Needham sees at least 30% upside potential for these 3 tech stocks
Who brought the charges forward on Wall Street? Technology. After major players in space pushed the market down in September due to overheated valuations, technology is back on top. The rise in technology makes sense. The pandemic has helped accelerate the move towards remote working and teleworking, which in turn is a premium on tech products. From the 5G rollout to improvements in semiconductor chips to the expansion of IoT and smart device functions – technology is ubiquitous and growing rapidly. With that in mind, we reached out to Needham, which lands in the top ten on the TipRanks list of top research firms for inspiration. The company’s analysts highlight three tech stocks that seem particularly compelling, noting that there could be at least 30% upside potential in each. We used the TipRanks database to get the details on these three tech picks and what makes them such compelling opportunities. Silicon Motion (SIMO) Silicon Motion brings extensive experience and high-performance storage solutions into smartphones, PCs , Data centers, and commercial and industrial applications are widespread. After a tough quarter, Needham believes this tech name has a bright future ahead of it. Analyst Rajvindra Gill, who writes for the company, tells his clients that third-quarter revenue will be 8% above its original forecast according to SIMO’s advance notice, including EPS, which also beat its estimate by $ 0.09. What was behind this solid performance? A recovery in client SSDs. In the second quarter, SIMO’s client SSD business, especially the module vendor component, declined as NAND flash vendors allocated NAND capacity from client SSDs to hyperscalers to support the increase in data consumption on the network. In the third quarter, however, the opposite happened. Along with a pause in hyperscale spending, module customers were allocated additional NAND capacity as NAND prices declined quarter on quarter. To that end, Gill believes NAND prices could fall another 5 to 10% quarter over quarter in the fourth quarter. He added, “We expect the drop in NAND prices to further spur SSD customer adoption in the fourth quarter as this market, especially the channel markets, is quite price elastic.” To a lesser extent, a rebound in China Cell Phones and a Sustained Ramp of 5G, Gill said cell phones contributed to SIMO’s strong performance. In addition, the analyst argues that game consoles and next-generation desktop games could further boost SSD demand. Gill points out that based on reports from MSI, the board maker for Nvidia GPUs, the demand for cheaper SSDs for high-end gaming desktop computers is increasing. In response, Gill stated, “This could potentially be related to COVID-19 demand as more people (of all ages) stay home and find more time to play video games. In addition, we expect SIMO to participate in the next generation of game consoles (PS5, Xbox) in the fall. SIMO supplies its PCIe SSD controllers to five out of seven NAND manufacturers that are sold to game consoles. We believe that two out of five SIMOs could be suppliers. “If that weren’t enough, even though laptop penetration rates remain relatively high at 80-90%, Gill believes that SSD mount rates could accelerate and drive up the desktop market for SSDs. Gill stayed with the cops. Together with a buy recommendation, he has a price target of USD 55 for the stock. Investors could pocket a 30% profit if this goal is achieved in the next twelve months. (To see Gill’s track record, click here.) If you turn to the rest of the street, the cops have them on this one. With 4 purchases and a lone hold, the word is on the street that SIMO is a strong buy. At $ 49.60, the average target price implies an upside potential of ~ 18%. (See SIMO stock analysis on TipRanks.) Domo (DOMO) As a business cloud software specialist, Domo supports its customers in integrating data from any source, converting data into live visualizations and expanding BI in apps. With positive momentum as well as new deals, Needham believes now is the time to buy shares. After the company reported impressive results for the second quarter of 2021, 5-star analyst Jack Andrews is right with the bulls. Revenue of $ 51.1 million knocked both his and the consensus estimate out of the water. In addition, subscription revenue, billing and non-GAAP EPS exceeded expectations. “In our view, Domo appears to benefit from tailwinds related to the ongoing pandemic and improved sales flow (e.g., game books and an improving partner ecosystem) as it closed a remarkable number of large deals during the quarter,” said Andrews . According to management, the demand for digitization of business processes and real-time analysis is increasing as a result of the pandemic. More and more customers are also being allocated IT budgets to modernize BI and gather insights from dark data. To that end, DOMO