Amid the merger-and-acquisition frenzy, I am closely watching the tech sector for the next opportunity to buy into a company before a buyout sends shares soaring. I have three technology buys that could all be attractive acquisition targets for you today. They are F5 Networks (NASDAQ: FFIV), NetApp (NASDAQ: NTAP) and Salesforce.com (NYSE: CRM).
What’s more, each of these high-flying tech stocks has strong sales and earnings, so even if they are not acquired they you will have a very good addition to your portfolio. Let’s look at each of these picks in detail now:
F5 Networks (NASDAQ: FFIV) is on the cutting edge of an emerging trend in business: telecommuting. The company’s application delivery controllers and software programs help make networks run faster and more efficiently. This allows companies to conduct business over great distances. F5 also develops file virtualization, WAN optimization and remote access products that further help customers “decentralize” their businesses.
I travel a lot so I know firsthand the value of a reliable network. The ability to conduct business in real time from even the furthest stretches of the world is becoming a necessity in our modern age. That’s why FFIV’s services are so crucial and, in turn, why its stock is performing so well. F5 Networks works with customers in a variety of industries, including telecommunications, manufacturing, financial services and e-commerce and has some big-name clients on its list, including Blue Cross and Blue Shield of Kansas, Microsoft (NASDAQ: MSFT) and Toshiba America.
In its latest quarter, F5 Networks’s sales rose 45.7% to $230.5 million, compared with $158.2 million in the same quarter a year prior. The company’s earnings also increased during the period to $40.5 million, or 66 cents per share, compared with $22.8 million, or 66 cents per share, in the previous year. The analyst community had been expecting earnings of 59 cents per share on sales of $218.4 million, resulting in 5.5% sales and 11.8% earnings surprises for the company. Looking forward, the company expects earnings of 69 cents per share to 71 cents per share and sales of between $242 million and $247 million. Both of these estimates are significantly higher than previously stated analyst expectations.
NetApp (NASDAQ: NTAP) operates in another field that is becoming increasingly important to companies: data storage and security. The breach of large company databases by hackers in recent years reminds us of the importance of securing our data. One such breach last year at Heartland Payment Systems resulted in the leak of up to 100 million credit card numbers and other personal information. NetApp develops products that help businesses store data securely and prevent such events.
The company’s network-attached storage systems are designed for midsized to large enterprises. These devices can also be employed on Internet Protocol-based storage networks as well. The NearStore line of disk-based devices is designed for backup and archiving specifically. Additionally, the company provides operating system, data management and content delivery software, which it sells directly and through channel partners to customers in the communications, energy, health care, manufacturing and technology sectors. Some of NetApp’s biggest customers you are familiar with:
Boeing (NYSE: BA), Deutsche Telekom (NYSE: DT) and Yahoo! (NASDAQ: YHOO).
In its latest quarter, NetApp’s sales rose 36% year-over-year to $1.14 billion. During the same period, the company’s earnings rose 160% to $141.8 million, or 39 cents per share, compared with $51.7 million, or 15 cents per share, previously. Excluding extraordinary items, the company’s operating earnings were 49 cents per share. This beat analysts’ expectations of 46 cents per share by 6.5%. For the current quarter, the company’s provided earnings guidance of between 35 cents per share and 38 cents per share — or 47 to 50 cents per share excluding extraordinary items — on sales of between $1.16 billion and $1.21 billion.
Salesforce.com (NYSE: CRM) is the third aggressive new buy I have for you this month and it is one of the most exciting. The company develops applications that manage customer information for sales, marketing and customer support. Harnessing data about the personal interests and preferences of customers is incredibly important in our banner-ad-revenue- driven age. Now more than ever, companies need to know what their customers want at that exact moment in order to grab their attention.
Salesforce.com helps companies do this by creating applications that generate sales leads, maintain customer information and track customer interactions. More than 65,000 clients from a variety of industries, including financial services, telecommunications, manufacturing and entertainment, use Salesforce.com’s applications. Interestingly, Salesforce.com has also made its applications available via mobile phone, giving businesses even more timely access to this critical data.
In the second quarter, Salesforce.com’s sales rose 24.8% to $394.4 million from $316.1 million in the same quarter a year earlier. The figure topped analysts’ estimates, which had been for sales of $384.8 million. During the same period, the company’s operating earnings rose to 29 cents per share, beating analysts’ expectations of 27 cents per share by 7.4%. For the third quarter, Saleforce.com provided earnings guidance of 30 to 31 cents per share and it raised its guidance for 2011 to $1.15 to $1.17 per share (from $1.13 to $1.15 per share previously). Its yearly sales expectation also increased from between $1.55 billion and $1.56 billion to $1.6 billion.
As of this writing, Louis Navellier was recommending all three of these stocks in his Blue Chip Growth newsletter.
Top 5 Stocks for the 4th Quarter Surge. Louis Navellier details five stocks set to deliver record earnings this October and jump 30%-50% in the next 90 days as the big money piles in. Get their names online here, including Louis’ buy-below and target prices.
