No one knows what the future will bring. Otherwise we would all be billionaires. But it can’t hurt to try and predict how society will change over the coming years. Luckily, RBC Capital Markets has just released a fascinating report identifying the themes and opportunities it believes will become the norm by 2025. It then identified the stocks most boldly and effectively positioned for this future framework.
These are the tech stocks RBC believes are best positioned to outperform over a seven-year time horizon through 2025. Here we also use TipRanks market data to understand whether these stocks make compelling investing propositions right now according to the Street’s best analysts. These are the analysts with the highest success rates and average return. Let’s take a closer look now:
1. Facebook (NASDAQ:FB)
Social media giant Facebook has had a rough time recently. Following disappointing Q2 earnings results, the stock has plunged almost 20%. But don’t unfriend the social media giant just yet. Word on the Street is that this stock still has a long road ahead. For RBC Capital, FB has a unique advantage. This is the amount of ‘Big Data’ FB can leverage- from over 2 billion plus users on the Facebook platform alone.
The firm writes “We believe FB has made substantial progress in their AI and machine learning efforts, as it takes advantage of its scale and resources… FB leverages AI/ML in text analysis, ad targeting, demographic categorization, and newsfeed sorting, to name a few.”
We can also see that FB has retained its Strong Buy analyst consensus. On July 26, top RBC analyst Mark Mahaney (Profile & Recommendations) reiterated his Buy rating and $225 price target (30% upside potential).
He writes: “This likely constitutes One of the Best Entry Points you can get on FB, in our view.” According to Mahaney, monetization of core FB & Instagram assets still has material upside potential and Messenger & WhatsApp remain unmonetized.
2. ServiceNow (NASDAQ:NOW)
Cloud computing company ServiceNow enables businesses to automate their IT operations. This is a stock that is generating big momentum right now with shares up 35% year-to-date. Looking further forward, RBC Capital writes:
“We think NOW is exposed to large and growing areas of spend in several next-gen areas including automation and machine learning. We also believe a lack of real competition and a highly profitable model sets NOW apart.”
Notably, as you can see below, five-star RBC analyst Matthew Hedberg (Profile & Recommendations) has just reiterated his NOW Buy rating. This comes with a $205 price target (17% upside potential). He calls the stock a Top Pick, writing: “The company remains a favorite for us given best-in-class unit economics, above-average growth, a lack of competition, expanding use cases, and FCF leverage.”
3. Splunk (NASDAQ:SPLK)
Splunk turns machine data into answers. It essentially produces software for searching, monitoring, and analyzing machine-generated big data. This can be for anything from producing actionable business insights to monitoring cybersecurity.
“We think SPLK is well positioned as a hybrid-cloud data management platform that can leverage massive data-sets and harness machine learning trends better than most. Along with growth that can remain at elevated levels, improving margins puts SPLK in a good position in our mind” states RBC Capital.
Short-term, Hedberg sees prices spiking over 30% to $125. He has just ramped up his price target from $117 to $125. The move came on the back of strong earnings results that beat consensus estimates by a wide margin.
“We raise our PT on higher estimates, increased confidence in FY/20 guidance, and peer group multiple expansion” explains Hedberg. Note that the Street-high price target of $145 (from Monness’ Brian White) indicates robust upside potential of 47%.
4. PayPal (NASDAQ:PYPL)
RBC Capital describes PayPal as a “champion of democratized finance around the globe.” Plus, the company is perfectly positioned for the long-term global shift to digital commerce.
“PYPL brings scale and a unique two-sided model (relationships with both consumers and merchants), which allows them to control the entire consumer experience. We believe its growing platform of assets will open up the ~2B people around the world who lack financial services” writes the firm.
The company just reported mixed earnings results for Q2. But the Street is sticking with its ‘Strong Buy’ consensus rating. This includes RBC’s Daniel Perlin (Profile & Recommendations). He has just reiterated his Buy rating and boosted his price target from $87 to $95 (16% upside potential).
According to Perlin, “As PYPL continues to expand its partnership structure with companies, once thought to be competitors, we believe the company’s growth, visibility, and sustainability will support higher valuation multiples.”
5. Micron (NASDAQ:MU)
This stellar chip stock makes for a compelling investing proposition both short and long term. Indeed, prices are up 28% year-to-date. This is with 80% stock gains on a one-year basis. But the best part is that this growth story is far from over.
Five-star RBC Capital analyst Amit Daryanani (Profile & Recommendations) has an $83 price target on the stock. This translates into 57% upside potential from current levels. According to Daryanani, investors don’t have to be so scared of drastic bust-boom cycles for memory stocks.
“Our bullish bias reflects our belief that while we don’t think cycles are done, we do think they are going to be inherently more muted and MU is positioned to generate positive EPS and FCF under most down-cycle scenarios.” The stock’s bullish ‘Strong Buy’ consensus suggests that most analysts feel the same.
And stretching out until 2025, the firm notes that “All roads in IMAGINE 2025 result in data creation. To the extent that transpires we see MU with their DRAM * NAND portfolio as well positioned.”
Find fresh investment ideas with TipRanks Trending Stocks tool
TipRanks’ new Trending Stocks tool takes advantage of our big data capabilities to scan stock recommendations from over 4,800 analysts, giving users the most up-to-date and objective picture of the market while revealing which stocks analysts are really getting excited about.
At the click of a button users can discover the Best-Rated, Most-Rated and Worst-Rated stocks over the last 72 hours, 1 week or 1 month. Looking for investment ideas? This is a great place to start. Go to the Trending Stocks tool now<<
