Sometimes the best time to buy top stocks of all varieties is when they are out of favor on Wall Street and Main Street. This is especially true in the technology sector as trends and new applications can change so fast. In a new research note, Jefferies is bullish on three top companies that are residing in the woodshed now.

If you think buying tech stocks that are down doesn’t make sense, just talk to people bought shares of Apple in 2009 at $15. All it takes is one change or one innovation, and the tables can turn, and turn fast. The Jefferies team is high on three technology stocks that have the potential for explosive gains when their fortunes turn around.

Hewlett-Packard

This old-school tech stock has been sold off all year as investors feel that the personal computer sales slowdown could continue to hurt earnings. Hewlett-Packard Co. (NYSE: HPQ) stock is down a whopping 25% year to date and trades at a very low 8.2 times 2015 estimated earnings. Some Wall Street analysts feel that weak PC demand could continue to have a negative impact on its revenue and free cash flow. The company again posted so-so earnings recently. Profits declined 13% in the quarter, further promoting a company split in order to reduce costs. HP’s net income dwindled to $900 million from $1 billion in the same quarter last year. Total sales for the company decreased 8% to $25.3 billion.

The company is focused on splitting into two entities, a move that the Jefferies analysts feel will be a very positive catalyst event for the company. One company, to be named Hewlett Packard Enterprise, will focus on selling technology like servers and data center gear to businesses. The other, to be called HP, will sell printers and personal computers. Jefferies feels that the company has among the least downside risk of the large IT hardware companies and suggests investors buy stock before the split.

HP investors are paid a 2.60% dividend. Jefferies has a very solid $40.50 price target for the stock. The Thomson/First Call consensus target is $36.88 Shares closed Friday at $26.54.
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Oracle

This is another mega-cap software company for investors to look at following less the stellar earnings for the second quarter in a row. Oracle Corp. (NYSE: ORCL) stock trades at 15.4 times estimated 2015 earnings and sports a 7.03 free cash flow yield. Combined sales in Oracle’s cloud software, infrastructure and platform-as-a-service businesses were solid, and Jefferies feels that this business has room to grow.

Co-Chief Executive Officer Mark Hurd has maintained that Oracle plans to make almost all of its services available via the Internet by mid-October, as the database-software company changes its business model to fit a new competitive landscape. Around 65% of Oracle’s products are available on the cloud today, and that will climb to 95% by the time the company holds its annual Oracle OpenWorld conference in October.

Jefferies also feels that the company should report decent fiscal first-quarter results as expectations for the company are very modest. However currency headwinds are persistent, and seasonal trends may be a hindrance to current license estimates.

Oracle investors are paid a 1.6% dividend. The Jefferies price target is $50, and the consensus target is at $36.88. Shares closed Friday at $36.38.

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Twitter

The stock was hammered again after second quarter-earnings and user numbers came in below expectations. Twitter Inc. (NASDAQ: TWTR) is either a total value tech buy or caught in a death spiral, depending on who on Wall Street you ask. High multiple valuations, issues with the current search for a new CEO and overall terrible negative market sentiment has trampled the stock and made it a favorite target of short sellers.

The Jefferies team has remained positive on the stock and cite the fact that monetization remains strong, and last quarter revenues were better than some estimates. The problem is the company added only 2 million core monthly active users (MAU), and many do not expect to see meaningful growth in MAUs for a considerable time. That brought the market hammer. The analysts are bullish on long-term users and what they call “engagement improvement.” It is also important to remember that the Google traffic partnership is a catalyst that still lies in front of the stock.

The analysts also cite a positive new deal with Bloomberg with the aim of enhancing financially relevant information on Twitter for Bloomberg Terminal users. Real-time information from Twitter will be incorporated into Bloomberg user workflows, a continuation of Bloomberg’s social media offering. In April 2013, Bloomberg became the first financial information platform to integrate tweets.

The Jefferies price target is a whopping $56, and the consensus target is much lower at $39.29. The stock closed on Friday at $27.96, down over 40% from the high in late April.

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While these stocks are only appropriate for very aggressive growth accounts, they could offer investors big gains once they get things back on track. Those who are willing to be patient and take a shot may see dramatic gains.

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