Technology

Analyst Lauds 3 Cheaper Tech Stocks That Posted Outstanding Earnings

Lee Jackson

Published: May 26, 2016 8:50 am

Last Updated: January 13, 2020 7:32 am

While technology remains a favorite sector on Wall Street for 2016, many companies posted less than thrilling first quarter numbers. Clearly the two big winners were Facebook Inc. (NASDAQ: FB) and Amazon.com, Inc. (NASDAQ: AMZN), but for many investors, the share prices of the two tech giants are out of their price range, and shares may be better owned in an exchange traded fund (ETF) or a mutual fund. The question becomes what tech stocks that reported good earnings are reasonable for investors with less capital?

One firm that addressed that question is West Coast boutique regional Wedbush. In fact they even had a recent research report focusing on tech stocks to buy after earnings, aside from Facebook and Amazon, both of which they also like. The firm listed five top companies they preferred, and we focus on three of the bigger and more liquid picks.

Activision Blizzard

This company reported very solid first-quarter quarter results and remains a top pick on Wall Street. Activision Blizzard Inc. (NASDAQ: ATVI) develops and publishes online, personal computer (PC), video game console, handheld, mobile and tablet games worldwide.

The company develops and publishes interactive entertainment software products through retail channels or digital downloads and downloadable content to a range of gamers. The company’s Call of Duty franchise, which has propelled earnings for this industry powerhouse for years lead a strong product inventory along with other favorites like Skylanders and Guitar Hero.

The big news last fall was the company’s purchase of Candy Crush saga creator King Digital Entertainment, and most of Wall Street think the buy is an outstanding move for the company and specifically the synergies between the two companies is cited. Many analysts feel that the key to unlocking some monster value is creating and cross-promoting the Activision product inside the King Digital mobile distribution network.

The Wedbush team feels that the company could earn up to $3 per share by 2018 if it can optimize the King Digital advertising opportunities and unlock synergies.

Shareholders are paid a small 0.67% dividend. The analyst raised the price target to $43 from $40, and the Thomson/First Call consensus price target is lower at $42.02. The stock closed most recently at $38.95.

This was a red-hot stock that took a huge hit earlier this year when it reported poor earnings. Tableau Software Inc. (NASDAQ: DATA) provides business analytics software products in the United States, Canada and elsewhere. The company offers Tableau Desktop, a self-service analytics environment that empowers people to access and analyze data independently, and 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 company announced last year 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 company reassured investors when it reported a very solid first-quarter earnings beat and raised the forward guidance. The Wedbush analyst feels that the company can grab a larger chunk of the enterprise business intelligence market, enlarge the market through greenfield adoption by a bigger population of information workers at enterprises and small and medium-size businesses.

The Wedbush price target is a strong $68, and the consensus figure is set at $66.25. The shares closed Wednesday at $49.35.

Cypress Semiconductor

This stock has been cut almost in half in less than a year. Cypress Semiconductor Corp. (NASDAQ: CY) produces high-performance, high-quality solutions for some of the most advanced embedded systems, from automotive, industrial and networking platforms to highly interactive consumer and mobile devices.

The broad, differentiated product portfolio that includes NOR flash memories, F-RAM and SRAM, Traveo microcontrollers, the industry’s only programmable system-on-chip (PSoC) solutions, analog and power management integrated circuits (PMICs), CapSense capacitive touch-sensing controllers and Wireless BLE Bluetooth low-energy and USB connectivity solutions.

The company recently announced an expansion of its automotive portfolio that will help enable manufacturers to bring high-tech automotive systems historically available only in luxury models to mainstream vehicles. Leveraging a wide range of differentiated products that includes microcontrollers (MCUs), PMICs, memories and touch-sensing solutions, the portfolio enables value-added systems for Cypress’s top tier automotive customers.

The company beat first-quarter earnings estimates and raised its forward guidance. In addition the chief executive officer is stepping down, and the company will spend over half a billion for Broadcom’s Internet of Things business. Cypress also repurchased $182.5 million in common stock, under its $450 million repurchase authorization approved two quarters ago.

Cypress shareholders are paid a big 4.33% dividend. The Wedbush price target for the stock is set at $11, and the consensus price target for the stock is posted at $10.75. Shares closed Wednesday at $10.16.

These three top tech ideas posted solid first-quarter numbers and had a positive view of things to come for the rest of 2016. These are smaller and more volatile companies, and they are better suited for more aggressive growth accounts.