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Expert Analyst Shaul Eyal Favors These 2 Tech Stocks
Stock Analysis & Ideas

Expert Analyst Shaul Eyal Favors These 2 Tech Stocks

Story Highlights

Do the recent lows witnessed by technology stocks present an attractive entry point? Our expert analyst thinks so.

Despite the massive tech sell-off and irrespective of the macroeconomic scenario, the pace of digitalization and the growing need for cybersecurity will continue to bolster the performance of companies in the technology sector.

The tech-laden Nasdaq 100 (NDX) is down 26.6% year-to-date and some of the individual stocks in the index have lost almost 60% to 70% of their values so far this year. Does this mean we abandon the sector completely? No, in fact, it presents an even better opportunity to differentiate between well-positioned companies and average ones.

In our “Expert Spotlight” today, we will look at the recommendations of five-star analyst Shaul Eyal, who has expertise in covering U.S. listed stocks from the Communications, Security, and Infrastructure Software sectors.

Eyal is a Managing Director and Senior Equity Research analyst at renowned Wall Street firm Cowen & Co. Eyal was also a Managing Director and Senior Analyst at Oppenheimer & Co. for over 22 years, with a prime focus on covering Israeli technology-related equities.

Eyal holds an MBA from Fordham University and an LL.B with honors from Oxford Brookes University. Notably, Eyal has also held the rank of a Lieutenant for five years in the Special Forces of the Israeli Defense Forces.

Eyal’s Rank on TipRanks’ Experts List

According to the TipRanks Star Ranking system, Eyal ranks #8 out of the 7,911 analysts in its universe. Furthermore, out of the 20,283 experts tracked overall, Eyal holds the #15 position.

Remarkably, Eyal has had a success rate of 69% with an average return of 28.1% over the past year. Moreover, his calls have generated an alpha of 14.7% and 8.1% over the S&P 500 (SPX) and the technology sector, respectively, during the same period.

As seen from the majority of his calls, Eyal is highly optimistic about the technology sector, with 81.1% of his recommendations having Buy ratings, while 18.7% have Hold ratings, and a minor 0.2% have a Sell rating.

To date, his most profitable Buy call was on California-based web infrastructure and website security company, Cloudflare Inc. (NET), between the periods of February 14, 2020, and February 14, 2021, which generated a humongous 384.2% return.

Fortinet (NASDAQ: FTNT)

Based out of California, Fortinet offers cybersecurity solutions such as physical firewalls, antivirus software, intrusion prevention systems, and endpoint security components. The company has consistently outperformed Wall Street earnings expectations. FTNT stock has lost 11.2% year-to-date compared to gaining 19.7% over the past year.

Eyal has an impressively bullish call on FTNT stock with a price target of $425, which implies a staggering 618.7% upside potential to current levels. Eyal’s price target is based on 13 times his 2023 revenue estimates.

Other analysts, however, have a cautious view of FTNT stock with a Moderate Buy consensus rating based on 15 Buys and six Holds. The average Fortinet price target of $71.32 implies 20.6% upside potential to current levels.

In a mid-quarter check report, Eyal noted that Fortinet is currently tracking ahead of the consensus revenue/earnings per share (EPS) estimates of $1.025B/$1.09.

This, he believes, is powered by broad-based demand for Fortinet’s network security and cloud solutions with healthy momentum across all geographies. The analyst sees strong demand for FTNT’s mid and high-end appliances from customers seeking higher throughput, lower latency, and a lower total cost of ownership.

Moreover, the analyst believes that Fortinet’s SD-WAN offerings will strengthen its competitive positioning once rival VMware (VMW) gets acquired by Broadcom (AVGO).

Eyal also believes that Fortinet is efficiently managing the ongoing supply chain issues by undertaking steps such as “re-designing products, re-prioritizing component allocations, qualifying additional suppliers, shifting to air freight from ocean freight, and increasing inventory purchase commitments.”

As per Eyal, Fortinet is increasingly seen as the go-to vendor for both digital transformation and on-premise defense hardening, making the company one of the leading hybrid security vendors.

Eyal concluded, “FTNT is executing efficiently into a favorable demand environment, targeting a $138B TAM that is set to expand to $199B by 2026 (10% CAGR). We have confidence in the company’s ability to achieve both its 2022 guidance and its long-term targets.”

Notably, Eyal has given consistent Buy ratings on FTNT stock since 2013 with a success rate of 88% and generated an average return per rating of 50.9%.

Verint Systems (NASDAQ: VRNT)

New York-based Verint Systems sells software and hardware products for customer engagement management and business intelligence. VRNT stock has lost 16.7% year-to-date compared to losing 3.3% over the past year.

Eyal is highly optimistic about VRNT stock with a Buy rating and a $75 price target, which implies 71.1% upside potential to current levels. Eyal’s price target is based on five times his FY24 estimated revenue.

Other Wall Street analysts also have a Strong Buy consensus rating on VRNT stock based on four Buys and one Hold. The average Verint Systems price target of $63.80 implies 45.6% upside potential to current levels.

Eyal was impressed by Verint’s virtual investor day held on June 9. The analyst noted that Verint’s cloud transition is helping to expand margins, improve cash flows, and is tracking ahead of its three-year plan. As per Eyal, Verint’s artificial intelligence (AI) and automation allow improved labor efficiencies and enable clients to more effectively realize return on investment (ROI).

Moreover, Eyal stated that Verint’s One Workforce eliminates silos and automates processes, thereby providing enhanced synergies of previously siloed engagement personnel and tools (e.g., bots).

Lastly, Verint’s new commercial model, Da Vinci application programming interface (API), enables partners to create and bring to market new applications leveraging VRNT’s AI, thus furthering customer stickiness.

According to Eyal, Verint earns higher gross margins (mid 70%) from recurring revenue compared to perpetual customers. As the contribution from recurring mix rises, VRNT’s gross margins should enhance towards the mid 70%s and cashflows should also accelerate.

Interestingly, Eyal has given consistent Buy ratings on VRNT stock since 2010 with a success rate of 65% and generated an average return per rating of 26.4%.

Ending Thoughts

Eyal is highly bullish on cybersecurity and infrastructure software stocks. The two names highlighted by Eyal seem to be well positioned for a massive upward trajectory as the markets and recessionary fears cool off.

Notably, to insulate your corpus funds from the broader market sell off it would likely be relatively safe to follow the convictions of TipRanks’ Top Experts to successfully steer your investment decisions.

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