Deutsche Bank Favors 3 Top Tech Stocks to Buy Before the Market Corrects

By Lee Jackson Updated Jun 3, 11:41AM EDT · Published Jun 3, 10:10AM EDT

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Many investors sense it and can almost feel it. A looming sell-off could be right around the corner, and nobody wants to be holding momentum stocks, because the old Wall Street adage “Stocks go up like an escalator, but down like an elevator” was never more true with momentum stocks. In a new research report, Deutsche Bank highlights three tech stocks that make good sense for investors now.

Three top tech stocks look especially attractive now, and with the market expensive on a trailing earnings basis and yields lifting, the more cautious tech investors are, the better they will fare when the inevitable sell-off comes our way.

Cisco Systems

This stock trades at a very low 13.4 times estimated 2015 earnings. Cisco Systems Inc. (NASDAQ: CSCO) boasts an outstanding 7.44 free cash flow yield. The networking giant also seems to have fought through numerous headwinds, including up and down demand from telecom carriers, weakness in emerging markets and threats to its very lucrative switching business, and it delivered another solid quarter of earnings last week. The company also stands to benefit from a better corporate spending environment in Europe, as well as continued growth here at home.

Cisco recently won an important contract for the Verizon build out of the company’s next-generation 100G metro network. While Cisco’s optical business is small as a part of total revenue, this win is seen by Wall Street as a significant endorsement of the investments Cisco has made into its optics business.

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After 20 year of leading the Silicon Valley giant, John Chambers recently announced that Chuck Robbins will become the next chief executive of the world’s biggest networking equipment company when he steps down as CEO, a move that should keep things going smoothly. The Deutsche Bank team notes that two other senior management employees will be leaving in late July. Many believe this could pave the way for new blood and a fresh direction at Cisco, which was also one of our 10 top stocks to own for the next decade.

Cisco shareholders are paid a 2.88% dividend. The Deutsche Bank price target for the stock is $33, and the Thomson Reuters consensus target is $31.03. Shares closed Tuesday at $29.08.
Infinera

This stock is another solid play for investors in data networking. Infinera Corp. (NASDAQ: INFN) provides Intelligent Transport Networks for network operators, enabling reliable, easy to operate, high-capacity optical networks. Infinera leverages its unique large-scale photonic integrated circuits to deliver innovative optical networking solutions for the most demanding network environments. Intelligent Transport Networks enable carriers, cloud network operators, governments and enterprises to automate, converge and scale their data center, metro, long-haul and subsea optical networks.

The Deutsche Bank team noted the stock outperformance this year to peers and attributed the strength to exposure to faster-growing Web 2.0 and cloud 100G+ optical interconnect markets. They also spent time recently with the chief executive and the chief financial officer at the firm’s headquarters, where the tone from the top was positive and near-term demand trends were solid.

The Deutsche Bank price target is $25, and the consensus target is $24.50. The stock closed most recently at $20.85.

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Infoblox

This stock has been on fire and could be poised to go higher. Infoblox Inc. (NYSE: BLOX) delivers automated network control solutions, the fundamental technology that connects end users, devices and networks. These solutions enable approximately 7,100 enterprises and service providers to transform, secure and scale complex networks.

The company recently unveiled Infoblox Internal Domain Name System for DNS Security, the most comprehensive solution from a single vendor for securing DNS inside enterprise networks. Infoblox Internal DNS Security is a hardened DNS appliance that turns the internal DNS server from a vulnerability into a strength by providing protection against exploitation of DNS for infrastructure attacks, malware, advanced persistent threats and data exfiltration via DNS.

The Deutsche Bank team reports that the April quarter had the largest number of large enterprise new customer additions, in the company’s view. New customers being added is a key leading indicator in the analyst’s view of the company’s overall order book visibility and the fundamental basis for accelerating revenue growth trends, as they move into the next fiscal year.

The Deutsche Bank price target is posted at $32, and the consensus objective is $29.31. The shares close trading on Tuesday at $26.04.

ALSO READ: 4 Chip Stocks That Could Be Huge Internet of Things Winners

The Deutsche Bank recommendations are the right tech stocks in the hottest and most in-demand area of technology. Internet media consumption is up 105% since 2010, while every other media outlet is down. Streaming, security and networks are huge, and they will remain that way for the foreseeable future.

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.