'A' Is For Apple...Can You Guess What The Rest Of Brian White's S.T.A.R. Picks Are?
Cantor Fitzgerald’s Brian J. White named four IT Hardware and Software stocks as the Top Picks for the second half of 2015. These include Apple Inc. (NASDAQ: AAPL), Splunk Inc (NASDAQ: SPLK), Tableau Software Inc (NYSE: DATA) and Red Hat Inc (NYSE: RHT).
“The combination of a mixed 2Q:15 earnings season and growing macro concerns has created a more volatile market environment this summer but has also provided attractive opportunities, in our view,” White wrote.
Splunk: PT at $90
Big Data trend was still in its initial stages, White said, while adding that Splunk represented “one of the few pure plays for investors.”
Although the company was expected to record revenue growth of 36 percent in CY15, its expanded portfolio as well as increased customer use cases, attractive pricing options and increased overseas penetration were likely to act as catalysts thereafter.
Tableau Software: PT at $162
Tableau had positioned itself as a “must have” Big Data tool for information workers. White added, “As such, we believe the late July sell-off was an overreaction to a strong 2Q:15 print; our 53% sales growth estimate in CY:15 is the fastest in our coverage universe.”
The company appeared poised to achieve attractive growth in 2015, driven by the “momentum around Big Data, the recent introduction of Tableau 9.0, increased market penetration, and international expansion (nearly 25% of 2Q:15 sales),” the report stated.
Apple: PT at $195
Although Apple was in the strongest quarter of this year, its stock had declined by 7 percent so far in 3Q15, White pointed out. iPhone units in the quarter had been “slightly light” as compared to “lofty expectations.” This had begun to weigh on Apple's stock in July, while “a barrage of negative data points out of China over the past month have added more fuel to the fire.”
White believes that competitors would be “unable to keep up with Apple's innovation in the coming years.” Moreover, the upgrade cycle around the larger iPhones was a multiyear event, and the company had highlighted in July that merely 27 percent of the installed iPhone base had upgraded to the iPhone 6/6 Plus.
Red Hat: PT at $90
The increasing shift towards open source innovation was expected to significantly benefit Red Hat in the future.
“Although RHEL remains the dominant contributor of Red Hat's revenue, the Applications Development-related & Other Emerging Technology Offerings (ADOET) has been growing at a much faster rate and represents 60-65% of the company's estimated $67 billion TAM,” White noted.
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