The second half of 2024 is well underway, making it the perfect time to dive into analyst picks. The Rosenblatt Securities team has been working on compiling their “best ideas” for the coming months, with a strong focus on technology-related investments.
These picks include interesting investments in video content, networking, and artificial intelligence, three technologies that are expected to pave the way for the next generation of digital connectivity. These are stocks that are at the cutting edge of technology—and Rosenblatt sees potential upsides of up to 83%.
We have opened TipRanks Database Let’s get the latest on the three and see how they look in the wider street view. Let’s take a closer look.
harmonic (Hi)
The first of Rosenblatt’s tech stock picks we’ll look at here is Harmonic, a leader in virtual broadband and video delivery solutions. The company provides solutions to media companies, service providers, and digital content providers, enabling them to deliver the best-in-class streaming and broadcast video services in the global marketplace. Using Harmonic’s technology, cable operators can deploy gigabit-speed internet services with greater flexibility, connecting homes and mobile devices. The company is simplifying video delivery through cloud and software platforms, changing the way media and service providers monetize on-demand content.
More than 5,000 companies worldwide trust Harmonic to provide the latest technology in video delivery, including names like CNN and Comcast. Operating out of 20 international offices, Harmonic has 25 years of experience simplifying online video streaming.
Despite Harmonic’s industry-leading position, the company’s overall revenue declined year-over-year in the first quarter of 2024. Net income was $122.1 million, down more than 22% from the first quarter of 2023 — though it beat expectations by about $470,000. Harmonic’s net earnings, or non-GAAP earnings per share, were in line and a penny better than pre-release expectations.
For Harmonic, the key point is the company’s leadership position; a fact that caught the attention of Rosenblatt’s Steve Frankel, who wrote: “Harmonic continues to dominate the next-generation broadband journey, setting the stage for a multi-year product cycle that will deliver accelerated revenue growth and margin expansion. Harmonic’s customer service remains the clear leader in vCMTS, driving internet infrastructure upgrades across the industry. As of Q1, Harmonic had 113 live deployments powering more than 28 million cable modems. The company has won 13 Tier-1s with Charter and Comcast is set to remain significant customers for the foreseeable future as both work through a multi-year rollout process…”
Looking ahead, Frankel goes on to explain why investors should take a bullish view on Harmonic, adding: “Overall, the company has set a target of $1.0 billion in revenue and $254 million in adjusted EBITDA in 2026, up from our 2024 forecast of $660.0 million/$113.2 million. We believe management’s assumptions, particularly in broadband, are appropriately conservative. Upside could come from higher-than-expected node share and/or faster-than-expected fiber ramp-up.”
These comments lead to a Buy rating from Frankel, whose $18 price target suggests 51% upside potential for HLIT stock in the coming months. (To watch Frankel’s track record, see click here)
Harmonic has a Strong Buy rating from Street analysts, based on 6 recent unanimous positive reviews. The stock is selling for $11.91 and its $17.83 average price target suggests a 50% gain over the next year. (See HLIT Stock Forecast)
Applied Optoelectronics (AAOI)
The second stock on our list backed by Rosenblatt is Applied Optoelectronics, an innovator in digital communications. The company produces semiconductors and laser components, along with advanced optical transceivers and radio frequency solutions. All of these products are essential for advanced digital networks.
In detail, Applied Optoelectronics’ product lines include semiconductor lasers and DFB chips; optical components for next-generation communications systems; optical transceivers for optical computing and networking; and HFC system amplifiers, line extenders, boosters, and other advanced networking solutions. Applied Optoelectronics’ products have found a place in a wide range of communications applications, including wireline and wireless, FTTH, sensing, wireless, data center, and cable broadband technologies.
Applied Optoelectronics is headquartered in Texas, one of the fastest-growing state economies in the United States. The company is headquartered in Sugar Land, just outside of Houston, an area that was recently impacted by Hurricane Beryl. The company announced on July 9 that its headquarters suffered no damage from the storm and that its production facilities were able to continue operations.
The hurricane wasn’t the only bullet the company has dodged recently. In June, the company announced that it had reached an agreement with Molex to settle a patent infringement dispute and other related lawsuits.
