When analysts lower the target price of companies, value investors could view this as a starting point for under-appreciated investing ideas. Companies that have a worsening outlook and a business model that is broken should be avoided. Conversely, a business whose fortunes are weak right now, but are on the right path of turning itself around should interest investors. If the discount to intrinsic value is large enough, and investors have a time horizon of at least a year or longer, which companies are ones to buy? [Related list: 4 Tech Buys and a Sell from Jim Cramer]
The technology stocks having a lower price target are listed below:
1. Hewlett-Packard Company (HPQ, Earnings, Analysts, Financials): Offers various products, technologies, software, solutions, and services to individual consumers and small- and medium-sized businesses (SMBs), as well as to the government, health, and education sectors worldwide. Market cap at $32.86B, most recent closing price at $16.83.
HPQ continues to be a wait and see. The discount on shares shrunk as its competitor, Dell (DELL), announced a deal that would take Dell private. HP recently re-hired a VP of EDS to be its Head of Enterprise Services. Talk that the company is studying a break-up helped push shares up 24.4% in the last three months. A break-up of the company is a recurring story that is unlikely to happen. HP’s printing and desktop computing business is declining, but HP can turn those units around. A focus on enterprise software sales will also take time.
GLW faced a 2.32% decline in its target price. Corning is healthily growing its sales in gorilla glass, but its shares are being weighed down by weak LCD TV sales and solar panels. Gorilla glass will continue to grow, but until the material is used in greater quantities for larger mobile devices like tablets, Corning shares will remain at a discount.
3. EMC Corporation (EMC, Earnings, Analysts, Financials): Develops, delivers, and supports the information and virtual infrastructure technologies and solutions. Market cap at $51.89B, most recent closing price at $24.63.
EMC has big data/analytic systems that is a segment that will continue to grow. Analysts decreased their target price by 1.94%. They could have been influenced by VMWare (VMW) earnings that missed forecasts. EMC and VMWare are spinning off the “Pivotal Initiative.” This unit provides everything from cloud development to big data projects, a sector within the technology space that is growing.
4. Apple Inc. (AAPL, Earnings, Analysts, Financials): Designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide. Market cap at $450.68B, most recent closing price at $479.93.
AAPL targets were reduced by 1.91%. Shares rebounded over 9% from a 52-week low, trading recently at around $475. Apple has a very healthy business, but reported lower margins last quarter. This is expected, because iPhone 5 and iPad Mini units are ramping up. Over time, margins should improve and excitement for product refreshes by late-2013 should ensure Apple shares will rise.
BRCM is continuing its innovation in mobile chips. A Wi-fi/Bluetooth chip could be used by Samsung in the Galaxy S refresh. When the S4 is released, it will have a Qualcomm (QCOM) processor, along with Broadcom’s chips. In its last quarter, Broadcom earned $0.76 per share on revenue of $2.08 billion. The company forecast gross margins to be unchanged to down 50 basis points (quarter over quarter).
Interactive chart: Use Kapitall's tools to compare changes in average analyst ratings over the past two years.
(List compiled by Chris Lau)
Analyze These Ideas: Getting Started
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Dig Deeper: Access Company Snapshots, Charts, Filings
- Hewlett-Packard Company (HPQ, Chart, Download SEC Filings)
- Corning Inc. (GLW, Chart, Download SEC Filings)
- EMC Corporation (EMC, Chart, Download SEC Filings)
- Apple Inc. (AAPL, Chart, Download SEC Filings)
- Broadcom Corp. (BRCM, Chart, Download SEC Filings)
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