Deep Dive: Wall Street sees plenty of upside for these downtrodden tech stocks

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Deep Dive

Shares of companies including Micron Technology, Western Digital and Motorola Solutions have fallen this year

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(Editor’s note: The original version of this story included incorrect price-target information in the last table. The table has been corrected.)

http://www.marketwatch.com/

A Micron Technology X100 NVMe solid-state drive. The company’s stock is down 15% in 2020 through May 12, but the consensus price target among analysts polled by FactSet implies 31% upside potential over the next 12 months.


Micron Technology Inc.

It’s easy to say investors should buy low and sell high, and you might think an opportunity to do so has escaped you because of the U.S. stock market’s remarkable recovery from its March lows. But there are still opportunities in the most highly regarded sector.

The information technology sector has been the best performer in the S&P 500 Index this year. Trends including cloud collaboration and software-as-a-service are impervious to the coronavirus lockdown, and even accelerated by it. People who are new to working at home have needed to upgrade computers, peripherals and communications equipment.

But the IT sector includes plenty of stocks that have declined significantly, some of which are expected by analysts to roar over the next 12 months.

The S&P 500
SPX,
+1.15%

hit a 2020 closing low March 23, when it was down 31% for the year. Since then, it has risen 28%, so it is now down 11.2% this year through May 12. (All price changes in this article exclude dividends.)

Of the 11 sectors in the benchmark index, only information technology has risen this year:

S&P 500 sector

Price change – 2020

Price change – 2019

Information Technology

1.9%

48.0%

Health Care

-2.4%

18.7%

Consumer Discretionary

-5.5%

26.2%

Communication Services

-5.8%

30.9%

Consumer Staples

-8.9%

24.0%

Utilities

-14.4%

22.2%

Materials

-17.0%

21.9%

Real Estate

-18.6%

24.9%

Industrials

-25.6%

26.8%

Financials

-31.0%

29.2%

Energy

-38.0%

7.6%

Source: FactSet

The sector’s impressive year-to-date price increase reflects the solid performance of some very large companies (the S&P 500 is weighted by market capitalization). Six of this year’s “tech winners” have market capitalizations of more than $100 billion:

Company

Ticker

Market capitalization ($ millions)

Price change – 2020

Price change – 2019

Nvidia Corp.

NVDA,
+3.22%
191,984

33%

76%

PayPal Holdings Inc.

PYPL,
+0.47%
165,567

30%

29%

Microsoft Corp.

MSFT,
+0.43%
1,384,054

16%

55%

Adobe Inc.

ADBE,
-0.88%
175,906

11%

46%

Salesforce.com Inc.

CRM,
-1.55%
159,682

9%

19%

Apple Inc.

AAPL,
+0.61%
1,349,755

6%

86%

Source: FactSet

Among the 71 stocks in the S&P 500 IT sector, 22 are down at least 15% this year, and analysts polled by FactSet see double-digit upside potential of up to 75% over the next year for 17 of them:

Company

Ticker

Price change – 2020

Price change – 2019

Closing Price – May 12

Consensus price target

Implied 12-month upside potential

DXC Technology Co.

DXC,
+3.34%
-58%

-29%

$15.82

$27.71

75%

Western Digital Corp.

WDC,
+2.77%
-35%

72%

$40.98

$61.82

51%

Alliance Data Systems Corp.

ADS,
+6.26%
-64%

-25%

$40.47

$55.07

36%

Micron Technology Inc.

MU,
+5.05%
-15%

69%

$45.69

$59.92

31%

HP Inc.

HPQ,
+3.20%
-28%

0%

$14.87

$19.18

29%

Hewlett Packard Enterprise Co.

HPE,
+0.99%
-40%

20%

$9.48

$12.03

27%

Motorola Solutions Inc.

MSI,
-0.81%
-19%

40%

$131.23

$161.67

23%

Microchip Technology Inc.

MCHP,
+2.20%
-18%

46%

$85.99

$102.79

20%

NetApp Inc.

NTAP,
+0.91%
-31%

4%

$43.03

$51.35

19%

FleetCor Technologies Inc.

FLT,
+2.96%
-21%

55%

$228.46

$272.22

19%

Corning Inc

GLW,
+1.57%
-30%

-4%

$20.41

$23.78

17%

TE Connectivity Ltd.

TEL,
+1.60%
-25%

27%

$71.41

$82.38

15%

CDW Corp.

CDW,
+1.72%
-29%

76%

$101.98

$116.86

15%

Xerox Holdings Corp.

XRX,
+0.13%
-54%

87%

$16.90

$19.20

14%

Amphenol Corp. Class A

APH,
+1.78%
-22%

34%

$84.27

$94.00

12%

Seagate Technology PLC

STX,
+1.34%
-18%

54%

$48.62

$53.95

11%

Automatic Data Processing Inc.

ADP,
+0.27%
-17%

30%

$141.73

$156.19

10%

Source: FactSet

You can click on the tickers for more about each company.

You will have to scroll the table to see all of the data.

Don’t miss:12 health-care stocks that will be winners because of coronavirus-led trends, according to Jefferies


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Philip van Doorn covers various investment and industry topics. He has previously worked as a senior analyst at TheStreet.com and TheStreet Ratings. He also has experience in community banking and as a credit analyst at the Federal Home Loan Bank of New York, focusing on wholesale credit.

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