3 IT Services Tech Stocks to Buy With Solid Upside Potential

By Lee Jackson Published May 4, 10:10AM EDT

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Once again technology is holding its own this year as a sector leader, just slightly trailing consumer discretionary and health care. The question for many investors is where is there value to buy when taking profits or having fresh capital to put to work? The technology team at UBS like three IT services stocks as a solid tech plays with lower potential volatility.

With most earnings for the tech sector in the books for the first quarter, the question is what to own for this quarter and beyond. With the UBS narrowing the firm’s focus to just five services stocks, investors have a much easier list to look at and consider. UBS has just three of the stocks rated at Buy: EPAM Systems Inc. (NYSE: EPAM), Luxoft Holding Inc. (NASDAQ: LXFT) and Travelport Worldwide Ltd. (NYSE: TVPT).

EPAM Systems

This company primarily provides software product development services worldwide. It offers product research, design and prototyping, product development, component design and integration, full life-cycle software testing, product deployment and end-user customization, performance tuning, product support and maintenance, and porting and cross-platform migration.

The stock is one of the three UBS picks in the industry and is in the small cap arena. Many analysts on Wall Street believe that EPAM is one of the top new breed vendors with the largest social, mobility, analytics and cloud exposure, and it could be one of the companies best positioned to generate hyper-growth.

The UBS price target for the stock is $70, and the Thomson/First Call consensus price target is $67.07. Shares closed Friday at $66.79 headed higher early Monday morning.

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Luxoft

This one, like other IT services companies, typically will display multiple expansion when the macro outlook is stable or improving, and a very positive outlook may drive the stock in the second half of 2015. The company provides software development services and IT solutions to multinational corporations, primarily in Western Europe and North America. The company offers software development services, including custom software development and support comprising application software development, software architecture design, performance engineering, optimization and testing.

The company was recently named one of top 10 outsourcing service providers by Information Services Group, a leading technology insights, market intelligence and advisory services company.

The UBS price target of $55 is a little higher than the consensus target of $53.39. Shares closed up over 2% on Friday at $52.88 but showed a bit of uncertainty early Monday.

Travelport Worldwide

Travelport Worldwide provides distribution, technology, payment and other solutions for the $8 trillion global travel and tourism industry. With a presence in over 170 countries, more than 3,400 employees and 2014 net revenue of $2.1 billion, Travelport is comprised of two separate silos that drive earnings at the company.

The company’s Travel Commerce Platform facilitates travel commerce by connecting the world’s leading travel providers with online and offline travel buyers in a proprietary business-to-business (B2B) travel marketplace. In addition, Travelport has leveraged its domain expertise in the travel industry to design a pioneering B2B payment solution that addresses the needs of travel intermediaries to efficiently and securely settle travel transactions.
Through Technology Services, the company provides critical IT services to airlines, such as shopping, ticketing, departure control and other solutions, enabling them to focus on their core business competencies and reduce costs.

Travelport investors are paid a 1.9% dividend. The UBS price target is set at $17, and the consensus target is $18.40. The stock closed Friday at $15.83 per share, and headed higher Monday morning.

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These three leading IT services companies could be poised to have a very solid rest of the year. Any increase in economic growth is only going to help drive earnings, revenues and overall sales.

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.