3 Tech Stocks That Could Have Big Earnings and a Bigger 2016

By Lee Jackson Updated Oct 20, 10:02AM EDT · Published Oct 20, 8:25AM EDT

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With technology high on the radar screens of most of the Wall Street firms we cover, the question for investors is where to position portfolios for the final quarter of this year and for 2016. One thing is for sure, chasing 2015 winners may not be the best route, and looking for solid ideas that aren’t overbought could work much better.

A new research note from Stifel highlights three quality technology stocks that make good sense for the rest of this year and may offer aggressive growth investors very solid upside for 2016. All are rated Buy at Stifel.

Micron Technology

This top technology stock has been absolutely mauled this year. Micron Technology Inc. (NASDAQ: MU) trades at a 3.38 price-to-cash-flow figure. Since January the stock is down a massive 50% and over 30% since the end of June.

Some on Wall Street think the company may be one of the companies in talks to buy SanDisk and that Micron could significantly benefit from SanDisk’s technology and portfolio leadership in the NAND flash semiconductor and enterprise flash systems market. The Stifel team noted that the Micron investor relations executive acknowledged there are extensive mergers and acquisitions discussions going on in the chip sector.

Micron’s broad portfolio of high-performance memory technologies, including DRAM, NAND and NOR flash, is the basis for solid state drives (SSDs), modules, multichip packages and other system solutions. The company’s memory chip solutions enable the world’s most innovative computing, consumer, enterprise storage, networking, mobile, embedded and automotive applications.

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Micron and Intel announced recently the availability of their 3D NAND technology, the world’s highest-density flash memory. Flash is the storage technology used inside the lightest laptops, fastest data centers and nearly every cell phone, tablet and mobile device. The collaboration with Intel on the 3D XPoint also creates new opportunities in SSDs. Micron may have the most room to improve in enterprise grade SSD controllers, which include the electronics that bridge the flash memory components to the SSD input/output interfaces.

The Stifel price target for the stock is $23, and the Thomson/First Call consensus target is right in line at $22.52. Shares closed Monday at $19.16.
Microsoft

This top technology stock should not only do fine in the coming rising interest rate environment, but it gives investors some degree of mega-cap tech safety. Microsoft Inc. (NASDAQ: MSFT) stock has gapped up and down this year on earnings, and while the release of the Windows 10 has put some focus back on the software giant, some bugs in the software have cause update issues. Those are reportedly being dealt with.

The recent feedback on Microsoft at a tech conference was very positive, and frequently Azure, which is the company’s cloud computing platform offering, was flagged as a top rival to Amazon’s AWS service. Also noted is that Microsoft is discounting Azure for large enterprises, such that Azure may be cheaper than AWS for larger users. The Stifel analysts believe the company continues to make steady progress with its cloud transition and expect Office 365 and Azure to be solid contributors to top and bottom line for the next several years. While they are only looking for an inline quarter top line, they do see the possibility for upside on the bottom line.

Microsoft investors are paid a very solid 3.02% dividend, and the forward valuation remains very compelling. Stifel upgrades the stock to Buy, with a price objective of $55. The consensus price target is $50.45. The stock closed Monday at $47.62.

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Tableau Software

This had been a red-hot stock but has taken a huge hit since July and is offering aggressive accounts a great entry point. Tableau Software Inc. (NASDAQ: DATA) provides business analytics software products in the United States and internationally. The company offers Tableau Desktop, a self-service analytics environment that empowers people to access and analyze data independently, as well as Tableau Server and Tableau Public, a free cloud-based platform for analyzing and sharing public data. The company’s business intelligence platform with data management and scalability has the security to foster the sharing of data.

The Stifel team notes that they have heard that Tableau 9.0’s Data Prep capabilities are a substantial step forward for the company. They remain convinced that demand for Tableau Server remains quite robust and that third-quarter numbers will be solid, with upside potential to fourth-quarter results.

In addition, the company announced the launch of its Shanghai operations — Tableau (China) — as the company expands in China to better serve customers and partners locally. With 1.3 billion people, a quickly expanding urban economy, and exponential rates of Internet and smartphone penetration, China generates an immense amount of data annually. Tableau can help bring that data to life for corporations seeking to assimilate the huge data input.

The $145 Stifel price target is higher than the consensus price objective of $120.22. Shares ended Monday at $85.52.

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With a mega-cap blue chip and two other very solid companies that have been shoved down in price, the Stifel picks make good sense for aggressive account looking to buy quality technology on sale.

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.