Top Analysts Defend Battered Technology Stock Leaders

We screened our 24/7 Wall St. research data base for analysts that are sticking with, and in some cases upping numbers, on tech stocks that either really missed the mark or had headwind glitches that tempered the overall earnings presentation and forward guidance. They are EMC Corp. (NYSE: EMC), Facebook Inc. (NASDAQ: FB), F5 Networks Inc. (NASDAQ: FFIV), Qualcomm Inc. (NASDAQ: QCOM) and Yahoo! Inc. (NASDAQ: YHOO).

EMC

The storage giant missed revenue estimates for the fourth quarter and just squeaked by on the bottom line, beating estimates by a penny. Troubling to some analysts on Wall Street is that EMC is once again going to lay off workers, restructure and take a large charge while doing it.

With the company expected to buy back $3 billion of stock in 2015, and the lower VMW numbers baked into future calculations, now may be a good time to add shares of this outstanding technology stock.

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EMC investors are paid a 1.75% dividend. FBN Securities pointed out Thursday that it is not as worried about currency risks as some on Wall Street, and it kept its rating at Overweight, while lowering the price target from $33 to $30. Shares closed Thursday at $26.40.

Facebook

With some of the most highly anticipated numbers this week, many were expecting a blowout that did not occur. While the numbers were very solid, and in line with most estimates, the analysts at Merrill Lynch said for investors to expect some modest changes to Wall Street revenue estimates, and conceded that the strong dollar could add some pressure this year. The firm is still very positive on the stock and actually raised the 2016 earnings per share estimate by 4%.

Merrill Lynch raised its price target to $92 from $90. The Thomson/First Call consensus price target stands at $88.66. The stock closed Thursday at $78.

F5 Networks

The company actually beat earnings estimates, but the stock was absolutely eviscerated after F5 missed on revenues and gave dreadful forward guidance. Lower-than-expected revenue and earnings forecasts for the second quarter dampened investors’ enthusiasm for the stock in a big way.

The Deutsche Bank team is sticking with the stock and noted the potential for fundamental upside to consensus low double-digit revenue growth. They cited continuing strength in F5’s Next-Generation Security and Service Provider Layer 4/7 business. The analysts also stressed that Cloud Services are a positive new revenue stream.

Deutsche Bank lowered the price target on the stock to $140 from $150, while keeping a rating of Buy on the company. The consensus price target is $128.24. Shares closed Thursday at $113.98.

Qualcomm

Shares were absolutely blasted Thursday when the company reported solid earnings numbers that beat estimates, but lowered its full-year earnings and revenue forecasts, as it lowered the sales outlook for its semiconductor business. Not what Wall Street was expecting.

The team at Cowen though are sticking to their guns and basically say that trading at current levels, the stock is at 10 times earnings, minus cash on the new guidance. They point out that while valuation isn’t always the best guide, for a quality company like Qualcomm with recurring royalty revenues and a strong footprint, patient investors may fare very well.

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Qualcomm investors are paid a 2.68% dividend. Cowen lowered its price target from $79 to $75 but kept the rating of Outperform. Shares closed down big on Thursday at $63.69.

Yahoo

Investors may be getting whiplash after a roller-coaster week. The tech giant jumped big, despite posting so-so earnings, when it announced the tax-free spin-off of the company holdings in e-commerce giant Alibaba. The stock was then hammered as Alibaba was hit hard after posting earnings-per-share numbers that beat estimates, but revenues and, most importantly, growth metrics that disappointed.

While many see the company as strictly a derivative play on the spin-off, others view Yahoo as a potential takeover target after the Alibaba spin-off. While not many analysts rushed to the defense per-se of Yahoo, many remain bullish on the prospects going forward.

SunTrust Robinson Humphrey has a rating of Buy on the stock and a $61 price target. Shares closed down over 6% Thursday at $43.73.

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While there were indeed some disappointments this earnings season, many of the numbers were tremendous, and Apple proved sales can be stellar with the right product. Long-term tech investors with a tolerance for volatility may want to scale in some money to these quality tech leaders.