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These 3 Top Tech Stocks Present Strong Buying Opportunity
Stock Analysis & Ideas

These 3 Top Tech Stocks Present Strong Buying Opportunity

The current global scenario is fraught with various uncertainties, which include seemingly endless supply chain pressures, the inflationary environment, regional lockdowns in China, IT staffing issues, raw material cost increases, and the Russian-Ukraine conflict, to name a few.

Likewise, some of the top stocks across major sectors have been hammered due to the tough macro backdrop globally and not due to their own company-specific weaknesses.

For instance, take a look at the technology sector. There is significant demand growth across the industry triggered by secular drivers, especially in the potentially growing cloud and artificial intelligence (AI) space, coupled with the need for digital transformation creating a giant market opportunity.

However, given the tough macro backdrop, it has become extremely difficult for investors to go cherry-pick the best rewarding stocks.

Much to investors’ relief, using the Tipranks Analysts’ Top stocks tool for the technology sector helps them make an insightful investment choice. Let us take a look at the Top 3 among them.

Micron Technology (NASDAQ: MU)

Micron Technology, Inc. is a leading provider of innovative memory and storage solutions globally. It produces computer memory and computer data storage including dynamic random-access memory, flash memory, and USB flash drives.

The company operates through four segments: Compute and Networking Business Unit (CNBU); Mobile Business Unit (MBU); Storage Business Unit (SBU); and Embedded Business Unit (EBU).

Concurrent with the company’s upbeat second-quarter Fiscal 2022  results last week, the company provided an optimistic technology roadmap going forward, which gives Micron a competitive advantage over its peers, who lag MU by several quarters. Micron is expected to provide further details on its Investor Day scheduled for May 12, 2022.

Evercore ISI analyst C J Muse remains bullish about the stock based on his expectations of “incremental ASP and margin tailwinds from the coming DDR5 ramp, eSSD wins in NAND, as well as broader end market catalysts – including rising DC mix, content tailwinds from corp. laptop refresh (despite flattish overall PC units) and strong Auto/Industrial growth.”

Notably, 75% of Micron’s revenue includes long-term agreements versus just 10% five years ago, a trend widely prevalent across the industry. According to the analyst, this gives Micron better visibility, more efficient planning of investments, and reduces business volatility, especially in these uncertain times.

Muse has a price target of $120 on the stock, implying an upside potential of 57.52% to the current levels.

Overall, the Wall Street community is optimistic about the stock with a Strong Buy consensus rating based on 18 Buys and two Holds. Micron’s average price target of $117 implies that the stock has an upside potential of 53.58% from current levels. Meanwhile, MU shares have gained 8% over the past six months but lost 18% over the past year.

Baidu (NASDAQ: BIDU)

Headquartered in Beijing, Baidu, Inc. is a Chinese multinational internet search company, which provides internet-related services, AI and online marketing solutions. It is one of the largest AI and Internet companies in the world.  Last month, Baidu posted better-than-expected Q4 results.

The Chinese government recently expressed support for digital transformation in its public sectors. As a result, city governments are receiving subsidies for a net-zero emissions policy and approvals to raise fresh capital.

This is great news for companies like Baidu leading them towards strong share gains driven by the digital transformation for public sectors, including transportation and smart cities.

Mizuho Securities analyst James Lee notes that Baidu is working in 35 markets on smart transportation, with more than 90% of customers buying projects on a repeat basis.

Baidu remains a top China-based internet pick for Lee based on Baidu’s ongoing relationships with city governments for smart transportation. He further highlights that the total addressable market (TAM) could be even larger than transportation for smart cities, covering many verticals such as energy, utilities, industrials, tourism, and public safety.

The analyst expects Baidu to continue to gain market share over its peers as seen in the last few quarters, and leverage its success into other public sectors as well.

The rest of Wall Street, however, is cautiously optimistic, resulting in a Moderate Buy consensus rating on the stock based on seven Buys, one Hold, and one Sell. The average Baidu price target of $220 implies 56.06% upside potential from current levels. BIDU shares have lost 36.6% over the past year.

Duck Creek Technologies (NASDAQ: DCT)

Duck Creek Technologies is a technology company and one of the leading software as a service (SaaS) providers of core systems for the property and casualty (P&C) insurance industry. Its product portfolio includes distribution management, reinsurance management, digital management, and other services.

According to RBC Capital analyst Rishi Jaluria, the P&C insurance software industry is a duopoly led by two market leaders capturing most of the market share: Duck Creek and Guidewire. The P&C space presents a huge opportunity for both companies as it remains far behind in the digital transformation curve due to the huge costs involved.

Following stronger-than-expected fiscal Q2 results driven by robust performance across all segments last week, the analyst highlighted that Duck Creek has achieved a successful SaaS transition, which began six years ago.

Currently, SaaS accounts for nearly half of Duck Creek’s total revenue (and nearly 80% of its software revenue). Further, 95%+ of new bookings are SaaS, implying that new business from both new and existing customers is almost entirely SaaS.

Jaluria believes that Duck Creek should trade at a premium to the overall SaaS comp group based on “Duck Creek’s higher growth profile, high-quality SaaS revenue stream (very low churn), and unique position as the only pure-play SaaS vendor in the insurance software space.”

Overall, the stock has a Strong Buy consensus rating based on nine Buys and one Hold. The average Duck Creek Technologies price forecast of $28.13 implies 47.74% upside potential from current levels. Shares have lost 57% in the past year, at the time of writing.

Conclusion

While the current macro headwinds and other challenges may remain a drag for tech stocks in the near term, in the long-term these stocks have the potential to be multi-baggers fueled by robust demand and huge growth potential.

In fact, the current dip in the global markets presents an attractive opportunity for investors to gain ownership of these stocks as they trade at a significant discount to their historic valuations.

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To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights. 

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