3 Bullish Tech Ideas and 1 With Over 25% Upside

Chris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Value investors could look for a gap between consensus estimates and share price as a starting point for misunderstood companies. In a compilation for technology companies trading well below 1-year target prices, two companies stand out: Jabil Circuit (NYSE: JBL) and NVIDIA (NASDAQ: NVDA).

Jabil has just eight analysts covering the company, which could explain the 27.6% gap below the recent share price. NVIDIA, whose shares rose nearly 3% after reporting quarterly earnings, closed the gap slightly, but still offers 21% in upside:

<table> <tbody> <tr> <td> <p><strong>NAME </strong></p> </td> <td> <p><strong>Gap</strong></p> </td> <td> <p><strong># Analysts</strong></p> </td> <td> <p><strong>1-Yr Target $</strong></p> </td> <td> <p><strong>Recent Price $</strong></p> </td> </tr> <tr> <td> <p>Jabil Circuit</p> </td> <td> <p>27.6%</p> </td> <td> <p>8</p> </td> <td> <p>25.2</p> </td> <td> <p>19.75</p> </td> </tr> <tr> <td> <p><strong>Apple</strong></p> </td> <td> <p>32.0%</p> </td> <td> <p>44</p> </td> <td> <p>615.83</p> </td> <td> <p>466.59</p> </td> </tr> <tr> <td> <p>NVIDIA</p> </td> <td> <p>21.3%</p> </td> <td> <p>20</p> </td> <td> <p>15.44</p> </td> <td> <p>12.73</p> </td> </tr> <tr> <td> <p><strong>Broadcom</strong></p> </td> <td> <p>17.5%</p> </td> <td> <p>36</p> </td> <td> <p>40.61</p> </td> <td> <p>34.57</p> </td> </tr> <tr> <td> <p><strong>Micron Technology</strong></p> </td> <td> <p>15.5%</p> </td> <td> <p>22</p> </td> <td> <p>9.33</p> </td> <td> <p>8.08</p> </td> </tr> </tbody> </table>

Data Source: Bloomberg

1-Year Performance:


<img src="/media/images/user_15008/jblfeb142013_large.jpg" />

Data Source: Yahoo Finance

Are NVIDIA and Jabil the best investments? Let's take a closer look at all of the companies.

Which Companies are Compelling?

To decide which technology stocks to pursue further as an investment, the least-followed companies would interest value investors most. Apple (NASDAQ: AAPL) could be a great investment, since the company trades at single-digit P/Es (excluding cash), pays a small dividend of 2.3%, is well off the $700 peak. A legal battle by a hedge fund manager to force Apple to issue preferred shares illustrates how under-valued shares are at the moment.

The problem with Apple as a compelling investment is that it is highly followed by Wall Street. 

NVIDIA was already mentioned as a compelling investment. The company is being held back by its reliance on the legacy business of PCs. Tegra continues to be an important platform for the chip maker in the mobile space -- 19% of revenue now comes from Tegra. In the quarter, sales for Tegra grew 90% from last year. In the PC sector, sales for graphics cards rose 7% as NVIDIA outperformed AMD.

A challenge remains for NVIDIA: integrating broadband on the app processor is still needed to compete more effectively against the champ, Qualcomm. The integrated chip is expected in the second half of 2013.

Broadcom (NASDAQ: BRCM) has a market cap of nearly $20 billion, which may be too well-noticed for value investors. The average trading volume is 7.41 million shares, which is twice as high as that of Jabil, but below the average trading volume of NVIDIA. Speculation is high that Broadcom will make a chip that has wi-fi and Bluetooth, which would be used in the upcoming Samsung Galaxy S IV. An analyst at RBC thinks Apple could use the 4G modem for LTE-Advanced and TD-SCDMA 3G-based phones in China.

Micron Technology (NASDAQ: MU) is well-above its 52-week low, closing recently above $8. HIS thinks that NAND flash memory sales are forecast to grow this year. The company refinanced $440 million in debt, which is related to funding for Micron’s Elpida acquisition. The problem with investing in Micron is that much of its upside relies on memory pricing. This is hard for individual investors to forecast.

Conclusion: Jabil Most Compelling

Jabil forecast revenue and earnings within consensus estimates. The company sees Q2 revenue of $4.3 billion to $4.5 billion. Earnings of between $0.50 - $0.58 are expected for the quarter. In its last quarter, the company increased revenue by 20% in diversified manufacturing services. Specialized services increased 51%.

Jabil could be a beneficiary of BlackBerry ending its order with Celestica. A solid BlackBerry 10 release could help Jabil report stronger earnings. This would close the gap on the shares, rewarding investors by over 27%.

chrispycrunch has no position in any stocks mentioned. The Motley Fool recommends Apple and NVIDIA. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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