Technology
Deutsche Bank Very Positive on Cloud and IT Spending: 5 Stocks to Buy Now
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The technology tsunami continues full speed ahead, which is why so many of the top Wall Street firms we cover here at 24/7 Wall St. remain overweight the sector in their asset allocation models for 2018 and beyond. With huge projects like 5G, Internet of Things, edge cloud and next-generation public safety driving spending over the course of the coming months and years, some top companies are poised to benefit big-time.
In a new research report, Deutsche Bank seeks to generate alpha by, as they put it, “Identifying major information technology spending and business model transitions at the early stage of the life cycle.” The firm has five top ideas now. The report noted this:
The IT spending transitions and related ideas that we highlight in this note are yet to be fully discovered in consensus expectations – making our Top Ideas fundamentally interesting and “investable” for both near-term and mid to longer term performance.
Cisco
This top mega-cap technology company recently reported an outstanding quarter. 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.
Deutsche Bank is very positive on the company and said this in the research report:
Cisco is best positioned in our group – based on portfolio competencies such as Edge Computing Nodes, Industrial Grade Switches, Routers, Wireless, Security + Analytics Software Platforms – to capture a new stream of IT spending dollars utilized in the buildout of Edge Clouds. More specifically, we refer to Cisco selling product and services competencies in Edge Cloud Platforms. This is for rapid processing of low-latency data from a diverse range of Internet of Things end-points – i.e. Smartphones, Home Automation, Connected Cars, Smart Building and Manufacturing IT Sensors, etc.
Shareholders receive a 3.16% dividend. The Deutsche Bank target price for the shares is $55, and the Wall Street consensus target is $49.70. The stock closed Friday’s trading at $41.78.
Motorola Solutions
This stock has been on fire and Deutsche Bank feels more upside is possible. Motorola Solutions Inc. (NYSE: MSI) is a provider of communication infrastructure, devices, accessories, software and services. The company operates through two segments.
The Products segment has two product lines: Devices and Systems. The primary customers of the Products segment are government, public safety and first-responder agencies, municipalities and commercial and industrial customers operating private communications networks and manage a mobile workforce.
The Services segment provides a range of service offerings for government, public safety and commercial communication networks. This segment’s product lines include Integration services, Managed & Support services and Integrated Digital Enhanced Network.
The analysts noted this about the company’s prospects:
While the stock has rallied +30% since November, yet to be fully discovered in consensus expectations is the “multi-year” opportunity in HD and Cloud based Video Surveillance – i.e. a new +$11 billion total addressable market that is incremental to the company’s current +$21 billion market opportunity in LMR and LTE Public Safety Systems and Managed Services.
Shareholders receive a 1.72% dividend. Deutsche Bank has a $135 price objective, and the consensus target price is $125.64. The stock closed Friday at $120.77.
Akamai Technologies
This company got hit hard on earnings and is offering a very good entry point. Akamai Technologies Inc. (NASDAQ: AKAM) provides cloud services for delivering, optimizing and securing content and business applications over the internet in the United States and internationally.
The company offers performance and security solutions designed to help websites and business applications operate while offering protection against security threats. It also provides media content delivery solutions that are designed to deliver movies, television shows, live events, games, social media, software downloads and other content on the internet in fixed-line and mobile networks; adaptive delivery solutions for streaming video content; and download delivery solution that offers accelerated distribution for large file downloads, including games, progressive media files, documents and other file-based content.
The analysts like the setup for the shares and noted this:
The company is trading at a reasonable multiple and is likely to be an out of consensus beneficiary during the second half of 2019+ from total addressable market expansion and new growth opportunities in Edge Cloud Services for Internet of Things – i.e. Edge Computing and Security Services, IOT Analytics Processing, HD Video Surveillance Media Delivery, etc.
The $90 Deutsche Bank price target is well above the $79.86 consensus target. Shares closed Friday at $77.32.
Keysight Technologies
This more under-the-radar technology stock looks very interesting. Keysight Technologies Inc. (NASDAQ: KEYS) is a global electronic measurement technology and market leader helping to transform its customers’ measurement experience through innovations in wireless, modular and software solutions. Keysight’s electronic measurement instruments, systems, software and services are used in the design, development, manufacture, installation, deployment and operation of electronic equipment.
This is another solid valuation play, and the analysts noted this:
Of interest to clients is the “relevance” of the company’s Design, Test, and Instrumentation solutions: currently bench and modular hardware centric, and likely to transition to Software centric (Keysight PathWave Platforms, etc) – over the next several years, as 5G Broadband and IOT + Edge Cloud rollouts sequence through the product cycle – i.e. from Prototyping, Validation, and Production at the Wireless and Optical Layers to the Network Switch Router and Application + Security Layers.
Deutsche Bank has set its price target at $66. The consensus target is $61.14, and shares closed Friday at $59.97.
24/7 Wall St.Commscope
This is another of the top ideas at Deutsche Bank. Commscope Holding Co. Inc. (NASDAQ: COMM) is a leading provider of antennas, cabling, connectors and other connectivity equipment for enterprise and service provider customers. The company is a market leader in its three segments: Wireless, Enterprise and Broadband.
The analysts see the stock as another good valuation idea and noted this:
We see Commscope also trading at a discount multiple (~10x P/E on our $2.95 fiscal year 2020 EPS view) as a multi year pure play beneficiary of the buildouts of 5G Small Cells and Metro Cells, along with a Fiber Connectivity attach rate, at major US and rest of world carriers, heading into 2019, and into 2020+.
The Deutsche Bank price target is $40. The consensus target is $34.31, and shares ended Friday at $29.75.
The technology revolution will only continue to grow as consumer and business demand for Internet of Things and beyond continues to manifest. While attractive now, these stocks are only suitable for accounts with a high risk tolerance, as earnings or guidance misses can cause big volatility.
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