The tech sector has just finished its worst month since the Great Recession, and after glancing at the headlines you might be forgiven for thinking that the sky is falling. After all, Facebook, Amazon, Apple, Microsoft, and Alphabet (parent company of Google) did lose $75 billion dollars at the end of last week. News network CNBC summarized the carnage among the big-name techies: “Tech stocks are coming off their worst month since 2008. The Nasdaq closed October down 9.2 percent, with Amazon and Alphabet leading the decline down 20 percent and 9.7 percent, respectively.”
The news, however, is not all glum for tech sector investors. While the big names lost money, and by their sheer size led the market’s Friday downturn, a number of smaller tech firms showed real strength that same day. We’ll use the TipRanks data to take a look at three of those and explore why they are gaining ground.
Amdocs Limited (DOX – Research Report)
Amdocs is a major global supplier of software and support services for digital communications systems. The greater part of the company’s business is with US customers, although it maintains development and support departments worldwide.
September marked the end of Q4 FY18 for Amdocs, and the results were solid. The company reported revenue of $1.003 million, just ahead of the consensus estimate. North American business accounted for nearly 70% of the total, with the remainder divided between Europe and the rest of the world. Amdocs projects continued success into next year, giving guidance of 1% to 5% revenue growth in FY19.
The result is a stock that shows plenty of promise to weather today’s market climate. DOX added 2% on Friday, on top of 5% since October 29.
Top analyst Shaul Eyal (Track Record & Ratings) of Oppenheimer agrees that Amdocs is primed for growth. After reviewing the Q4 results, he gives DOX a ‘Buy’ rating and comments, “We view DOX as the predominant global player in the billing and customer experience space, with a demonstrated ability to execute large-scale and complex projects. We expect escalating competitive rivalry in the telecom sector to drive demand for DOX’s offerings.” Eyal sets a 15% upside for DOX, with a $77 price target.
The analyst consensus on Amdocs is a ‘Moderate Buy,’ with a 13% upside and a $75 average price target. DOX holds two ‘Buy’ ratings in the last week.
NICE, Ltd. (NICE – Research Report)
Like Amdocs, NICE has also shown strong quarterly results and a share-price beat. The software company is a major player in the fields of workforce optimization, call center analytics and recording, and detection and prevention of digital financial crimes.
NICE’s Q3 results showed a $5 million beat of the estimate, with revenue coming in at $356 million. Earnings per share were $1.12, a five-cent beat of the $1.07 consensus. The company’s diverse income streams are apparent in the revenue breakdown – core product services brought in more than half, but cloud services and support still accounted for almost 50%.
As NICE looks ahead to the end of their current fiscal year, they have bumped up their guidance to $1.45 – $1.466 billion, representing a 0.5 to 1% increase. The upgraded guidance reflects both the quarterly revenue beat and the recently concluded acquisition of Mattersight Corporation, which NICE foresees adding up to $38 million in additional annual revenue.
The strong quarter and the upbeat outlook are making an impact on the NICE’s stock valuation. NICE has jumped nearly 12% since its most recent trough, and now stands at $113 per share. 4.5% of that gain has come since this past Wednesday, November 7, and the stock now stands just below its all-time peak.
Oppenheimer’s Shaul Eyal has also reviewed NICE, and agrees that the outlook is excellent. Eyal goes over the quarterly results and guidance, concluding, “Leading-edge software technologies continue to drive performance for NICE. NICE is leveraging advanced capabilities, streamlined operations and optimized processes to enable critical capabilities for its enterprise customers.” Eyal gives NICE a price target of $120, for a 6% upside potential.
NICE currently holds a ‘Moderate Buy’ rating per the analyst consensus, with an average price target of $123, for a 9% upside.
Twilio, Inc. (TWLO – Research Report)
Twilio is a platform as a service (PaaS), specializing in cloud communications. The company’s services allow users to connect with their customers via text message, telephone, and video.
Of the three stocks in this article, Twilio is in the best position for continued growth. The company posted a 12% jump in share price last week, peaking at the company’s highest ever valuation, after a powerful Q3 report beat expectations. Revenue, at $168.9 million, was up 68% from the previous year, $18.5 million over the consensus estimate. After yesterday’s close, the company’s shares stand at $83.
Ittai Kidron (Track Record & Rating), of Oppenheimer, gives Twilio a ‘Buy’ rating, citing the strong Q3 revenue and specifically noting that TWLO has beaten the estimates for three quarters in a row. He comments, “Twilio reported another impressive quarter with robust metrics across the business, leading to the third straight quarterly guidance increase. We believe investors still underestimate Twilio’s long-term top-line growth potential, best highlighted by its accelerating net dollar expansion rate. We see a long runway for growth, … and maintain our long-term bullish view.”
Kidron’s price target for Twilio is $90 – that target was set on November 6, when the share price stood at $71, and just before TWLO jumped in the markets. Since then, analysts have been setting a higher bar for Twilio, with Brian White (Track Record & Ratings) of Monness putting the price target at $117. White has a record of success with this stock – eleven of his last fourteen ratings on it were profitable, at an average return of 83%.
The analyst consensus on Twilio is a ‘Strong Buy,’ with no ‘Hold’ or ‘Sell’ ratings. The average price target, $95, represents a 3% upside from the current $92 share price, but this low number could be an artifact of TWLO’s sudden jump. In short, the analysts may have been slightly too cautious in setting their price targets, and did not foresee TWLO reaching them in just two days’ trading. Twilio’s Q3 performance propelled it to the price target, now it’s poised to keep gaining.
Enjoy Research Reports on the Stocks in this Article:
Amdocs Limited (DOX) Research Report
NICE, Ltd. (NICE) Research Report
Twilio, Inc. (TWLO) Research Report
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