The tech sector is hip, it’s edgy, even the word ‘tech’ has a buzz cachet to it – but for investors, the real question is, do tech stocks deliver?
They can and do, despite a general market hit to the tech sector. This past month has been the worst for tech stocks – compared to the overall trading markets – in over a year. But as with any decline, not all the news is bad. David Kostin, from Goldman Sachs, believes that tech stocks are still a compelling buy, and that worries about value are overblown. In a report last week, he said, “Popularity has turned into concerns of overcrowding and outperformance has turned into concerns of overvaluation. We believe these risks are overstated.”
Here, we’re looking at 4 tech stocks with upsides of 20% or higher. This is according to the current price vs the average analyst price target.
Red Hat, Inc. (RHT)
Red Hat Software (RHT – Research Report) is best known for its long-standing commitment to creating open-source programs. You may ask, how does a software company make money when their releases are open to the public, and it’s a fair question. The answer is, Red Hat’s software is free – but the service and support is available by subscription. Since the overwhelming majority of software customers and users are not coding experts, the open source nature of the tools doesn’t matter. They’ll still need help when things don’t work, and the company that first wrote the software is the logical place to turn. Red Hat has been turning that business model into profits since 1993.
Today, the company has a market cap of $21 billion, and while its recent stock performance has been rocky, there is significant reason for a bullish outlook. Writing for RBC Capital last month, top analyst Matthew Hedberg (Track Record & Ratings) says that Red Hat turned in “a solid quarter against negative sentiment,” outperforming in “billings, operating margins, and earnings.” He added that “Red Hat is a long-term opportunity, even though the company is facing short-term headwinds in middleware and portfolio renewals.” He gives RHT a ‘Buy’ rating with a target price of $169.