On the financial front, Applied Opto Electronics missed targets in its first-quarter 2024 results. Net income of $40.7 million fell more than 23% year over year, missing expectations by $2.92 million. The company also reported a net loss for the quarter of 31 cents per share, according to non-accounting measures, missing expectations by 2 cents per share.
Despite these setbacks, analyst Michael Genovese is bullish on the tech company. Genovese specifically points to AAOI’s growth potential in a high-demand industry: “We’re hammering the table and reiterating our Buy rating on the high-risk/high-reward ‘show me’ story. Over the next few quarters, we believe the company can prove to be the primary beneficiary of the very strong multi-year secular demand for 800+G optical transceivers used to connect all the compute (accelerated servers) and networking (switches) resources within AI data centers. The proof points for our thesis will be new Hyper Scale customer announcements, such as Amazon and Tesla, and strong above-consensus results and guidance by the end of 2024.”
Along with his Buy rating, Genovese set a $16 price target, implying a 70.5% upside over a one-year horizon. (To watch Genovese’s track record, see click here)
The three analyst reviews for Applied Optoelectronics include two Buy recommendations and one Hold recommendation, for a Moderate Buy rating. The stock’s $9.38 selling price and $15.33 average price target together imply a 12-month gain of more than 63%. (See AAOI Stock Forecast)
five9 (five)
Finally, we have Five9, a software development company that creates cloud-based platforms for contact centers. The company’s cloud-based software offers a range of capabilities, including campaign management, monitoring, real-time and historical reporting, and call recording—all of which are vital processes in the contact center space. The company is a leader in contact center software, and its platform is used in a wide range of industries, from telemarketing to financial services to customer service to retail to healthcare. The company counts names like Wyndham Hotels & Resorts, Teladoc Health, and Alaska Airlines among its user base.
Call centers are big businesses, and their software systems are just as big. Some Five9 numbers tell the story: 20+ years of cloud computing experience, 2,600+ employees, 3,000+ customers — large, mid-sized, and SMBs — all over the world. The Five9 platform facilitates over 14 billion recorded call minutes each year.
Artificial intelligence, particularly generative AI, has taken the tech world by storm over the past year — and Five9 has been at the forefront of applying AI technology to contact center systems. The company has used AI to address simple, repetitive questions that take up a lot of a customer’s time, and developed chatbots that quickly deliver impressive customer contact results. Last month, Five9 announced that it had partnered with Salesforce to jointly develop AI-powered customer experience solutions.
Five9’s operations led to the company’s record quarterly revenue in the first quarter of 2024. Quarterly net revenue of $247 million was up 13% year over year and was $7 million better than expected. Five9’s non-GAAP earnings per share were 48 cents, beating estimates by 9 cents per share.
Rosenblatt analyst Katherine Trebnick is bullish on Five9 stock, making a clear case for it. She writes: “Five9 presents a compelling investment opportunity, showing a balanced outlook that acknowledges the current economic challenges while preparing for a strong recovery in the second half of the year… Five9 has closed major deals like Wells Fargo, demonstrating its capabilities in AI, scale, reliability and complex migrations.”
“This, coupled with industry-leading retention rates in the mid-90s, demonstrates the company’s ability to attract and retain high-value customers even in challenging economic conditions,” Trebnick says. “Overall, Five9’s solid foundation, promising growth trajectory, and strong AI differentiation position it well for potential investors seeking exposure to the growing CCaaS market.”
Trebnik’s stance supports her Buy rating on FIVN stock, and her $80 price target suggests 83% upside potential in the coming year. (To watch Trebnik’s track record, click here)
Overall, Five9 has a Moderate Buy rating from the Street consensus, based on 18 recent reviews that include 14 Buys, 3 Holds and 1 Sell. Shares are currently trading at $43.74, and the average price target of $76.69 suggests 75% upside in one year. (See FIVN Stock Forecast.)
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Disclaimer: The opinions expressed in this article are solely those of the participating analysts. The content is intended for informational purposes only. It is very important that you conduct your own analysis before making any investment.