Top 10 Tech Stocks for 2013: Are Facebook, Broadcom, EZchip, and RIM Set to Gain?
The tech sector is a sea of battling companies, but some names are hinting that they'll stand out in the coming year.
The first one is easy: Google (NASDAQ:GOOG). I'm not sure I really need to add a lot of explanation here. I've produced a mountain of analysis on Google and frankly, most of it has been correct. I will also state that I'd put my market share numbers on Google's various business areas up against anyone’s, and I don't think anyone has been better on the Android versus. iOS share. This could become even more important in the 2013-2015 time frame.
Frankly, the market hasn't given Google enough credit for what it has done with both Android and mobile search, as it tends to focus too much on the volatility of the quarterly EPS results and puts very little focus on the dominance that Google sees once it enters a market. As I've stated a few times, the best comparison for Google might well be Berkshire Hathaway (NYSE:BRK.A); once the market correctly viewed it as the unparalleled investment vehicle it was (and still is), the stock never looked back. For Berkshire Hathaway, that happened in the $8-10k range in the early 1990s.
Google remains my largest investment position and I see nothing to change my $900, $1200, $1800, and even $3000 future target prices for the name.
The caveat here is that I could make Apple (NASDAQ:AAPL) a bigger short to intermediate term trading position as I do think we should see the next 80-120 points higher occur more quickly in its stock than in Google’s. But as far as my race to $1,000 is concerned, I think Google wins that one easily.
Facebook (NASDAQ:FB) makes both my high-conviction list and also my Top Spec list. I certainly believe the stock will retake the $38 IPO level, and that would be a strong performance in the mid 30s percent range, which could get it onto my Top Spec list. However, I don't see the stock stopping in the $33-38 area where many analysts see it. Frankly, I see the stock getting to 50% of total revenues being mobility-based by the end of 2013 (and likely earlier); to me, that means the stock should be closer to $50 than that $38 IPO price. Therefore, a near 100% move should be enough to get FB on both lists.
Research In Motion
This stock—beleaguered, maligned, and, well, I could use just about any "ugly" adjective here—to me looks poised to have a big year. While many (including me) feel that the BlackBerry 10 platform launch will be a make-or-break issue for the stock, I think many are overlooking something very important: how Research In Motion (NASDAQ:RIMM) reported the last two quarters.
The low for the stock was put in two quarters ago on a better-than-expected report. The most recent report was frankly stunning in how good it was relative to expectations. Yes, the stock got hammered, but that doesn't mean that reaction was correct. The simple fact is that RIM generated $900 million in cash in two quarters, and these were very tough operations quarters. Just think what the company can report if it sells two or three million BlackBerry 10 devices in a quarter, or four to six million devices, or even six to eight million devices. The average selling prices (ASPs) for the new devices will be much higher than current RIM phones.
Lastly, as I've said previously, Research In Motion is not going to lose all its service revenues! My bet right now is that service revenues won’t even drop by 35%. But if they do, and that sells them an additional one to two million BlackBerry 10 units per quarter, than that is probably a good short-term move by the company. And if the platform takes off and becomes a "very strong enterprise security" product again, RIM will be able to increase the service revenues in the future.
Long term, I still feel Research In Motion is challenged, and I also feel that the company should certainly make an Android handset that rides on its network. I stand by my prior views that if this happens, the stock will be in the $30 range, if not higher. I also do not think RIM can compete strongly in the consumer market against Android and iOS in the long term. But for the stock to work into the $24-30 range, it doesn't need consumer market share. It just needs to hold current subs and slowly regain some of that lost enterprise share.
Again, the breakeven for RIM on BlackBerry 10 is in the 15-16 million unit mark by my numbers (18 million by Wall Street numbers), and I see the company getting those sales within three full quarters versus a full year. If the company does it in fewer than three full quarters, then analyst projected EPS numbers of -$.53 will be off by as much as $1.50-2.00.
Bottom line: RIM makes my Top Spec list but not my Top Tech list, as I still don't view the stock as a strong long-term investment. If RIM were to make an Android handset, I would instantly list it as a small core investment. Other factors that could also move my long-term investment thesis on the stock would be proven share gains in the enterprise and increasing net cash closer to the $4 billion area.
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