Top Analyst Says Buy This Fastest-Growing Enterprise Technology Company in History

By Lee Jackson Updated Jan 13, 5:34PM EST · Published Nov 4, 8:20AM EST

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

Top Analyst Says Buy This Fastest-Growing Enterprise Technology Company in History — © Thinkstock

It is one thing when Wall Street analysts are very positive on new technology or innovations in a sector. It is quite another when one of the top analysts on the street proclaims that the enterprise embrace of cloud computing platforms and other public cloud infrastructure architecture and players is the “biggest and most disruptive trend impacting the technology industry today.”

In what can only be described as a new research book, Deutsche Bank’s highly respected software analyst Karl Keirstead and his team do an exhaustive in-depth report on the industry changing effect of the cloud computing and hosting revolution on the technology enterprise world. They maintain, and have a solid thesis to back it up, that many are underestimating how fast this market will grow the public cloud transition.

Deutsche Bank has three top stocks to rated Buy in its report, and the superlatives for one are almost off the charts.

Amazon

This company is the absolute leader in online retail, as well as a dominate player in cloud storage business, and it just crushed earnings recently. Amazon.com Inc. (NASDAQ: AMZN) serves consumers through retail websites that primarily include merchandise and content purchased for resale from vendors and those offered by third-party sellers.

The company also serves developers and enterprises through Amazon Web Services (AWS), which provides computing, storage, database, analytics, applications and deployment services. Deutsche Bank flat out calls AWS “the fastest-growing enterprise technology company in history” and point out that the stock is up a whopping 60% since financials for AWS were included in the first quarter report this year. With huge growth following, the firm concedes that while others have figured out this play, it is by no mean ubiquitous at this point.

ALSO READ: Jefferies Top Large Cap Value Stocks to Buy for This Week

Other Wall Street analysts have noted that Amazon had outstanding unit and revenue growth. They also cite that the online retail giant’s fulfillment advantage over peers may end up being one of the most significant silos in the company’s overall business structure.

The Deutsche Bank price target is raised to $800 from $725. The Thomson/First Call consensus price target is $718.13. The stock closed Tuesday at $625.31.
Microsoft

This top technology stock should not only do fine in the coming rising rate environment, but it gives investors some degree of mega-cap tech safety. Microsoft Inc. (NASDAQ: MSFT) stock has gapped up and down this year on earnings, and while the release of the Windows 10 has put some focus back on the software giant, some bugs in the software have cause update issues, which reportedly were being dealt with.

Deutsche Bank feels 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. Other analysts maintain that Microsoft is discounting Azure for large enterprises, such that Azure may be cheaper than AWS for larger user.

Deutsche Bank believes Microsoft continues to make steady progress with its cloud transition and expects Office 365 and Azure to be solid contributors to top and bottom line for the next several years. While not likely to snag the top slot from Amazon, it could add huge incremental revenue for years to come.

Microsoft investors are paid a very solid 2.65% dividend, and the forward valuation remains very compelling. Deutsche Bank’s price objective is $55, and the consensus price target is $50.45. The stock closed Tuesday at $54.15.

ALSO READ: UBS Makes Big Changes to Equity Focus List for November

Salesforce

This company posted outstanding earnings for the second quarter, and it is one of Wall Street’s favorite large cap growth ideas now. Salesforce.com Inc. (NYSE: CRM) has been the momentum stock trader’s dream over the past few years. Many on Wall Street feel that while the stock trades mostly in line with its fast organic software-as-a-service (SaaS) peer group, which many see as having the largest growth rate in 2015, the company should trade at a premium to the group.

The company posted year-over-year billings growth way above estimates and has seen operating margins expand by 1.7%. Its growing portfolio of enterprise-class solutions have not only enhanced the brand, but helped to achieve access into bigger companies.

Wall Street analysts see substantial billings growth and many already have raised their fiscal 2016 estimates on both revenues and earnings. Importantly, the company’s new analytics products are factored into many 2016 estimates and could provide upside. Salesforce will report third-quarter earnings in the middle of November.

Deutsche Bank points out that Salesforce’s Platform business now generates $1 billion of annual subscription and support revenues, equal to about 16% of Salesforce’s total revenue mix. The Platform segment includes Force.com (enterprise-grade, hosted in Salesforce’s data centers) and Heroku (hosted on AWS, more of an elastic cloud, supports most new programming languages).

While many think that the company’s current growth guidance could be conservative, Salesforce is constantly a part of Wall Street takeover chatter, and that tends to keep short sellers at a distance.

The $90 Deutsche Bank price target is above the consensus target of $81.44. Share closed Tuesday at $78.63.

ALSO READ: 3 Tech Stocks to Own for a Possible End of the Year Rally

While a ton of money has been made in Amazon, Deutsche Bank thinks that there is much more to come in this industry. Due to the restrictive Amazon share price, Microsoft and Cisco remain alternatives for cloud hosting and computing exposure.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.