Needham, the independent investment banking and asset management firm, has had its analysts working overtime lately, releasing a series of reports on what’s hot in today’s stock markets. The research notes are coming out at just the right time – the beginning a new year, and just as the Q4 earnings season is in full swing.
A look at some of Needham’s recommendations may be useful, in finding strong stocks to beef up a portfolio. We’ve pulled three reports from Needham’s top-rated analysts, and looked at the stocks through the TipRanks Stock Comparison tool. The results are interesting, as these three companies show different combinations of strengths.
Vonage Holdings Corporation (VG)
First up on our Needham list is Vonage, a telecom technology company. Vonage’s products allow customers to make and receive phone calls, local and long distance, on an ordinary touch-tone phone, via existing high-speed internet connections. The company’s cloud-based software products are available for both businesses and private customers.
Vonage’s prospects are looking good, after a strong Q4 earnings report. The company reported positive EPS of 6 cents, a welcome change after Q3’s 2-cent per share loss. Revenue grew more than expected, reaching $310 million for the quarter and expanding 2.4% sequentially.
Needham analyst Richard Valera, rated 5-stars by TipRanks, points out the overall quality of Vonage’s products, and the company’s position as a ‘one stop shop’ for UCaaS solutions. He is optimistic about the VG’s future prospects, and writes, “While sales execution issues and a limited international footprint for its natively developed VBC UCaaS product have resulted in below industry growth in its Applications business, we believe the company should be able to turn this around as sales investments over the past year plus start bearing fruit and it builds out its VBC footprint.”
Valera puts a Buy rating on this stock, along with a $13 price target that indicates room for 32% upside growth. (To watch Valera’s track record, click here)
Overall, Vonage’s 9 recent analyst ratings include 7 Buys against just 2 Holds, and add up to a Strong Buy consensus rating. The stock sells for $9.91, and the average price target of $13.69 suggests a strong 38% upside potential. (See Vonage stock analysis at TipRanks)
Advanced Energy Industries (AEIS)
Next on our list is mid-cap player in the energy industry. Advanced Energy is a tech company that designs custom power conversion and measurement & control systems for industrial customers. The company’s products have applications in the data center, manufacturing, semiconductor, and telecom sectors, among others. In fiscal 2019, AEIS saw $718.9 million in total revenues.
The fourth quarter earnings, for calendar 2019, show the company’s solid footing in greater detail. Revenue was up 93% sequentially and 119% year-over-year, to $338.3 million, beating the forecasts by over 8%. EPS was 24% above estimates, at 87 cents. That was a 61% sequential earnings gain, and 19% year-over-year.
Strengthening demand from semiconductor equipment makers pushed the top-line revenue growth, while AEIS’s data center business remained solid. These strong sectors were more than enough to outweigh headwinds in the industrial and telecom segments of the company’s business. AEIS shares are up 39% over the past 12 months, outperforming the broader markets.
Quinn Bolton, another of Needham’s 5-star analysts, is bullish on AEIS, rating the stock a Buy and giving it an $83 price target – for a 23% upside potential.
Supporting his Buy-side stance on the shares, Bolton writes, “Advanced Energy has been one of the fastest growing semiconductor critical subsystems suppliers in the wafer fab equipment (WFE) supply chain. Its semiconductor business tripled through the last WFE upcycle… Its semiconductor business also carries the highest gross margin in the semiconductor equipment supply chain due to the highly technical and mission-critical nature of power subsystems…” (To watch Bolton’s track record, click here)
AEIS shares sell for $67.50, and the stock has an average price target of $81. This yields a 16% upside potential, slightly below Bolton’s view. The 5 recent reviews include 4 Buys and 1 Hold, giving the stock a Strong Buy consensus rating. (See Advanced Energy’s stock analysis at TipRanks)
Camtek, Ltd. (CAMT)
Last on our list is Camtek, a small-cap company optical inspection and metrology business. The company is another equipment supplier to the chip industry; its software solutions enable semiconductor chip makers to improve yield while cutting costs.
Camtek has been benefiting the chip industry’s gains, and revenues were up in Q4. The top line showed $33.2 million in quarterly revenue, beating the estimate by 2.6% and just edging over the year-ago number of $33.17 million. EPS results were slightly mixed, with the 14 cents reported beating the forecast but slipping year-over-year. CAMT shares have gained 31% in the last 6 months.
Analyst Quinn Bolton reviewed this stock for Needham, and was impressed enough to initiate his coverage with a Buy rating. Bolton put a $14 price target on CAMT shares, suggesting an upside potential of 15%
Supporting his stance, Bolton wrote, “With ~60% of revenue derived from advanced packaging applications across logic and memory devices in a normalized market, Camtekis one of the top advanced packaging plays in our SemiCap coverage universe. Advanced packaging is one of the secular growth trendsas classic Moore’s Law slows down and is the new frontier of semiconductor scaling. Camtek is also uniquely positioned in the CMOSimage sensor segment with dominant share, which has seen exceptional growth driven by mobile, automotive, industrial IoT and securityapplications. Camtek has outperformed WFE, the process control equipment segment, as well as its closest peers over the past WFEcycle in 2011-2018. Leveraging its leadership in 3D inspection, significant upside in 2D inspection coupled with its strong customerrelationships, Camtek should continue its strong growth in coming years in our opinion.”
Net net, Camtek’s analyst consensus rating is unanimous – both of the most recent reviews are Buys. The stock is priced at just $12.03, and the average price target is actually more bullish than Bolton’s above. At $15.50, it implies a robust upside of 28%. (See Camtek stock analysis at TipRanks)