Among the hundreds of technology stocks, there are a relative handful of companies that stand out as bellwethers for the entire industry. Some are on the list for historical reasons; others are simply too big and too successful to ignore. Our list includes Apple (NASDAQ: AAPL), Google (NASDAQ: GOOG), Intel (NASDAQ: INTC), Microsoft (NASDAQ: MSFT), Oracle (NASDAQ: ORCL), IBM (NYSE: IBM), Hewlett-Packard (NYSE: HPQ) and Dell (NASDAQ: DELL).
An odd thing about these stocks is that although all are mature companies, three pay no dividend at all — Apple, Google and Dell — and except for Intel and Microsoft, the others pay less than 2%. The no/low dividend practices leave some of these stocks with no choice but to continue to grow their share prices in order to keep investors happy.
All data from Yahoo! Finance, with current prices gathered at about noon today.
Apple has a median target price of $502.50 from 48 brokers. Its recent share price is $387.37, calculating to a potential upside of $115.13, or 29.7%. That’s the highest implied gain of any of these stocks, meaning that analysts are expecting the company’s iPhones and iPads to continue to sell in large numbers at high margins. This has certainly been the case until now, and analysts have raised Apple’s target price by more than 2% in the past four weeks which indicates that they believe the run still has some headroom.
Google has a median target price of $730.00 from 31 brokers. Shares are trading at $615.00, yielding an upside potential of $115, or 18.7%. Google’s target price was raised by about 1% in the past four weeks, but over that time the company’s share price has risen 15%. Google’s share of the internet search market continues to be around 65% and efforts by competitors have really not had much effect on the company’s revenues or profits. If Google’s investment in its Android smartphone operating system — now the leading OS on the market — brings in substantial mobile advertising revenue, that target price will be in the rear-view mirror.
Dell has a median target price of $18.00 from 30 brokers. The shares are trading today at $15.29, which works out to a potential upside of $2.71, or 17.7%. Like Apple and Google, Dell does not pay a dividend, so it has to offer investors share price growth. For the past 12 months, Dell’s shares are up more than 15%. Apple shares are up nearly 29% in the same period, but Apple is positioned as the leader in both smartphones and tablets. Dell has no such claim on the PC market, and even if it did, so what? Margins are shrinking and the company now ranks third in global sales, having lost its second-place position to Lenovo. A lot of things have to go right for Dell to realize its implied upside.
Microsoft has a median target price of $32.00 from 25 brokers. Shares are trading at $26.45, for an implied upside of $5.55, or 21%. Microsoft’s dividend yield is 3%, second highest in this group. The company’s share price has gained just 2.5% in the past 12 months, so that dividend payment needs to be there to keep investors happy. The company is launching a huge push into smartphones through its deal with Nokia Corp. (NYSE: NOK), and while certainly not a bet-the-company kind of endeavor, Microsoft needs to make a good showing here if it wants to get near that target price. The stock is trading today at about 10% below its 52-week high which was set in late January.
Oracle has a median price target of $36.00 from 37 brokers. Shares are trading at $32.66, for an implied upside of $3.34, or 10.2%. Oracle pays a dividend yield of 0.7%, the lowest dividend among the companies in this group that pay dividends. The company’s share price is up nearly 19% in the past 12 months, though, more than any other company here except Apple. Over five years Oracle’s stock price is up 75%, compared to Microsoft’s share price decline of about -10% in the same period. That more than makes up for the paltry dividend, and the upside is looking good too.
Intel has a median price target of $27.00 from 38 brokers. Shares are trading at $25.29, for an implied upside of $1.71, or just 6.8%. Intel pays a dividend yield of 3.4%, however, the highest of these stocks. The stock posted a new 52-week high today of $25.50. If Intel can gain some additional sales in the fast-growing mobile device sector, the target price is easily reachable, and the dividend makes the stock a comfortable, if not spectacular, pick.
IBM has a median target price of $200.00 from 21 brokers. The shares are trading at $188.70, for an implied upside of $11.30, or just 6%, the lowest potential among this group. IBM pays a dividend yield of 1.6%. IBM’s share price has also doubled in five years. The combination of dividend and growth is solid, and certainly sustainable.
Hewlett-Packard has a target price of $30.00 from 26 brokers. Shares are trading at $28.17, for an implied upside of $1.83, or 6.5%. HP pays a dividend of 1.8%. The company’s recent management and strategic changes will take some time for both the company and the markets to sort out. There are plenty of reasons to steer clear of HP stock, and not so many to buy it. The majority analyst opinion on HP is to hold the stock if you already own it. Maybe it can come back from being down nearly -43% from its 52-week high.
For investors looking for a value-oriented play, Intel and IBM look like the better choices. For those willing to take on more risk, Apple and Google lead the pack.
Paul Ausick
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