In this article, I will discuss five stocks in the technology sector with excellent potential. I have chosen these stocks because they offer great potential at the price that they are trading. Two of the stocks (CLWR, JDSU) are speculative – there is significant risk but you can reap twice the return. On the other hand, the financial indicators of the three stocks (LLL, ALU, and LSI) are solid and their high growth potential means that they are excellent long term investments.
Clearwire (CLWR) is a wireless broadband services provider in the United States. Clearwire has a market capitalization of almost $3 billion and the average traded volume is Average volume around $13.3 million. The company had a catastrophic year in 2011 but showing good sings of recovery in 2012. The company has had a return rate of over 7% since January.
It is true that the business model of the company has suffered tremendously because of declining margins. Even though the revenues of the company more than doubled last year, it suffered a net loss of 684 million.
The financial indicators of the company are weak, which makes it an incredibly risky investment. However, technical analysis reveals that the company is that support level of the stock is in the range of $1.2 - $1.5 meaning that this is the minimum that the stock can go. The 52-week high of the stock is $6.11 and it is currently trading around $2.
This makes the stock of Clearwire a highly speculative one. It seems that the stock has almost bottomed out, which means that there is possibility that the price of the stock can double over 2012. It is a risky BUY and you should be aware of the risk you are assuming if you go long on the stock especially their high debt load.
L-3 Communications (LLL) is an intelligence and surveillance company that manufactures specialized communications systems and products.
The company has gained a BUY rating from many analysts because of its favorable run recently. The company has announced its plan to reposition that will enable it to achieve better growth. Furthermore, it is in the process of acquiring Kollmorgen Electro-Optical, which will allow it to widen the competitive moat significantly.
LLL has a market capitalization over $7 billion and average trading volume exceeding $1 million. The stock is trading around $70 and the P/E ratio is around 7.
The EPS is nearly $10 and the dividends payout ratio is 0.5. This makes the dividend yield almost 3% which means that LLL is among the few distinguished companies in the sector that has maintained an impressive dividend history.
LLL experienced a growth of almost 6% in 2011 and this combined with the solid financials and good dividend yield makes it a must BUY.
Alcatel-Lucent (ALU) has been a major surprise package. The company left its investor extremely delighted when their reported earnings were much stronger-than-expected.
The company intends to further improve their financial figures by seeking to monetize their extensive portfolio of 29,000 patents. The company will also benefit tremendously by the shift of the industry towards LTE and their own measures of increasing efficiency. The company has cut down fixed costs over the last 3 years by a total amount of €1 billion.
Alcatel-Lucent is confident for 2012 and so are its investors. The company said that it will achieve higher margins and as a result, will have more cash at the end of the year. This expectation is justified when you consider the results of the recent quarter.
The company reported an improving cash flow of €541 million, which was an improvement of 40% over the €360 million amount reported in the previous period.
The stock of ALU is trading around $2 and has hovered between $1 and $6 over the 52-week range. The trailing P/E of the company is around 8, which is highly impressive and means that investors are getting good value at the current price of the stock.
The aspect that makes ALU even more exciting is that they are all set to be awarded a contract by the Spanish company Telefonica to construct a high-speed wireless network throughout the nation. Hence, ALU is ready to conquer to Spain and this means investors are in for a highly profitable ride.
The future looks bright for ALU and its investors - a good BUY.
LSI (LSI) is a major designer, developer, and marketer of high performance networking and storage semiconductors and systems globally.
The company has a market capitalization of around $4.8 billion and its average trading volume is almost $10.6 million. The stock price is around $8 and 52-week price range has been $5 - $8.
LSI earned 50 cents per share in the last fiscal year and its earnings are projected to grow in the future. It is expected that the company will earn around 58 cents per share in the current fiscal year and 73 cents per share in FY2013.
The balance sheet of the company is excellent and 20% of its market cap is in net cash. Analysts expect that the company will experience revenue growth of 17% in the current fiscal year. This is evident from the projected 5 year P/E to growth ratio of 0.90 of the company. This means that the company is excellent in terms of earnings with respect to its price and the overall growth that it is expected to achieve.
The price of around $8 makes the share of LSI an excellent investment – BUY.
JDS Uniphase (JDSU) produces optical products and provides measurement solutions and communication test. The market capitalization of the company is around $3.2 billion and the average trading volume is $6.1 million. The stock of JDSU is considered volatile and has been facing tough times. It dropped around $1 at the start of February, only to rebound and then rally to $13.25. The reason for the intense movement of the stock was the reported earnings for the quarter.
The gross margin and net income of the company dropped and was a warning sign for the investors who began offloading the stock. However, analysts believe that the current share price of JDU is still 16.6% less than its target price. This optimism is the perhaps the major reason for the rise in price of the stock.
There is still a high amount of risk in JDS. The financials are weak and the volatility of the stock is high. Analysts believe that the stock is undervalued and it is possible as the 52-week price range of the stock is $9 - $27. A risky speculation with high return potential – BUY at your own risk.