It looks like the tech stock rally isn’t over yet. Far from it. “Tech’s become the answer for everything. It’s the play for growth ideas, it’s the play for a solid fundamental growth story, and the play for rising interest rates,” Jim Paulsen, chief investment strategist at the Leuthold Group, told CNBC recently.
He added: “Technology is one of the best sectors against rising yields, not just recently but historically.” That’s good news given the recent bout of Fed tightening. Fed officials raised interest rates by a quarter point for the second time this year and upgraded their median forecast to four total increases in 2018 on June 13.
So with this bullish tech outlook in mind, I set out to find the seven best tech stock ideas for 2018. Here I used TipRanks’ recently revamped Stock Screener to pull up ‘Strong Buy’ tech stocks with big upside potential. You can set the filters to screen for only tech stocks with over 10% upside potential from current levels. Plus the ‘Strong Buy’ analyst consensus rating is based on only the last three months of ratings. I also double checked that these stocks have a ‘Strong Buy’ outlook from analysts and top-rated analysts alike. Let’s take a closer look at these premium tech stock ideas:
Best Tech Stock: Allscripts Healthcare Solutions Inc (MDRX)
I recommend keeping a close eye on this compelling healthcare tech stock. Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) provides physicians, hospitals and healthcare providers with practice management and electronic health record technology. And now five-star Cantor Fitzgerald analyst Steven Halper is out with a very bullish report on this undervalued stock.
“We reiterate our Overweight rating on MDRX shares. The stock offers 43% upside potential to our 12-month price target of $18” states Halper. He is a fan of the company’s recent spout of savvy deal-making: “We continue to believe that Allscripts’ growth outlook has improved after a series of strategic acquisitions. The acquisitions of McKesson’s EIS business and Practice Fusion added a significant amount of recurring revenue.”
Plus MDRX has been “pretty active” in stock repurchases in 2Q18. This is on the back of a whopping $50 million of share buybacks in 1Q18. According to Halper, this share repurchase activity is a “logical indicator of confidence in underlying fundamentals.” In total, five analysts have published Buy ratings on MDRX in the last three months vs 1 Hold rating. These analysts have an average price target of $16.80 on Allscripts (33% upside potential).
Best Tech Stock: Zayo Group (ZAYO)
Welcome to the world of dark fiber. Zayo Group Holdings Inc (NYSE:ZAYO) is the largest provider of dark fiber in the U.S. and it targets large enterprises whose bandwidth needs exceed 10 Gigabit connections. The best part is that Zayo doesn’t have many rivals. Through over 30 acquisitions and high investment spending, the company now boasts a unique bandwidth infrastructure.
“Its dense, scalable infrastructure is difficult to replicate without significant capital expenditures and time-to-market” sums up top Oppenheimer analyst Timothy Horan. This means Zayo is perfectly positioned for strengthening fiber demand. He adds “The company is poised to benefit from continued IP traffic growth, in our view, and fits with our horizontal segmentation thesis of the communications industry.”
Most interestingly, Zayo looks like a sweet acquisition target. Horan again: “The fiber industry should benefit from consolidation, and we see Zayo as a potential target for other shared infrastructure companies.” Overall, Zayo has 100% Street support right now with 6 recent Buy ratings. These analysts have an average price target on Zayo of $42.75 (16% upside potential).
Best Tech Stock: Microsoft (MSFT)
Microsoft Corporation (NASDAQ:MSFT) has a powerful weapon up its sleeve. Gaming. The company’s gaming unit is “moving from Gillette to Netflix” according to top-rated Morgan Stanley analyst Keith Weiss. He has just reiterated his MSFT Buy rating with a bullish $130 price target (30% upside potential). “We think that gaming has historically been largely ignored, misunderstood, and undervalued by analysts and investors” says Weiss. Luckily, he is now here to set the record straight.
Kiss goodbye to the former “razor/razor blade model” centered on the $400 Xbox console. Instead MSFT wants to move towards a much broader subscription gaming service. It will stream games from its Azure cloud platform to all types of devices. “Azure is a key differentiator for Microsoft in the technology required to achieve streaming,” explains Weiss because it “allows for developers to scale and customize gaming infrastructure on a reliable cloud.”
This view was confirmed by the analyst’s recent meeting with Microsoft’s Executive VP of Gaming, Phil Spencer. Weiss notes that MSFT now wants to add five new development studios to substantially boost its first-party gaming content. And ultimately, gaming could “support a path to $50 billion in earnings-before-interest-and-tax and a $1 trillion market cap for Microsoft.”
In total, MSFT — a “Strong Buy” stock — has scored 16 recent buy ratings, with just 1 hold rating and 1 sell rating. Meanwhile, the average analyst price target of $114 indicates 14% upside from the current share price.
