3 Mid-Cap Technology Stocks With Strong Upside Potential

Includes: ATML, QLIK, RVBD
by: Nick Chiu

Riverbed Technology (NASDAQ:RVBD), Atmel (NASDAQ:ATML), and Qlik Technologies (NASDAQ:QLIK) have received positive call(s) from analysts recently. In this article, these 3 stocks will be quickly analyzed fundamentally, and the overall price targets given by the analysts will also be presented.

Riverbed Technology, Inc. (RVBD)

Atmel Corporation (ATML)

Qlik Technologies Inc. (QLIK)

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Source: Google Finance

Date: February 19, 2013

Riverbed Technology, Inc.

Riverbed Technology, Inc. has developed innovative solutions to the fundamental problems associated with information technology performance across wide area networks (WANs). RVBD had been trading in the range of $13.30-$29.59 in the past 52 weeks. RVBD has a beta of 1.72.

Riverbed Technology had been awarded IDG's InfoWorld 2013 Technology of the Year Award for the Riverbed Granite appliance as of February 19, 2013. Granite appliances radically reduce the operational burden on IT managers while massively increasing their control over the infrastructure, all at a lower total cost of ownership.

Fundamentally, there are a few positive factors for RVBD:

  • Strong revenue growth (3 year average) of 29.6 (vs. the industry average of -3.5).
  • Higher operating margin and net margin of 13.3% and 8.7%, respectively (vs. the averages of 9.9% and 7.3%, respectively).
  • Strong operating cash flow of $239.26M with a levered free cash flow of $184.65M.

Analysts' Calls

Needham & Company upgraded RVBD from Buy to Strong Buy with a price target of $27.00, saying WAN Op is not saturated, but a robust growth market. As the analyst commented:

"There has been a slowdown in the growth rate of the WAN Op segment. But we think this reflects a shift to building out Private Cloud, weak economic conditions, Cisco's withdrawal from the market due to poor product performance, and Riverbed's product cycles. But as Riverbed's new products ramp and become increasingly virtualized, the huge spending on Private and Public Cloud establish more WAN application traffic, and economic conditions gradually improve, we strongly believe investors' perception of a "saturated market" will give way to a realization of the importance of WAN Op to cloud enablement."

Analysts have an overall rating of Neutral with an average target price of $22.81 for RVBD, which represents a 38.2% upside potential from the current price of $16.50.

Atmel Corporation

Atmel Corporation, engaged in designing, developing and supplying of microcontrollers, is offering a portfolio of touch products, which integrate its microcontrollers with touch-focused intellectual property. ATML had been trading in the range of $4.37-$10.74 in the past 52 weeks. ATML has a beta of 1.09

On February 7, 2013, ATML reported a net loss of $12.3M or 3 cents per share in Q4 2012. Excluding one-time items, non-GAAP net income for the reported quarter was $29.4 million or 7 cents per share against $67.5M or 14 cents per share in the year-ago quarter. The adjusted earnings for Q4 exceeded the Zacks Consensus Estimate by 4 cents. As reported by Zacks, the year-over-year decrease in earnings was primarily due to losses incurred on purchase commitments, restructuring activities, and write-off of receivables. The company reported net sales of $345.1M in Q4 2012, down 11.2% year-over-year. Net sales, however, beat the Zacks Consensus Estimate of $341M.

There are a few positive factors:

  • In 2012, ATML bought back a total of 3.3 million shares at an average price of $4.87 each during Q4 2012.
  • ATML expects to reap synergistic benefits from the acquisition of Ozmo, Inc., a leader in ultra-low power Wi-Fi solutions, in the upcoming quarters.
  • ATML is continuously upgrading its product portfolio to fuel growth and stay competitive.

Analysts' Calls

Needham & Company upgraded ATML from Hold to Buy with a price target of $10.00. The firm is bullish for the following four fundamental reasons: "1) we believe the touch enabled notebook market represents a significant growth engine in the capacitive touch market; 2) GMs should improve substantially in 3Q13/1H14 driving earnings power of $1+ exiting 2014; 3) Galaxy S4 win would add incremental $0.05-0.10 EPS; and 4) xSense represents a sizable opportunity and entirely new market where investor expectations still seem muted." The firm raised FY14 EPS from $0.60 to $0.75.

Overall, analysts have a Buy rating for ATML with an average price target of $9.96, which represents a 36.8% upside potential from the current price of $7.28.

Qlik Technologies Inc.

Qlik Technologies Inc., engaged in the development, commercialization and implementation of software products and related services, provides a business intelligence solution. Its solution addresses the needs of a diverse range of customers from middle market customers to large enterprises. The QlikView Business Discovery platform (QlikView) helps people create and share insights and analysis in groups and across organizations. QLIK had been trading in the range of $16.71-$33.59 in the past 52 weeks.

On February 14, 2013, QLIK reported strong Q4 revenue of $137.5M. Revenue from licenses rose about 24 percent to $93, and revenue from the Americas jumped 42 percent, while that from Europe increased 20 percent. Excluding items, QLIK earned 25 cents per share. Analysts had expected adjusted earnings of 23 cents per share on revenue of $126.9 million, according to Thomson Reuters I/B/E/S. According to the report from Reuters, "The company, which also counts Autodesk Inc. (NASDAQ:ADSK), Kraft Foods Group (KRFT), L'Oreal (LRLCY.PK) and Qualcomm (NASDAQ:QCOM) among its customers, said there had been an increase in the overall number and average size of deals across its markets." QLIK forecasts a first-quarter adjusted loss of between $0.12-$0.15 on revenue of $87M-$91M. However, analysts on average were expecting an adjusted loss of 1 cent per share on revenue of $94.2M.

There are a few positive factors for QLIK:

  • Stronger revenue growth (3 year average) of 39.4 (vs. the industry average of 8.2).
  • Total cash of $195.80M with zero total debt.
  • Strong operating cash flow of $27.69M with a levered free cash flow of $26.85M.

Analysts' Calls

On February 15, 2013, RBC Capital upgraded QLIK from Sector Perform to Outperform with a price target of $32 (up from $23) following Q4 results. Susquehanna also upgraded QLIK from Neutral to Positive following Q4 results.

Overall, analysts have a Buy rating for QLIK with an average price target of $30.18, which represents a 13.7% upside potential based on the current price of $26.55.

In short, while the 3 stocks above have received positive calls from analysts, investors need to focus on the fundamental developments for the companies. Analysts' target prices are for reference only, as these prices can sometimes represent the best case/most optimistic scenario.

Note: All prices are quoted from the closing of February 19, 2013, and all calculations are before fees and expenses. Investors and traders are recommended to do their own due diligence and research before making any trading/investing decisions.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.