Aside from biotechnology, there is no other industry that can produce rapid gains more than technology. In this piece, I am looking at three such stocks that analysts recently upgraded, and that may be beneath your radar.
Expensive But Rapidly Growing
I sure wish I would’ve known about Textura Corp (NYSE:TXTR) prior to today, as the company has doubled from its June 7 IPO price of $15. While you may think that all upside is priced into its stock, analysts from Oppenheimer, William Blair, Credit Suisse, and Barrington Research are all saying “not just yet!” As a result, the stock flew higher by 10% on Tuesday.
Underwriters and analysts are forbidden from initiating coverage on a stock in the initial weeks following its IPO — Tuesday was the first day that these firms were allowed – and all rated the stock “Outperform.”
The company, a provider of cloud-based construction industry software, could be “disrupting the collaboration-intensive commercial construction market,” according to Oppenheimer. All analysts share the same belief that Textura Corp (NYSE:TXTR)’s technology is replacing useful tools such as spreadsheets and on-premise apps.
As an investment, this is a $630 million company with revenue of just $27 million, but one that is growing at 60% year-over-year. Oppenheimer estimates its addressable market being $1.2 billion, and that it should triple in size over the next few years. Thus, this is a long-term growth play, and with the performance of other high-growth IPOs such as Workday Inc (NYSE:WDAY) and LinkedIn Corp (NYSE:LNKD), this is a stock that could soar higher.
This Stock Is Lighting up the Market
After losing 70% of its value in the 20 months prior to January 2012, the semiconductor company Cree, Inc. (NASDAQ:CREE) has since soared by 200%. Almost half of these gains have been created in 2013, and much of the new-found excitement is surrounding the company’s entrance into the LED bulb business.
While LED bulbs may sound boring, success would give Cree, Inc. (NASDAQ:CREE) more consumer leverage. According to Goldman Sachs, this is exactly what’s happening right now. Goldman upgraded the stock, saying that its channel checks indicate that LED bulb sales are far better than expected.
So far, these bulbs are only available at Home Depot, but success could help the company grow its network of distributors. The company made a big bet with these bulbs, hoping that a consumer desire to save money would lead to fundamental gains. According to Goldman, the bet might be paying off. Thus, with 20% growth and margins that continue to increase rapidly, I would seriously explore this high-flyer, as success in LED would result in fundamental gains that are not priced into expectations.
New Services to Change Sentiment
After losing 45% of its value in 2013 due to poor quarterly reports, the Wi-Fi solutions company Ruckus Wireless Inc (NYSE:RKUS) rallied with gains of 5% on Tuesday in response to a bullish call from Piper’s Gus Richard.
In a market where spectrum is crowded and data is growing faster than the capabilities to supply, a company such as Ruckus Wireless Inc (NYSE:RKUS) could present a grand opportunity. Richard explains that the company’s new Wi-Fi products should gain traction among both consumers and businesses over the next five years due to their ability to save on costs.
Richard estimates that two-thirds of all mobile data traffic will be offloaded onto Wi-Fi and small cell networks within five years, which benefits a Wi-Fi solutions company. Richard specifically notes Hotspot 2.0, a new service integrated with Apple’s new iOS, which will allow consumers to seamlessly connect to Wi-Fi networks when the consumer enters its range. This ultimately saves money for the consumer.
All of Ruckus Wireless Inc (NYSE:RKUS)’ products were similar to Hotspot 2.0. Thus, there is value to the company. Last quarter, it grew revenue by 27.2% and maintains operating margins above 6%. After its large loss the stock is trading at just four times sales. As a result, I think expectations now reflect fundamentals and that Ruckus Wireless Inc (NYSE:RKUS) is a “Buy” with new products hitting the market.
Final Thoughts
Strangely enough, these companies are rarely discussed. Cree, Inc. (NASDAQ:CREE) has been one of the market’s best performing stocks, but has very little coverage. Ruckus Wireless Inc (NYSE:RKUS) has been one of the market’s worst performing stocks in 2013 and Textura Corp (NYSE:TXTR) is one of the hottest IPOs of the year, albeit under-the-radar.
In my opinion, each of these three tech stocks is attractive, and they are presenting different levels of value. If I had to pick one, I think Cree, Inc. (NASDAQ:CREE) is looking the best. The company announced its new bulbs in March, therefore its success was not priced into quarterly expectations. If Goldman is correct, this could signal significant gains when the company reports earnings.
Brian Nichols has no position in any stocks mentioned. The Motley Fool recommends Ruckus Wireless. Brian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article 3 Under-the-Radar Tech Upgrades That You Should Note originally appeared on Fool.com is written by Brian Nichols.
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