Needham Sees at Least 30% Upside Potential for These three Tech Stocks
Out on Wall Street, who has been main the cost ahead? Tech. After the area’s key gamers dragged the market decrease in September attributable to overheated valuations, tech is as soon as once more on the helm.The rise in tech is sensible. The pandemic helped speed up a transfer towards distant work and telecommuting, and this in flip has put a premium on tech merchandise. From the 5G rollout, to enhancements in semiconductor chips, to the enlargement of IoT and sensible system capabilities – tech is in all places, and it’s rising quick.Bearing this in thoughts, we turned to Needham, which lands among the many prime ten on TipRanks’ checklist of Prime Performing Analysis Corporations, for some inspiration. The agency’s analysts spotlight three tech stocks that seem particularly compelling, noting at the least 30% upside potential may very well be in retailer for every.We’ve used the TipRanks database to tug the main points on these three tech picks, to search out out what makes them such compelling alternatives.Silicon Movement (SIMO)Bringing in depth expertise to the desk, Silicon Movement offers high-performance storage options broadly utilized in smartphones, PCs, information facilities and business and industrial purposes. Following a bang-up quarter, Needham believes this tech identify has a shiny future forward.Writing for the agency, analyst Rajvindra Gill tells shoppers that primarily based on SIMO’s preannouncement, Q3 gross sales are set to land 8% above his authentic forecast, with EPS additionally beating his estimate by $0.09.What was behind this strong displaying? A restoration in shopper SSDs. In Q2, SIMO’s shopper SSD enterprise, particularly the module maker part, declined as NAND flash makers allotted NAND capability away from shopper SSDs to hyperscalers, to help the spike in information consumption on the community. Nonetheless, the other occurred in Q3. Together with a pause in hyperscale spending, module prospects had been allotted further NAND capability as NAND pricing declined quarter-over-quarter.To this finish, Gill thinks NAND pricing may decline one other 5-10% quarter-over-quarter in This fall. He added, “We expect the decline in NAND pricing to further stimulate client SSD adoption in Q4 as this market is quiet price elastic, especially the channel markets.”To a lesser extent, a rebound in China handsets together with a continued ramp of 5G handsets contributed to SIMO’s sturdy efficiency, in Gill’s opinion.What’s extra, the analyst argues that next-generation gaming consoles and desktop gaming may additional enhance SSD demand. Gill factors out that primarily based on stories from MSI, the board maker for Nvidia GPUs, demand for cheaper SSDs for higher-end gaming desktop computer systems is on the rise.Expounding on this, Gill acknowledged, “This could be potentially COVID-19 related demand as more people (of all ages) stay home and find more time to play video games. Moreover, we expect SIMO to participate in the next-generation gaming consoles (PS5, Xbox) coming out in the Fall. SIMO is shipping its PCIe SSD controllers into five out seven of the NAND makers sold into the game consoles; we believe two out of five could be SIMO’s suppliers.”If that wasn’t sufficient, regardless that the penetration charges for laptops stay comparatively excessive at 80-90%, Gill believes connect charges for SSDs within the desktop market may speed up, driving upside in CY21.Given the entire above, Gill stayed with the bulls. Together with a Purchase ranking, he retains a $55 price goal on the stock. Traders may very well be pocketing a acquire of 30%, ought to this goal be met within the twelve months forward. (To observe Gill’s observe file, click on right here)Turning to the remainder of the Street, the bulls have it on this one. With four Buys and a lone Maintain, the phrase on the Street is that SIMO is a Robust Purchase. At $49.60, the common price goal implies ~18% upside potential. (See SIMO stock evaluation on TipRanks)Domo (DOMO)As a enterprise cloud software program specialist, Domo helps its prospects combine information from any supply, flip information into reside visualizations and prolong BI into apps. Based mostly on constructive momentum in addition to new offers, Needham thinks that now could be the time to snap up shares.After the corporate reported spectacular fiscal Q2 2021 outcomes, 5-star analyst Jack Andrews stands squarely with the bulls. Income of $51.1 million blew each his and the consensus estimate out of the water. Moreover, subscription income, billings and non-GAAP EPS exceeded his expectations.