Technology
Top Strategist Gives Bull Market a Year: Buy Old-School Tech Now
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It has gone on now for over eight years and is one of the longest running bull markets in history. While it only truly became a secular bull market in 2013, when the 1,500 level was finally broken, we have come a huge distance from the lows posted in March of 2009. Despite rates going higher over the next year, one top Wall Street strategist feels the market won’t top out until the third quarter of 2018.
In a recent research note, Barry Bannister, the top-notch strategist from Stifel, says that bull markets rarely end with the level of worry that is present in the current markets. That is backed up by the fact the fund managers have a severe underweighting of U.S. stocks and a high level of cash. He also doesn’t think the S&P 500 tops out until this time next year.
Given that we could have another year to run, and all of Wall Street remains positive on technology, we screened our 24/7 Wall St. research database for reasonable and established technology stocks that have solid upside potential and are rated Buy. We found four that look solid now.
Cisco
This top mega-cap technology stock pick on Wall Street makes good sense for investors seeking tech exposure. Cisco Systems Inc. (NASDAQ: CSCO) designs, manufactures and sells internet protocol (IP) based networking products and services related to the communications and information technology industry worldwide.
It provides switching products, including fixed-configuration and modular switches, and storage products that provide connectivity to end users, workstations, IP phones, wireless access points and servers, as well as next-generation network routing products that interconnect public and private wireline and mobile networks for mobile, data, voice and video applications.
Wall Street likes the company’s stellar balance sheet, and the ability for the company’s gross margins to move close to the 65% range on a consistent basis as it moves away from the legacy products sold for switching and routing. Cisco is another company that could benefit from the tax on overseas money being lowered as it has a whopping $70 billion in cash, 90% of which is overseas.
While Cisco reported fiscal fourth-quarter results that beat or matched most estimates, revenue was down year over year for the seventh consecutive quarter. Despite the decline, Cisco has beaten earnings and sales estimates for every quarter since CEO Chuck Robbins took over from John Chambers two years ago, and most think he has the tech giant headed in the right direction.
Cisco shareholders receive an outstanding 3.61% dividend. UBS has a $37 price objective on the stock. The Wall Street consensus target price is $35.73. The shares closed Friday at $32.37.
Intel
This leader in semiconductors is working hard to scale away from dependence on personal computers, and the Internet of Things is a big part of the shift. Intel Corp. (NASDAQ: INTC) designs, manufactures and sells integrated digital technology platforms worldwide.
The company’s platforms are used in various computing applications comprising notebooks, two-in-one systems, desktops, servers, tablets, smartphones, wireless and wired connectivity products, wearables, retail devices and manufacturing devices, as well as for retail, transportation, industrial, buildings, home use and other market segments.
Intel announced recently, that it has invested more than $1 billion in companies aiming to advance artificial intelligence (AI), including Mighty AI, Data Robot and Lumiata. Intel expects AI to speed up research on cancer, Parkinson’s disease and brain disorders and also to expand the scientific efforts in climate change, space exploration and oceanic research.
Intel investors receive a 2.95% dividend. The JPMorgan price target for the shares is $45. The consensus price objective is $39.99. The shares closed Friday at $37.18.
Microsoft
This is another top old-school tech stock that posted an all-time high this year, and it has a massive $121.79 billion sitting on the balance sheet. Microsoft Inc. (NASDAQ: MSFT) continues to find an increasing amount of support from portfolio managers, who have added the software giant to their holdings at an increasingly faster pace all of this year and last.
Numerous Wall Street analysts feel that Microsoft has become a clear number two in the public or hyper-scale cloud infrastructure market with Azure, which is the company’s cloud computing platform offering. Some have flagged Azure as a solid rival to Amazon’s AWS service. Analysts also maintain that Microsoft is discounting Azure for large enterprises, such that Azure may be cheaper than AWS for larger users. The cloud was big in the recent report.
When the company released solid second-quarter results, the analysts noted this:
Against very high Street expectations, Microsoft posted a modest overall revs beat ($24.7 billion and slightly above our $24.6 billion estimate) and a modest adjusted earnings-per-share beat (GAAP EPS of $0.75 ex an unusual Phone tax benefit, above the $0.71 Street consensus) but the real upside came in the all-important Cloud business, with Azure growth accelerating to 97%, total Cloud revenues growth ramping to 56% (and now 22% of the total mix) and Cloud gross margins up a full 10 points to 52%.
Microsoft shareholders currently receive a 2.11% dividend. The $80 Deutsche Bank price target is in line with the posted consensus price objective of $80.70. The shares closed Friday at $74.41.
24/7 Wall St.Oracle
This top software stock was hit hard recently and offers a very good entry point. Oracle Corp. (NYSE: ORCL) develops, manufactures, markets, sells, hosts and supports database and middleware software, application software, cloud infrastructure, hardware systems and related services worldwide.
The company licenses its Oracle Database software to customers, which is designed to enable reliable and secure storage, retrieval and manipulation of various forms of data. Its Oracle Fusion Middleware software aims to build, deploy, secure, access and integrate business applications, as well as automate their business processes.
The company reported solid results, but some metrics disappointed. Merrill Lynch rates the stock a Buy and noted this after the earnings report:
Shares were lower following stronger than expected August quarter, as second quarter earnings-per-share and revenue guide was in-line with the Street. Cloud revenues guide at 43% year-over year was lower than our 48% year-over-year causing the Street to overestimate SaaS organic growth. Our thesis is intact – Oracle is poised to deliver mid-single digit software revenue growth and double digit EPS growth.
Shareholders are paid a 1.57% dividend. Merrill Lynch has set its price target at $62, while the consensus target is $56.60. The stock closed Friday at $48.16 a share.
These four old-school technology stocks make sense in an extended market. All pay dividends and have established businesses that are unlikely to be threatened in a big way any time soon.
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