With earnings reporting for the first quarter just about over, and the second quarter of 2019 well underway, many of the top companies we follow on Wall Street are making some changes to the lists of their high-conviction stock picks for clients. With the market showing some marked volatility not seen in years, it makes sense to examine these lists and make some portfolio changes because the rest of the year could have additional volatility as the political and geopolitical cycle could prove to be a very explosive component.
In a recent research note, the analysts at Merrill Lynch made a big move by adding Corning Inc. (NYSE: GLW | GLW Price Prediction) to the firm’s well respected US 1 list of top-rated stocks to Buy. Corning is a technology pioneer that manufactures LCD glass for flat-panel displays. Telecommunications (30% of sales) produces optical fiber and cable, component hardware and equipment, and photonic components for the telecommunications, CATV and networking industry.
In addition, the company’s Environmental Technologies division (12% of sales) produces specialized glass, glass ceramic and polymer-based products for the automotive industry. Earlier this month, the Merrill team upgraded the shares to a Buy rating and noted this:
We upgrade Corning to a Buy rating as concerns appear overblown, growth prospects are solid, operating leverage a driver in fiscal year 2020 and beyond. Stock is down 6% despite a solid Quarter as investors focus on weaker gross margin guidance for fiscal year 2019, driven by investments in new capacity.
Shareholders are paid a reasonable 2.61% dividend. Merrill has a $40 price target on the shares, which compares to the $36.72 consensus estimate across Wall Street. The stock was last seen trading on Thursday at $30.63 a share.
We also screened the Merrill Lynch US 1 list for other technology companies that make the cut and found four additional outstanding companies for aggressive growth investors to consider.
Dropbox
This had a hot initial public offering last year but has come back to earth and could be offering investors a great entry point. Dropbox Inc. (NYSE: DBX) provides a cloud-based file sharing and collaboration platform and has over 500 million registered users across 180 countries. The company generates revenue by selling cloud file storage and collaboration tools for subscription fees.
The company reported better than expected earnings on Thursday. On a per-share basis, the company said it had a loss of $0.02. Earnings, adjusted for stock option expense and costs related to mergers and acquisitions, were $0.10 per share. The results beat Wall Street expectations. The average estimate of eight analysts surveyed by Zacks Investment Research was for earnings of $0.06 per share.
Dropbox posted revenue of $385.6 million in the period, also surpassing Wall Street forecasts. Seven analysts surveyed by Zacks expected $381.4 million.
The $33 Merrill price target for the stock compares with a $32.38 consensus price objective. The shares were last seen trading at $23.23 apiece.
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Equinix
This is one of the larger capitalization companies in the data center real estate investment trust segment, and it is a solid play for more conservative accounts. Equinix Inc. (NASDAQ: EQIX) provides data center services to protect and connect the information assets for the enterprises, financial services companies, and content and network providers primarily in the Americas, Europe, the Middle East, Africa and the Asia-Pacific.
The company provides colocation services and related offerings, including operations space, storage space, cabinets and power for customers colocation needs; interconnection services, comprising physical cross connect/direct interconnections, Equinix Internet Exchange, Equinix Cloud Exchange, Equinix Metro Connect and Internet connectivity services; and managed IT infrastructure services, including installation of customer equipment and cabling, as well as equipment rebooting and power cycling, card swapping and emergency equipment replacement services.
Equinix investors are paid a 2.06% distribution. The Merrill target price is $540. The consensus price objective was last seen at $508, and the shares closed most recently at $476.59.
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NXP Semiconductors
This is still considered a top play for investors looking for a chip stock with Internet of Things exposure. NXP Semiconductors N.V. (NASDAQ: NXPI) became the fourth largest semiconductor company in the industry after it merged with Freescale in late 2015. It is also important to note that the combined company is the number one supplier in auto semiconductors with a 14% share, as well as the number one supplier in global microcontrollers and a dominant supplier in mobile payments.
NXP continues getting its chips into high-growth areas such as contactless mobile payments, the Internet of Things, mobile phone charging, increased cellular data consumption and LED lighting. Trading at a solid discount to peers, some Wall Street analysts are very positive on the faster earnings growth potential relative to its competition.
NXP beat first-quarter expectations owing to a mix of communications infrastructure and handset sales upside, margin strength and below-the-line benefits. More surprising, the company guided the second quarter not only above-consensus but also above-normal seasonality.
Merrill has a target price of $125. The posted consensus target is much lower at $114.89, and the shares were trading at $100.33 on Thursday’s close.
Salesforce
This top company reported solid fiscal 2019 results as billings drastically improved but has been more volatile recently. 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.
Merrill has set its price target at $200, but the posted consensus figure is lower at $181.50. The stock ended Thursday at $156.31 a share.
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One new addition to the US 1 list and four other stocks of companies that are not only leaders in their technology subsectors but all are offered up at prices that make for enticing entry points. Again, these are best suited for aggressive accounts with higher risk tolerance.
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