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Needham Sees at Least 30% Upside Potential for These 3 Tech Stocks
Out on Wall Road, who has been main the cost ahead? Tech. After the house’s key gamers dragged the market decrease in September on account of overheated valuations, tech is as soon as once more on the helm.The rise in tech is smart. 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 good system capabilities – tech is all over the place, and it’s rising quick.Bearing this in thoughts, we turned to Needham, which lands among the many prime ten on TipRanks’ listing of High Performing Analysis Corporations, for some inspiration. The agency’s analysts spotlight three tech shares that seem particularly compelling, noting no less than 30% upside potential could possibly be in retailer for every.We’ve used the TipRanks database to drag the small print on these three tech picks, to seek out out what makes them such compelling alternatives.Silicon Movement (SIMO)Bringing in depth expertise to the desk, Silicon Movement supplies high-performance storage options broadly utilized in smartphones, PCs, information facilities and industrial 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 based mostly 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 stable exhibiting? A restoration in consumer SSDs. In Q2, SIMO’s consumer SSD enterprise, particularly the module maker part, declined as NAND flash makers allotted NAND capability away from consumer SSDs to hyperscalers, to assist the spike in information consumption on the community. Nevertheless, the alternative occurred in Q3. Together with a pause in hyperscale spending, module prospects have been allotted extra 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 autumn. He added, “We count on the decline in NAND pricing to additional stimulate consumer SSD adoption in This autumn as this market is quiet worth elastic, particularly 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 based mostly on reviews 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 said, “This could possibly be doubtlessly COVID-19 associated demand as extra individuals (of all ages) keep residence and discover extra time to play video video games. Furthermore, we count on SIMO to take part within the next-generation gaming consoles (PS5, Xbox) popping out within the Fall. SIMO is delivery its PCIe SSD controllers into 5 out seven of the NAND makers offered into the sport consoles; we consider two out of 5 could possibly be SIMO’s suppliers.”If that wasn’t sufficient, though 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 all the above, Gill stayed with the bulls. Together with a Purchase score, he retains a $55 worth goal on the inventory. Traders could possibly be pocketing a acquire of 30%, ought to this goal be met within the twelve months forward. (To observe Gill’s monitor document, click on right here)Turning to the remainder of the Road, the bulls have it on this one. With 4 Buys and a lone Maintain, the phrase on the Road is that SIMO is a Robust Purchase. At $49.60, the common worth goal implies ~18% upside potential. (See SIMO inventory evaluation on TipRanks)Domo (DOMO)As a enterprise cloud software program specialist, Domo helps its prospects combine information from any supply, flip information into stay visualizations and lengthen BI into apps. Based mostly on optimistic momentum in addition to new offers, Needham thinks that now’s 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 seems to be benefiting from tailwinds associated to the continued pandemic and improved gross sales execution (i.e. playbooks and an bettering associate ecosystem) because it closed a notable quantity of huge offers throughout the quarter,” Andrews defined.Based on 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 reminiscent of 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 associate, 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 money movement breakeven, which ought to “alleviate any remaining monetary issues.”To sum all of it up, Andrews said, “We consider Domo has created a novel platform levered to the longer term necessities of enterprise analytics (self-service and scalability) with out the exorbitant prices of implementation. As administration executes adjustments in its gross sales technique, we consider Domo, which trades at an EV/income a number of low cost, can shut the relative valuation hole to its Massive Knowledge software program peer group.”According to his optimistic strategy, Andrews reiterated a Purchase score and $61 worth goal. This goal places the upside potential at 46%. (To observe Andrews’ monitor document, click on right here)In relation to different Wall Road analysts, opinions are cut up evenly. With 3 Buys and three Holds assigned within the final three months, DOMO earns a Average Purchase consensus score. Clocking in at $47.17, the common worth goal implies 13% upside potential. (See Domo inventory evaluation on TipRanks)Everspin Applied sciences (MRAM)Final however not least, we have now 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 just lately, Needham believes that MRAM could possibly be a long-term winner.Agency analyst Rajvindra Gill, who additionally covers SIMO, is a severe fan. Per the broader trade, information heart demand has been moderating, which coupled with COVID-19-related headwinds, resulted in Q3 gross sales steerage that missed the mark.It must 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 nicely for MRAM. Nevertheless, by the top of Q2, there was a rise in buyer stock.“Whereas this improve is partially on account of provide chain issues, we consider the primary motive is a possible peak and anticipated slowdown in information heart demand… Nevertheless, we view the info heart stock digestion as a brief setback, with a restoration anticipated in This autumn,” the analyst commented.Including to the excellent news, MRAM thought that COVID-19 would negatively impression its capability 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 count on development to re-accelerate because 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 broaden 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 “right into a persistent reminiscence utility for an OEM that sells into information heart.”Though gross margins have been quickly smooth for Toggle and STT-MRAM because of the work-from-home setting, Gill argues that within the subsequent few quarters, margins for each are prone to get better, pushed by manufacturing efficiencies and decrease materials procurement prices.Every thing that MRAM has going for it satisfied Gill to take care of his Purchase score. Along with the decision, he left the value goal at $10, suggesting 44% upside potential. Wanting on the consensus breakdown, it has been quiet relating to different analyst exercise. As Gill is the one analyst that has revealed a assessment just lately, MRAM has a Average Purchase consensus score. (See MRAM inventory evaluation on TipRanks)To search out good concepts for shares buying and selling at enticing valuations, go to TipRanks’ Finest Shares to Purchase, a newly launched instrument 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 vitally necessary to do your individual evaluation earlier than making any funding.
