4 Technology Companies With Over 15% Upside

Includes: EA, HPQ, MU, SAP
by: Chris Lau

The S&P 500 index closed at 1,397.11, a rare negative weekly close for the year. In that time, the average target price increased by 1.76% for companies with the biggest target price change. Analysts expect these stocks to rise an average of 15.2%.

4 technology companies with a target price above the average target price are listed below:

Company Name

# Analysts

Current Target ($)

Last Price

% from Target

Avg Volume

























Click to enlarge

Electronic Arts (NASDAQ:EA) - Buy

EA is a technology company with the highest gap from its current price. Closing at $16.86, shares are 42.76% below its $24.07 target price. Shares continued to trade close to a 52-week low last week on declining volume, hurt by weak results from Gamestop (NYSE:GME). Gamestop issued a fiscal year EPS estimate of $3.10 to $3.30, within the mean estimate of $3.19. For Q1/2012, Gamestop issued guidance of $0.52 to $0.55, below the mean estimate of $0.60.

Investors are not disassociating EA's prospects from console-gaming, and continue to ignore EA's growth in social media and the digital-distribution of games. When investors recognize this value, EA will trade towards its target price.

Hewlett-Packard (NYSE:HPQ) - Buy

HP closed at $23.63, and looks set to re-test its 52-week at around $22. Analysts believe that shares will trade 30% below its closing price, at $30.72. HP announced that it was merging its printing division with its PCG unit. The consensus view is that printing will migrate to a digital format towards growing channels like tablets, smartphones and computers. HP has a 45% market share in inkjet printers, with 20% contributing to its total profit. Any migration to other channels will hurt profits.

The merger is not new for HP. When Carly Fiorina was the company's CEO, the units were combined. Mark Hurd then split the units when he was CEO. HP's competitors, Dell (NASDAQ:DELL) and Lenovo, both gained market share in 2011, while HP saw its market share drop 3.4% to 16%.

Despite the re-alignment, HP announced a 10% dividend increase.

Micron Technology (NASDAQ:MU) - Buy

After peaking at $9 earlier this month, Micron closed at $8.40 after reporting earnings. Analysts have a $10.89 target on the company. In its earnings report, the company said it lost $224M (or $0.23 per share) compared to a $72M profit a year-ago. Revenue dropped 8% to $2.07B.

Micron is pinning its upside in improving DRAM prices. Its Chief Executive, Mark Durcan, said that:

Recently we're seeing improvements in the DRAM market ... I think concerns over supply seem to be having a positive or at least stabilizing effect.

The executive was also seeing healthy demand and supply for NAND.

Investors bid shares down because average selling prices dropped 20% as the company sold more chips. Still, the use of NAND in solid state storage will be good for Micron.

Oracle Corporation (NASDAQ:ORCL) - Buy

Oracle closed at $28.55, 18.35% below the average $33.79 target. In its earnings call, Oracle saw a license revenue growth of 7% to $2.4B, hardware gross margins of 51%, and EPS growth of 15% (non-GAAP) to $0.62. The company has nearly $30B in cash and bought back $1.7B of its shares during the quarter. The company's core businesses continue to be strong. Its Exadata product was reportedly growing at triple digits.

During the conference call, Oracle spent considerable time addressing the lack of competitive threat from SAP (NYSE:SAP). Oracle CEO's Ellison said that:

I don't believe SAP is equipped to compete with us in a database business when we've been working on it for 10 years. This is arguably our core competency, database management. And SAP is going to beat us in data management with HANA? I'm going to turn it over to Mark to discuss all of the HANA losses we've experienced since the introduction of that SAP product.

Oracle said that SAP's HANA product was not compatible with the Hyperion product, unlike Oracle's Exalytics.

During the quarter, Oracle increased its sales force by 1,700. Patient investors should expect Oracle to be able to close more sales for Exadata/Exalytics in 2012. This implies that the 18% upside for Oracle is achievable.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in (HPQ) over the next 72 hours.