Top IT and Data Stock Picks From Cowen for the Rest of 2014

By Lee Jackson Published Jul 21, 9:15AM EDT

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With the demand for data and content growing exponentially almost every day, the top stocks in the tech sector are looking at a strong second quarter, and maybe even a stronger second half of the year. Investors who are looking to add tech companies, but are reluctant after the strong first half, where technology led all the S&P sectors, up 13.49%, may want to focus on some of these top names.

A new research report from the analysts at Cowen focuses on the stocks in the sector that have flexed their muscle and added capacity in the past to be ready for the current and future increased demand. We screened the research for stocks rated Outperform at the firm.

Akamai Technologies Inc. (NASDAQ: AKAM) has had a solid quarter. While the Cowen team expects them to report earnings above estimates, they do hold open the possibility for light third-quarter guidance. Akamai views its recent Prolexic acquisition as very different but adjacent to its Kona suite and could look at additional network-based security capabilities to address the area between the application and end user; technologies that cover DDoS appliances, app changes, identity management and analytics. Combined with the company’s huge server business, this could make it a top name for investors for the rest of the year and beyond.

The Cowen price target on Akamai Technologies is $68. The Thomson/First Call price target is posted at $65.81. Akamai closed Friday at $59.24 a share.

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CyrusOne Inc. (NASDAQ: CONE) is organized as a real estate investment trust (REIT). The company’s high-performance Texas data centers give customers the flexibility to leverage the most advanced server technology, accommodating 250 watts per square foot and higher, which in turn has enabled CyrusOne to become the leading technology provider for seismic exploration research and development. A surging oil industry has spurred high growth for the company.

Investors are paid a solid 3.5% distribution, which could contain return of principal with the REIT structure. The Cowen price target for the stock is $32, and the consensus target is at $27.25. Shares closed Friday at $25.73.

DuPont Fabros Technology Inc. (NYSE: DFT) is a stock that the Cowen team is very bullish on, and they think it could not only beat estimates but raise 2014 guidance. The analysts also feel the stock has been overlooked by Wall Street and investors. DuPont Fabros is another REIT that leases its data centers to American and international technology companies to house, power and cool the computer servers that support their critical business processes.

Investors in DuPont Fabros are paid sizable 5.3% distribution. Cowen has a $32 price target, and the consensus target is at $28.88. The stock closed Friday at $27.18.

Equinix Inc. (NASDAQ: EQIX) is another top stock rated Outperform at Cowen. It will convert to REIT status as of January 2015. Equinix connects companies directly to their customers and partners in networked data centers through the Equinix interconnection platform. The company announced earlier this year plans to develop a new International Business Exchange data center in Osaka, called OS1, which will be its first data center in the western region of Japan.

The Cowen price target for the stock is $226, and the consensus target is at $222.80. Equinix shares closed trading on Friday at $210.67.

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Interxion Holding N.V. (NYSE: INXN) is a top European play for investors. The company is a leading provider of cloud and carrier-neutral colocation data center services in Europe, serving a wide range of customers through 37 data centers in 11 European countries. Interxion provides uniformly designed, energy-efficient data centers offer customers extensive security and uptime for their mission-critical applications.

The Cowen price objective on Interxion is $30, and the consensus target is posted way below that at $21.46. The stock closed Friday at $27.22 a share.

Rackspace Hosting Inc. (NYSE: RAX) caught Wall Street’s attention in the spring when it said it was looking at strategic alternatives, which could mean a buyout or merger. Cowen feels that the earnings report will be solid, but nobody will really care as Wall Street and investors continue to focus on the strategic alternative news. Rackspace bills itself as the global leader in hybrid cloud and founder of OpenStack, the open-source operating system for the cloud.

The Cowen price target for the stock is posted at a whopping $57, so clearly they are thinking a deal gets done. The consensus target is at $41.32. Rackspace closed Friday at $31.62 a share.

There are many public companies, small and large, that compete in the public cloud space. Investors looking for an exposure to the sector may do very well by staying with the top players in the industry. The deep pockets of these companies will keep growth and innovation on the front burner as the sector continues to expand at a rapid pace.

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About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.