The markets are roaring upwards, and leading the trail is the tech-heavy NASDAQ. Our current market cycle began back in February, with the massive, coronavirus-inspired crash, and since bottoming out on March 22 the NASDAQ has risen a whopping 80%. It is truly an impressive performance.
On its own, the rise in tech makes sense. The pandemic helped accelerate a move toward remote work and telecommuting, and this in turn has put a premium on tech products. Telecom, networking, and video streaming systems have been big winners, but not the only ones. Semiconductor chip and laptop manufacturers are seeing gains, as are other equipment makers in the portable tech niche.
Yet, not all tech stocks are trading in the stratosphere. Investors can still find plenty at low prices, and with plenty of upside potential, and the TipRanks database can help. Searching the market for Strong Buy stocks with more than 20% upside brought up three bargain-priced techs – each with plenty of love from Wall Street’s analysts.
Sequans Communications (SQNS)
First on the list is a chipmaker, Sequans Communications. This company works in the fabless chip sector, designing and marketing chips and modules for both 4G and 5G systems, with a heavy focus on IoT applications. Sequans is a leader in the IoT chip market, leveraging seven generations worth of tech developments into its new designs. Sequans’ revenue trended upwards in 1H20, moving from $8.7 million in Q1 to $12.2 million in Q2.
Covering the stock for B. Riley FBR, analyst Craig Ellis sees a solid foundation to support Sequans moving forward.
“While COVID-19 supply chain issues impacting supply and project launch timing as with many in the sector, we believe upcoming catalysts remain compelling even as long-standing stock overhangs clear. First, cash funding concerns are greatly diminished. Second, secular Critical and Massive IoT drivers seem on track, with some accelerated developments due to COVID, such as fixed wireless in the former and distanced monitoring and health care for the latter sometime in C21. Third, we believe Distribution and MCU partnerships are under-appreciated with potential for increasingly material and high margin revenue beginning in C21, and like signs of early progress such as development tool and SDK interest. A new distributor agreement is possible in 2H20. Overall, we believe SQNS is well positioned for rapid long-term growth…”
In line with this optimism, Ellis sets a $12 price target to back his Buy rating. This target implies a 98% upside for the stock in the next 12 months. (To watch Ellis’ track record, click here)
Wall Street’s overall agreement with Ellis is obvious – SQNS has 4 recent Buy reviews, making the Strong Buy analyst consensus rating unanimous. The stock is selling for $5.78, and the $10.63 average price target suggests room for a 75% one-year upside. (See SQNM stock analysis on TipRanks)
Flex, Ltd. (FLEX)
Next up is Flex. The company has market cap of $5.4 billion, and is one of the world’s largest original design manufacturers (ODM) and electronics manufacturing service. The company brings in over $26 billion in annual revenue.
Flex markets its services to the tech industry generally, developing and designing original equipment for the aerospace, cloud, communications, defense, digital, energy, and health industries, among others. Disruptions in supply and delivery chains, as well as lower demand, hit hard at the company during 1H20, due to the coronavirus, but earnings remained positive at 10 cents per share even as revenues slid below $5.4 billion.
Looking ahead to the company’s fiscal Q2 (calendar Q3), management provides guidance for revenue between $5.4 and $5.7 billion, indicating the beginning of a turnaround as economic conditions loosen up and the coronavirus fades. Flex has deep pockets, and that has helped the company to weather the pandemic storm; the company finished Q2 with over $1.93 billion in cash on hand.
5-star analyst Christian Schwab, of Craig-Hallum, describes FLEX as a ‘stock opportunity,’ and writes, “Flex is executing well in a challenging environment… The company continues to face some headwinds due to COVID-19 but currently has all of its production sites up and running globally and has seen a dramatic improvement in its supply chain challenges. The company is seeing … strength for its critical medical products and sustained demand for lifestyle products supporting work/school from home… automotive demand, while still depressed, is also expected to improve sequentially from here.”
With the company’s business looking up, Schwab rates the stock a Buy. His $18 price target indicates confidence in a 66% upside for the coming year. (To watch Schwab’s track record, click here)
Flex’s Strong Buy analyst consensus rating is based on 6 recent reviews, breaking down to 5 Buys and 1 Hold. The stock is selling for $10.86 and the $14.33 average price target suggests an upside potential of 32% this year. (See Flex stock analysis on TipRanks)
Pure Storage, Inc. (PSTG)
Last on today’s list is Pure Storage, another name in the computer chip industry. Pure Storage focuses on memory chips, offering a line of solid-state flash drives for server and database use, desktop virtualization, high performance workloads, and cloud computing. The company saw total revenue of rise to $1.36 billion last year, reflecting the importance of high-end memory chips and solid-state drives in today’s tech environment – and that was before the coronavirus pushed the virtual office space to fore.
Pure Storage’s earnings performance in 1H20, during the corona crisis, was in-line with previous years. The first quarter is typically the company’s strongest of the year, and in Q1 20, PSTG saw earnings turn positive after steep net losses in 2019. Q2 earnings showed a net loss of 8 cents, but that was in-line with the company’s pattern – the second quarter is the weakest. In the event, the Q2 earnings were stronger than the estimates.
Northland analyst Nehal Chokshi, rated 5-stars at TipRanks, rates PSTG an Outperform (i.e. Buy) along with a $23 price target. This figure suggests room for 52% growth over the year ahead. (To watch Chokshi’s track record, click here)
Backing his stance, Chokshi writes, “[We] are not materially changing our FY22 or FY23 revenue or EPS estimates as we gain incremental confidence in our preview contention that PSTG is well aligned with digital transformation initiatives, especially given the evidence of 20+% y/y growth demand in international markets as a proxy for demand when lockdowns in local economies loosen…”
Overall, Pure Storage has a Strong Buy rating from the analyst consensus, based on 9 Buys against just 2 Holds. The stock’s average price target, $19.80, indicates a 30% one-year upside potential from the current trading price of $15.13. (See PSTG stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.