Well, it finally happened. After years of outstanding growth, Apple Inc. (NASDAQ: AAPL | AAPL Price Prediction) was forced to lower guidance in front of earnings for the first time since 2007. In addition, the company is expected to sell the fewest phones since 2015. The tech giant was battered in Thursday’s trading, and following some soft economic data, the rest of the market followed.
Apple’s revenues from China fell 27% year over year in the fourth quarter, a massive reversal from the 20% growth seen there in fiscal 2018. Economic nationalism and the Chinese economy are seen as the problem, and the results also suggest Apple’s price hike strategy could encounter similar push-back in other regions.
Apple shareholders are not the only investors to get scorched here. The suppliers for the company are also taking a big hit. We decided to screen the Merrill Lynch technology research database for tech stocks that are Buy rated that have little if any exposure to Apple. We found four that look like solid picks for aggressive accounts.
Adobe Systems
This high-profile old-school software company has been posting outstanding earnings. Adobe Systems Inc. (NASDAQ: ADBE) operates in three segments. The Digital Media segment provides tools and solutions that enable individuals, small and medium businesses, and enterprises to create, publish, promote and monetize their digital content. The other segments are Digital Marketing and Print and Publishing.
Top Wall Street analysts see the company benefiting from artificial intelligence, predictive analytics, automation bots, speech recognition and natural language processing and image recognition. Some on Wall Street see earnings per share increasing a solid 30% or more.
Merrill Lynch feels the company deserves a premium multiple to its peers due to Adobe’s strong competitive position in the creative space and above-average growth prospects. The company posted solid results in December, but it still got caught up in the across-the-board fourth-quarter selling.
The Merrill Lynch price target for the shares is $309, and the Wall Street consensus target is $290.04. The shares closed Thursday’s trading at $215.70, down almost 4% on the day.
[nativounit]
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.
The company recently released 400G switches that allow customers to create more powerful networks more cost-effectively and in a fraction of the space. They provide four times the bandwidth and four times the scale of existing switches without using four times the power. And since the new switches are built on Cisco’s leading Nexus portfolio, customers can choose to deploy 400G in the way that best meets their needs. They can be used on their own or in combination with Cisco’s leading security, automation, visibility and analytics software.
Cisco posted solid numbers in November, and the stock has acted well all year long. Toss in the continuation of a massive $25 billion share buyback plan, and investors should be well rewarded going forward.
Cisco shareholders are paid a solid 3.21% dividend. Merrill Lynch has a target price of $53, while the posted consensus target is $52.76. The stock closed at $41.07 a share on Thursday.
[recirclink id=515296]
Microsoft
This top old-school technology stock posted all-time highs last year, and there is a massive $133.6 billion sitting on the company’s 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 this past year.
Many 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, while others 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 third-quarter earnings report, which was outstanding.
Microsoft shareholders currently receive a 1.89% dividend. The $140 Merrill Lynch price target compares with a $125.39 consensus price objective. The shares closed Thursday at $97.40 apiece.
[recirclink id=515040]
Salesforce
This top company reported solid fiscal 2018 results as billings drastically improved, and it is on the Merrill Lynch US 1 list. Salesforce.com Inc. (NYSE: CRM) provides enterprise cloud computing solutions, with a focus on customer relationship management to various businesses and industries worldwide.
It offers enterprise cloud computing applications and platform services, including Sales Cloud that enables companies to store data, monitor leads and progress, forecast opportunities, gain insights through relationship intelligence and collaborate around sales on desktop and mobile devices.
The company also provides Service Cloud, which enables companies to deliver personalized customer service and support, as well as connect their service agents with customers on various devices; and Marketing Cloud, which enables companies to plan, personalize and optimize customer interactions.
Salesforce.com reported fiscal third-quarter results that exceeded expectations across the board. Billings growth of 27% exceeded consensus 2019 forecast and implied new sub-annual contract value grew 20% on an organic basis, versus consensus implied 7% decline. While fiscal fourth-quarter billing guidance came in considerably below Street expectations, it’s not unusual for the company to issue conservative guidance, and field checks indicate a robust deal pipeline for the U.S. business.
The Merrill Lynch price target comes in at $181. The consensus price objective is $171.78, and the shares closed trading most recently at $130.40, down almost 4% for the day.
[wallst_email_signup]
These four top companies with varying degrees of risk all have had a solid 2018 and look poised to continue to perform in 2019. Investors with a long-term view, those that can look past the recent volatility, can own these stocks at very good entry points, given the recent selling. Plus with limited or no exposure to Apple, they can continue forward progress.
Top Gaining Stocks
Top Losing Stocks