Despite the recent back-and-forth market rally, the Nasdaq and some of the top technology names have been struggling over the past few months. Inflation worries and rising interest rates have pressured some of the top stocks in the sector. Information technology (IT) plays a massive part in corporate productivity, and many of the top stocks look primed for a nice second half of 2021, and almost all are way off their 52-week highs.
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In a series of recent research reports, the IT team at BofA Securities makes the case that demand is picking up again and that, with the economy returning to life, there is some solid upside potential for some of the analysts’ favorite names. They are very positive on four industry leaders. While all are rated Buy, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Fiserv

This solid fintech play has good upside to the BofA Securities price target. Fiserv Inc. (NASDAQ: FISV) provides financial services technology worldwide.

The company’s First Data segment provides merchant acquiring, e-commerce, mobile commerce and other business solutions; credit card and loan account processing, commercial payments, customer communications, plastics solutions, customer service and other products; and various network solutions and security and risk and fraud management solutions.

The Payments and Industry Products segment offers electronic bill payment and presentment services; internet and mobile banking software and services; account-to-account transfers; person-to-person payment services; debit and credit card processing and services; payments infrastructure services; and other electronic payments software and services.

BofA Securities has a $136 price objective on the shares, while the Wall Street consensus target is $122.32. The final Fiserv stock trade for Tuesday was reported at $115.71  share.

Splunk

This is a top Wall Street pick in its industry. Splunk Inc. (NASDAQ: SPLK) provides a software platform for collecting, storing, indexing, searching and analyzing machine-generated data, such as log files and configuration files, which are prevalent in every type of IT system, device and application.

Splunk technology is potentially applicable and disruptive in several market segments, including IT operations, security and compliance, and business intelligence. These market segments are collectively worth $28 billion today.

Wall Street analysts agree that the company offers the de facto standard for security information and event management. That is an area heavily focused on in the Biden executive order. Splunk also offers orchestration solutions for security operations, a fast emerging category of products.

The research report noted this:

Partners suggest healthy new activity, upsells in the first quarter with the cloud driving customer conversations and good initial observability feedback We expect first quarter cloud annual recurring revenue and total ARR upside to 85% year-over-year and 39%, versus our and the consensus of 82% and 37% . Reaffirm Buy/top pick our price objective with shares trading at 6.3x calendar 2022 revenue, believe risk/reward is attractive

The BofA Securities price target of $180 is lower than the $189.69 consensus target. Splunk stock closed on Tuesday at $118.71.

This top analytics company could be an easy bolt-on for a larger big data company, and it has been a rumored takeover candidate. Teradata Corp. (NYSE: TDC) is one of the global leaders in data warehousing. Its solutions include software, hardware and related business consulting and support services. The company’s focus on business solutions for analytics, coupled with industry-leading technology and architecture expertise, makes it an in-demand service provider.
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The analysts said this in early May:

Teradata reported inline with pre-announcement. All metrics did better than original guidance. Timing of deals, lack of annual recurring revenue raise and weaker second half outlook create an attractive opportunity as the annual outlook is conservative. We model EPS above the high end of guidance (similar to last qtr) and note consensus estimates are moving higher.

The $67 BofA Securities price target is well above the $55 consensus target. Teradata stock closed at $46.56 on Tuesday.

Workday

This is a leader in the cloud software space and a Wall Street favorite. Workday Inc. (NASDAQ: WDAY) provides enterprise cloud applications worldwide. Its applications help its customers to manage critical business functions and optimize their financial and human capital resources.

Its Workday Financial Management application provides functions of general ledger, accounting, accounts payable and receivable, cash and asset management, revenue management and grants management, as well as project and resource management, time and expense tracking, project billing, revenue recognition, financial reporting and analytics.

It also provides Workday Human Capital Management application, which includes human resources management, such as workforce lifecycle and organization management, compensation, absence and employee benefits administration. It also includes global talent management, comprising goal and performance management, succession planning and career and development planning, as well as Skills cloud, a machine-learning-powered universal skills language to help source, utilize, develop and retain talent.

The analysts said this:

Channel feedback suggests improving new deal activity, citing strength in HCM and positive Accounting Center feedback. Believe first quarter bookings and current remaining performance obligations of $1.24 billion (+18% year-over-year;+17% ex-Peakon) and $6.69 billion (+21% y/y) likely versus. base of $1.14b billion and $6.51 billion. Reaffirm as top pick with Buy rating and our price objective representing 12x our calendar year 2022 revenue estimate of $4.982 billion (+18% y/y).

BofA Securities has set a $300 price objective. The $255.84 consensus target for Workday stock compares to Tuesday’s close at $236.57 a share.

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While certainly better suited for aggressive growth investors with a higher risk tolerance, these top stocks offer the best entry points in some time. Given the frothy stock market and potential for a summer pullback, it may make sense to buy partial positions now and scale capital in through the summer months.

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