still down 60.02% from its 52-week high. The company closed at $121.85 and is rewarding investors who bought the worst-performing companies of 2011. In its most recent earnings call, Reed Hastings forecast better contribution margins of 11% in its international space. Netflix was previously a "sell" call, but the company expects positive margins outside of the United States. Its $7.99 price point appears to be ubiquitous, as the package has similarities to competitors like Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT). Yet, Netflix has a niche advantage in the unlimited $7.99 price point that should support the company's international growth strategy.
2. Computer Sciences Corporation - Sell
Computer Sciences Corporation surprised the market when the company reported earnings. The stock is up 39.58% year-to-date, closing recently at $33.08. In its Q3 report, the company said its earnings were driven by its outsourcing business. Outsourcing contributed $2.4B of the $4.1B of the revenue.
3. First Solar, Inc. - Buy
Analysts downgraded solar energy stocks in droves, citing excess supply, weak demand, and an absence in subsidies in Europe. First Solar's average target price is $38.73, well below the $42.42 average price. First Solar was a stock to sell in 2009 when it was north of $100, and as recently as in November.
It would be ideal to have weak solar plays exit the market before adding to a position in First Solar, but demand strengthened in the last quarter. Suntech Power Holdings (NYSE:STP) showed that in its earnings report on February 17. The company saw a rush for projects ahead of subsidy declines from Germany.
4. Juniper Networks - Buy
Juniper Networks is still a company to buy on a pullback, despite trading above the $22.32 average target price. The company's shares rose 7% recently on speculation that AT&T (NYSE:T) would increase orders. Juniper forecasted profits of $0.11 - $0.14 for the current quarter, sales between $960 M - $990M. This is well-below the analyst estimates of $0.27 earnings per share and $1.1B in revenue.
5. Advanced Micro Devices - Buy
AMD is up 37.41% in the current year, and offers little upside, if the average analyst target price is used as any guide. Shares continued its climb in February, helped by additional analyst upgrades. On February 7, the company lost its head of sales. On February 15, the graphics division's CTO left. It would seem disturbing that the company's decision to shift away from the PC market would be bearish. AMD hopes to see higher growth and better margins by making custom chips combined with AMD's graphics.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.