The stock market correction has led to some new buying opportunities for investors, and the tech sector could be one of the best places to start picking up bargains. A number of tech stocks have seen substantial drops and now trade at levels even value investors could find compelling. Another reason to consider tech stocks is because many of these companies are seeing growth even in a weak economy, and many also have cash-rich balance sheets, which makes mergers and acquisitions more likely within the sector. Here are two tech stocks that are trading well below their 52-week highs and have rebound potential. In fact, analysts believe these stocks are poised for gains of nearly 100%.
SanDisk (SNDK) shares have been battered this year due to weaker-than-expected earnings for the first quarter of 2012 and a somewhat disappointing revenue outlook for the second quarter. At just over $34 per share, a lot of bad news is priced into the stock and investors might start seeing upside from these levels. SanDisk has a strong balance sheet with about $2.67 billion in cash and only around $1.6 billion in debt. The stock is trading about 40% off its 52-week high and for just a few dollars above book value, which is $28.87. Plus, this company continues to be one of the largest manufacturers of flash-memory, which is used in many popular electronic products.
For the first quarter of 2012, SanDisk reported a profit of $114.4 million, or 46 cents a share. This was well below the $224.1 million, or 92 cents a share, profit it posted in the first quarter of 2011. However, the company expects the second half of this year to improve due to increased demand from the smartphone market. A few weeks ago, an analyst at investment firm Stifel Nicolaus gave SanDisk shares a Buy rating and set a $60 price target. Based on the current stock price, that would offer investors gains of nearly 100%.
Here are some key points for SanDisk:
- Current share price: $34.22
- 52-week range: $31.34 to $53.46
- Earnings estimates for 2012: $1.99 per share
- Earnings estimates for 2013: $3.14 per share
- Annual dividend: none
Riverbed Technology (RVBD) shares dropped sharply after the company reported disappointing earnings, and the stock now trades for less than half its 52-week high. For the first quarter of 2012, GAAP revenues came in at $182 million, compared to $164 million in the first quarter of 2011, and net income was $7 million, or about 4 cents per share. This was below the 8 cents per share the company earned in 2011. A positive is that the company reported about 12% year-over-year growth in revenues, but profit margins need to be improved. While this is a short-term disappointment, the future looks bright because Riverbed products allow companies to optimize and consolidate their information technology systems.
Riverbed has a rock-solid balance sheet with about $484 million in cash and no long-term debt. An analyst at Gabelli & Co. believes that Riverbed is drastically undervalued and thinks the stock should reach $30 per share in 2013 and $34 by 2014. These price targets are based on private equity deals that have recently transpired. Based on a current share price around $16, that would give investors buying now a potential double in terms of gains.
Here are some key points for Riverbed:
- Current share price: $16.97
- 52-week range: $15.25 to $41.83
- Earnings estimates for 2012: 96 cents per share
- Earnings estimates for 2013: $1.17 per share
- Annual dividend: none
Data sourced from Yahoo Finance.
Disclaimer: No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
