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Needham Sees at Least 30% Upside Potential for These 3 Tech Stocks

Out on Wall Street, who has been leading the charge forward? Tech. After the space’s key players dragged the market lower in September due to overheated valuations, tech is once again at the helm.The rise in tech makes sense. The pandemic helped accelerate a move toward remote work and telecommuting, and this in turn has put a premium on tech products. From the 5G rollout, to improvements in semiconductor chips, to the expansion of IoT and smart device capabilities – tech is everywhere, and it’s growing fast.Bearing this in mind, we turned to Needham, which lands among the top ten on TipRanks’ list of Top Performing Research Firms, for some inspiration. The firm’s analysts highlight three tech stocks that appear especially compelling, noting at least 30% upside potential could be in store for each.We’ve used the TipRanks database to pull the details on these three tech picks, to find out what makes them such compelling opportunities.Silicon Motion (SIMO)Bringing extensive experience to the table, Silicon Motion provides high-performance storage solutions widely used in smartphones, PCs, data centers and commercial and industrial applications. Following a bang-up quarter, Needham believes this tech name has a bright future ahead.Writing for the firm, analyst Rajvindra Gill tells clients that based on SIMO’s preannouncement, Q3 sales are set to land 8% above his original forecast, with EPS also beating his estimate by $0.09.What was behind this solid showing? A recovery in client SSDs. In Q2, SIMO’s client SSD business, specifically the module maker component, declined as NAND flash makers allocated NAND capacity away from client SSDs to hyperscalers, to support the spike in data consumption on the network. However, the opposite happened in Q3. Along with a pause in hyperscale spending, module customers were allocated additional NAND capacity as NAND pricing declined quarter-over-quarter.To this end, Gill thinks NAND pricing could decline another 5-10% quarter-over-quarter in Q4. He added, “We expect the decline in NAND pricing to further stimulate client SSD adoption in Q4 as this market is quiet price elastic, especially the channel markets.”To a lesser extent, a rebound in China handsets along with a continued ramp of 5G handsets contributed to SIMO’s strong performance, in Gill’s opinion.What’s more, the analyst argues that next-generation gaming consoles and desktop gaming could further boost SSD demand. Gill points out that based on reports from MSI, the board maker for Nvidia GPUs, demand for less expensive SSDs for higher-end gaming desktop computers is on the rise.Expounding on this, Gill stated, “This could be potentially COVID-19 related demand as more people (of all ages) stay home and find more time to play video games. Moreover, we expect SIMO to participate in the next-generation gaming consoles (PS5, Xbox) coming out in the Fall. SIMO is shipping its PCIe SSD controllers into five out seven of the NAND makers sold into the game consoles; we believe two out of five could be SIMO’s suppliers.”If that wasn’t enough, even though the penetration rates for laptops remain relatively high at 80-90%, Gill believes attach rates for SSDs in the desktop market could accelerate, driving upside in CY21.Given all of the above, Gill stayed with the bulls. Along with a Buy rating, he keeps a $55 price target on the stock. Investors could be pocketing a gain of 30%, should this target be met in the twelve months ahead. (To watch Gill’s track record, click here)Turning to the rest of the Street, the bulls have it on this one. With 4 Buys and a lone Hold, the word on the Street is that SIMO is a Strong Buy. At $49.60, the average price target implies ~18% upside potential. (See SIMO stock analysis on TipRanks)Domo (DOMO)As a business cloud software specialist, Domo helps its customers integrate data from any source, turn data into live visualizations and extend BI into apps. Based on positive momentum as well as new deals, Needham thinks that now is the time to snap up shares.After the company reported impressive fiscal Q2 2021 results, 5-star analyst Jack Andrews stands squarely with the bulls. Revenue of $51.1 million blew both his and the consensus estimate out of the water. Additionally, subscription revenue, billings and non-GAAP EPS exceeded his expectations.“In our view, Domo appears to be benefiting from tailwinds related to the ongoing pandemic and improved sales execution (i.e. playbooks and an improving partner ecosystem) as it closed a notable amount of large deals within the quarter,” Andrews explained.According to management, demand for digitizing business processes and real-time analytics…

Read More: Tide Is Turning for Indian Bonds After RBI’s Liquidity Bonanza

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