Best Tech Stock: LogMeIn (LOGM)
LogMeIn Inc (NASDAQ:LOGM) describes itself as the No. 1 most reliable remote desktop tool. As well as remote services, the company also provides IT management and customer engagement solutions.
“We think mgmt. guidance remains conservative with numbers likely to be walked higher over the course of 2018” stated top Mizuho Securities analyst Abhey Lamba following encouraging first quarter results. “We see ongoing potential for upside over the course of the year on execution initiatives (pricing, cross-sell etc.)” As a result, Lamba advises investors to step on the gas into any weakness.
Lamba has a $145 price target on the stock (34% upside potential). With five recent buy ratings, LOGM is a top stock pick as far as the Street is concerned. We can also see that analysts are predicting big upside potential of 28% from the current share price.
Best Tech Stock: InterXion (INXN)
InterXion Holding NV (NYSE:INXN) is a stellar tech idea for your portfolio right now. Unlike other stocks, INXN has more of a Europe focus. This Dutch-based company is the leading provider of colocation data center services across Europe, supporting 1600+ customers in over 40 data centers.
Crucially, we can see that INXN reported very strong results for the first quarter. This prompted top Oppenheimer analyst Timothy Horan to nudge his price target from $68 to $70 (9% upside potential). “INXN saw strong bookings from leading cloud providers who are adding nodes to their footprint to meet demand for cloud services. Bookings were strong across all its geographic footprint,” writes Horan. Revenue was up by a robust 17% year-over-year.
Looking forward, the future also appears very bright. INXN has just announced 38K square meters of new capacity in the last six months — a capacity increase of 30%. The new space will be open in two years across 11 countries. As a result: “INXN will grow revenues/adjusted EBITDA in the low- to mid-double digits in the next two to three years, driven by strong volumes (on positive secular trends), pricing power (low single-digit annual increases) and expanding margins.”
In total, INXN has received only Buy ratings in the last three months. We can see that the average analyst price target comes out at $71.75 (11% upside potential).
Best Tech Stock: EPAM Systems (EPAM)
“Wham Bam EPAM,” writes five-star Cantor Fitzgerald analyst Joseph Foresi. He is a big fan of this leading software engineering company and has just ramped up his price target from $130 to $139. “We value EPAM at a premium to the traditional peer group, due to its high revenue growth rate, which is well above the industry average.”
Indeed, the company is consistently reporting results way above expectations. EPAM Systems Inc (NYSE:EPAM) has now beat adjusted earnings-per-share street estimates in Q1 2018 for the third period in a row. Revenue for Q1 2018 was $424.1 million, up 6.2% quarter-over-quarter and 30.6% YoY. “Growth was broad based and very strong in financial services” comments Foresi. For this quarter, 2Q18 revenue guidance is for “at least” $445 mn (vs. consensus of $440 mn), or at least 28% growth.
“We believe the company is well positioned at the heart of the Digital movement to address the outsourcing needs of the European market and to mine revenues from its current customer base,” states Foresi in his investment thesis. Bear in mind, this analyst has a very impressive track record. Our data ranks him in the Top 10 out of over 4,800 tracked analysts for his precise stock picking ability.
Overall EPAM boasts five recent buy ratings vs just one hold rating. These analysts have an average EPAM price target of 137 (10% upside potential).
Best Tech Stock: Facebook (FB)
Social media giant Facebook, Inc. (NASDAQ:FB) shows no signs of slowing down. Even the ongoing data scandal has done little to stem the stock’s bullish consensus. This is because Facebook has a crown jewel in its pocket: Instagram. This popular photo sharing app is the focus of a recent bullish report by top KeyBanc analyst Andy Hargreaves. He has a very upbeat price target on FB of $245 (24% upside potential).
“Core Facebook is clearly maturing, with ad load reaching a saturation point and pricing the last lever to pull, so we see Instagram driving an increasing portion of incremental advertising growth,” stated Hargreaves on June 11. He sees Instagram accounting for 58% of Facebook’s incremental ad growth by 2020 — delivering a whopping $22 billion in ad revenue. At that point Hargreaves models 1.4 billion monthly active users for the platform.
In the last three months, FB has received no less than 32 buy ratings. This is versus just 1 hold rating and 1 sell rating. Meanwhile the average analyst price target of $220 suggests 12.5% further upside potential from the current share price.
TipRanks offers investors the latest insight into eight different sectors by tracking the activity of 4,700 analysts, 5,000 financial bloggers and even 37,000 corporate insiders. As of this writing, Harriet Lefton did not hold a position in any of the aforementioned securities.