Tech stocks are doing great in 2019. According to the latest data from Fidelity Investments, year to date, tech stocks have surged 30%, beating out real estate stocks (26%), utilities (21%), and communications services stocks (20%), too. Of course, there’s a downside to such outsize performance: It’s getting hard to find good tech stocks that haven’t already gone up — ones that still have the potential to grow.
But “hard” isn’t the same as impossible.
Utilizing TipRanks’ Stock Screener, we recently ran a search for “buy” rated tech stocks on Wall Street, focusing on lesser-known names that haven’t yet run up in price — and having analyst price targets suggesting the potential to grow 30% (or more) over the next 12 months.
Insight Enterprises (NSIT)
Based out of Tempe, Arizona, Insight Enterprises produces information technology hardware, software, and services solutions for companies and government entities around the world. Insight stock has performed well this year — better than average, in fact — yet still sells for a very attractive P/E ratio of just 12 times trailing earnings.
And in a note last month, J.P. Morgan analyst Paul Coster predicted the company’s run isn’t yet done. Calling Insight “a low-risk investment idea for investors that seek exposure to overall growth in IT spending, and who look for leverage from a company that is a serial acquirer in the space, and who want to avoid technology-specific risk,” Coster initiated coverage of the stock with an “overweight” rating. (To watch Coster’s track record, click here)
Insight, argues the analyst, “is an established leader in a very large, fragmented market.” Despite pulling down $7 billion in sales over the past year, Coster notes that the company has captured less than 1% of the $680 billion global IT market, and still has “plenty of opportunity … to grow faster than the market, by gaining share, entering new geographies and verticals, by focusing on growth vectors such as mobility, cloud, AI.” And even if the company just grows its sales at 2% annually over the next three years, he thinks this should translate into 11% annualized earnings growth — plenty to justify a 12x P/E ratio.
Aside from Coster, NSIT has only received one other analyst rating in the last three months. Five-star B.Riley FBR analyst Marc Wiesenberger reiterated a “buy” rating on the stock with a relatively bullish $79 price target. The average price target among these two analysts stands at $73.50, which implies about 32% from current levels. (See NSIT stock analysis on TipRanks)
Cohu, Inc (COHU)
In contrast to Insight’s story of continuing success, semiconductor testing equipment producer Cohu is more a tale of a stock bouncing back — from a 34% slump in share price over the last year.
Cohu, you see, has come upon hard times, lowering guidance last quarter and booking its first loss in five years last year after taking more than $50 million in charges to earnings for restructuring costs. Despite those non-cash charges, though, Cohu is a company still generating plenty of cash — more than $29 million last year in fact.
5-star Craig-Hallum analyst Christian Schwab blames the U.S.-China trade war for much of Cohu’s problems, predicting that a return to growth is only a matter of time. Why?
“The automotive market should see growth from expanding electrification, advanced driver-assistance systems (ADAS), and longer term, autonomous driving,” says Schwab. And “Cohu’s ~70% share in RF power amplifier testing should see growth as phones migrate to 5G” over the next couple of years — with China or without it. Furthermore, while the restructuring charges were a downer, Schwab points out that Cohu has “aggressively right-sized the cost structure” of its business, and with costs under control, profits should return in short order.
Fixing his price target at $20 per share, Schwab thinks Cohu stock should be good for a 40% — or more — profit over the next year.
We can see from TipRanks that Cohu has regained its “Strong Buy” rating. Overall, in the last three months, the stock has received 3 “buy” ratings. Based on these ratings, the average $19.33 price target on COHU translates into upside of over 40% from the current share price. (See COHU stock analysis on TipRanks)
Synchronoss Technologies (SNCR)
Last but not least, we come to tiny, Synchronoss Technologies, a player in all things “Internet of Things.”
Synchronoss stock has taken quite a tumble since missing sales estimates back in August, with its stock falling 37% in just two months. And yet, this steep fall soon caught the eye of 5-star Canaccord analyst Michael Walkley, who initiated coverage of Synchronoss stock with a “buy” rating.
What about this fallen star attracted Walkley’s attention? “Following a tumultuous period under prior management,” says the analyst, “the new management team has spent the last ~1.5 years successfully stabilizing and refocusing the business, driving a return to topline growth, expanding margins, and improving the balance sheet.”
Synchronoss succeeded in cutting costs last year while meeting its revenue targets, and Walkley believes that despite the miss last quarter, the company is “on track to meet or exceed their 2019 guidance” as well.
Profits may be negative at Synchronoss right now, but free cash flow is firmly positive with nearly $46 million produced over the last 12 months. At a price-to-free cash flow ratio of less than 5.5, even the 10% annualized earnings growth rate that analysts on average are predicting could be more than enough to make this stock a winner.
Indeed, with consensus price targets — including Walkley’s — calling for Synchronoss stock to tip the scales at $13 a share within a year, this stock could literally double. (See Synchronoss stock analysis on TipRanks)