has closed multiple deals worth over $ 100,000 in heavily impacted industries such as fitness and manufacturing. In addition, the company signed a multi-million dollar deal with one of the world’s largest retailers, which started with the first use case of building insights through its analytics stack and now extends to new use cases like a store replenishment application. Andrews also points out that state-level COVID tracking dynamics continue to work in favor of the company as the state of Iowa expanded significantly and extended its contract for a two-year period. With the help of a partner, a seven-digit contract was signed to operate a publicly accessible website to track pandemic funding grants in the early third quarter of fiscal 2021. Additionally, Andrews highlights management’s “encouraging comment” on its cash flow breakeven move, which should “alleviate any remaining financial concerns.” In summary, Andrews stated, “We believe that Domo has created a unique platform geared towards the future needs of business analytics (self-service and scalability) without the exorbitant cost of implementation. As management makes changes in its sales strategy, believe.” We think Domo, which trades at a multiple discount between EV and revenue, can fill the relative valuation gap with its big data software peer group. ”Consistent with his bullish approach, Andrews repeated a buy rating and $ 61 price target Upside at 46%. (To view Andrews’ track record, click here.) When it comes to other Wall Street analysts, opinions are evenly spaced – with 3 buys and 3 holds in the past three months, DOMO gets a consensus rating on one moderate purchase, with an average price of USD 47.17 the average price target an upside potential of 13%. (See Domo stock analysis on TipRanks) Everspin Technologies (MRAM) Last but not least, we have Everspin Technologies, which designs and manufactures discrete magnetoresistive RAM, or magnetoresistive random access memory (MRAM) products, including Toggle MRAM and Spin-Transfer Torque MRAM (STT-MRAM ) Product families. While the company has faced headwinds lately, Needham believes MRAM could be a long-term winner. Corporate analyst Rajvindra Gill, who also covers SIMO, is a serious fan. In line with the broader industry, demand for data centers has weakened which, along with headwinds related to COVID-19, resulted in a third quarter revenue forecast, that missed the mark. It should be noted that STT-MRAM is almost entirely a data center, while Toggle did some data center exposures as Toggle is used in RAID controllers. Thanks to COVID-19, the demand for data centers soared in the first half of 2020, which is a good sign for MRAM. However, there was an increase in the customer base towards the end of the second quarter. “While this increase is partly due to supply chain concerns, we believe the main reason is a potential high point and expected slowdown in demand for data center … However, we view data center inventory digestion as a temporary setback, with a recovery in the fourth quarter, ”commented the analyst. In addition to the good news, MRAM believed that COVID-19 would adversely affect its ability to generate new design gains. Nonetheless, design profits rose 16% in the second quarter compared to the previous quarter, which is more than three times the figure for the same quarter last year. Gill said, “We expect growth to pick up as the market recovers.” The company began mass producing 32MB toggle MRAM products to a growing number of customers and planned to use a variety of packaging – and add temperature classes to expand to new customer applications. If that wasn’t enough, the second key design win for MRAM’s 1Gb STT MRAM product is expected to start production in a persistent storage application for an OEM selling to a data center in the third quarter. Although gross margins were temporarily weak due to the work-from-home environment for Toggle and STT-MRAM, Gill argues that margins for both are likely to recover in the next few quarters, driven by manufacturing efficiency and lower material procurement costs. Everything that MRAM has done has convinced Gill to keep his purchase recommendation. On top of the call, he left the target price at $ 10, suggesting upside potential of 44%. Regarding the consensus distribution, it was calm when it came to other analyst activity. With Gill being the only analyst to post a rating recently, MRAM has a consensus rating of moderate buy. (See MRAM stock analysis on TipRanks.) To find great ideas for trading stocks at attractive valuations, visit TipRanks’ Best Stocks to Buy, ‘a newly launched tool that brings together all of TipRanks’ stock insights. Disclaimer: The opinions expressed in this article are solely those of the analysts presented. The content is intended to be used for informational purposes only. It is very important that you do your own analysis before making any investment.