“In our view, Domo appears to be benefiting from tailwinds related to the ongoing pandemic and improved sales execution (i.e. playbooks and an improving partner ecosystem) as it closed a notable amount of large deals within the quarter,” Andrews defined.In keeping with administration, demand for digitizing enterprise processes and real-time analytics is accelerating because of the pandemic. It’s additionally seeing extra prospects allocate IT budgets to modernizing BI and gathering insights from darkish information. To this finish, DOMO finalized a number of over $100,000 offers in hard-hit industries like health and manufacturing. On prime of this, it closed a multi-million greenback cope with one of many world’s largest retailers that started with the preliminary use case of making insights throughout its analytics stack, however now extends to new use instances resembling an utility for retailer restocking.Andrews additionally factors out that momentum from the state-level COVID monitoring continues to work within the firm’s favor, because the state of Iowa expanded considerably and prolonged its contract by two years. With the assistance of a accomplice, it inked a seven-figure contract to energy a public-facing web site to trace pandemic funding grants in early fiscal Q3 2021.What’s extra, Andrews highlights the “encouraging commentary” from administration on its path to cash movement breakeven, which ought to “alleviate any remaining financial concerns.”To sum all of it up, Andrews acknowledged, “We believe Domo has created a unique platform levered to the future requirements of enterprise analytics (self-service and scalability) without the exorbitant costs of implementation. As management executes changes in its sales strategy, we believe Domo, which trades at an EV/revenue multiple discount, can close the relative valuation gap to its Big Data software peer group.”In step with his optimistic method, Andrews reiterated a Purchase ranking and $61 price goal. This goal places the upside potential at 46%. (To observe Andrews’ observe file, click on right here)With regards to different Wall Street analysts, opinions are break up evenly. With three Buys and three Holds assigned within the final three months, DOMO earns a Reasonable Purchase consensus ranking. Clocking in at $47.17, the common price goal implies 13% upside potential. (See Domo stock evaluation on TipRanks)Everspin Applied sciences (MRAM)Final however not least, now we have Everspin Applied sciences, which develops and manufactures discrete magnetoresistive RAM or magnetoresistive random-access reminiscence (MRAM) merchandise, together with Toggle MRAM and Spin-Switch Torque MRAM (STT-MRAM) product households. Whereas the corporate has confronted headwinds not too long ago, Needham believes that MRAM may very well be a long-term winner.Agency analyst Rajvindra Gill, who additionally covers SIMO, is a severe fan. According to the broader business, information heart demand has been moderating, which coupled with COVID-19-related headwinds, resulted in Q3 gross sales steering that missed the mark.It ought to be famous that STT-MRAM is sort of utterly information heart, whereas Toggle has some information heart publicity since Toggle is utilized in RAID controllers. Moreover, due to COVID-19, there was a surge in information heart demand within the first half of 2020, boding properly for MRAM. Nonetheless, by the tip of Q2, there was a rise in buyer stock.“While this increase is partially due to supply chain concerns, we believe the main reason is a potential peak and expected slowdown in data center demand… However, we view the data center inventory digestion as a temporary setback, with a recovery expected in Q4,” the analyst commented.Including to the excellent news, MRAM thought that COVID-19 would negatively influence its capacity to safe new design wins. That stated, design wins grew by 16% quarter-over-quarter in Q2, which is over 3 times greater than the prior-year quarter. Gill talked about, “We expect growth to re-accelerate as the market recovers.”The corporate kicked off mass manufacturing shipments of 32Mb Toggle MRAM product to a rising set of shoppers, with it planning so as to add completely different package deal and temperature grades to increase to new buyer purposes. If that wasn’t sufficient, the second pivotal design win for MRAM’s 1Gb STT-MRAM product is predicted to begin manufacturing shipments in Q3 “into a persistent memory application for an OEM that sells into data center.”Though gross margins had been quickly delicate for Toggle and STT-MRAM because of the work-from-home atmosphere, Gill argues that within the subsequent few quarters, margins for each are more likely to get better, pushed by manufacturing efficiencies and decrease materials procurement prices.Every part that MRAM has going for it satisfied Gill to keep up his Purchase ranking. Along with the decision, he left the price goal at $10, suggesting 44% upside potential. Trying on the consensus breakdown, it has been quiet on the subject of different analyst exercise. As Gill is the one analyst that has printed a overview not too long ago, MRAM has a Reasonable Purchase consensus ranking. (See MRAM stock evaluation on TipRanks)To search out good concepts for stocks buying and selling at enticing valuations, go to TipRanks’ Finest Stocks to Purchase, a newly launched device that unites all of TipRanks’ fairness insights.Disclaimer: The opinions expressed on this article are solely these of the featured analysts. The content material is meant for use for informational functions solely. It is rather necessary to do your personal evaluation earlier than making any funding.