Some analysts say that there is no upside in big-cap firms, but I disagree. Below you will find a succinct analysis on three behemoths within the tech segment that offer compelling growth prospects and very attractive valuations. These are Cisco Systems, Inc. (NASDAQ:CSCO), Microsoft Corporation (NASDAQ:MSFT) and Oracle Corporation (NASDAQ:ORCL). Let’s take a look at each of them.
IP stands for Intelligent Pick
Cisco Systems, Inc. (NASDAQ:CSCO) is the global leader in the networking business, providing a wide array of Internet-Protocol (IP)-based solutions for enterprises, educational institutions and government agencies. Although its reputation of profitability–even through tough macroeconomic patches–precedes it, the tech industry requires constant innovation. Going forward, the company is placing its bets on the intelligent networks segment and other related fields.
As stated by Morningstar analysts, important scale advantages coupled with high switching costs for customers and “a reputation as the go-to provider of enterprise-class networking equipment give Cisco Systems, Inc. (NASDAQ:CSCO) a durable competitive advantage in its core markets of routing and switching.” Furthermore, hefty investments in product innovation keep it ahead of its peers, excreting pressure over smaller companies.
High-end markets like telecom and cable providers are tending towards the use of IP-based networks as well, and Cisco Systems, Inc. (NASDAQ:CSCO) holds a comfortable lead in these segments. Other segments are being explored by management and promise to provide plenty of extra profit over the upcoming years. Some of these are its services, smart connected communities, small business and smart grids (for secure energy management) segments. Acquisitions will also play a major role in the years ahead, and as Oracle is currently going through a purchase spree, the benefits will be seen over the next several quarters.
As Internet traffic increases, Cisco Systems, Inc. (NASDAQ:CSCO) seems poised to grow. Analysts expect the firm to deliver an average annual EPS growth rate in the range of 8%-10% over the next five years, and even these projections could prove conservative. Trading at 13.4 times earnings, not even half the industry average, while offering great margins, returns and dividends, I’d recommend buying and holding on to this stock; the upside potential is high and the risks are low.
The way Bill Gates got rich
Most of you already know that Microsoft Corporation (NASDAQ:MSFT) develops, manufactures, licenses, sells, and supports software products. And, although many see it as a declining Goliath, I see plenty of potential left in a firm that enjoys one of the widest moats in the industry. Its late, but a strong incursion in the mobile and cloud storage segments promises to provide new life to the company.
In response to the challenges imposed by competitors like Apple and Google, Microsoft Corporation (NASDAQ:MSFT) has launched Office 365, Windows 8, the Surface tablet, and the Windows Store, hoping to recuperate regain some lost ground and to increase synergies and product interaction. Moreover, the recently announced launch of a version of Microsoft Corporation (NASDAQ:MSFT) Office for iOS proves Microsoft Corporation (NASDAQ:MSFT)’s intention to fight against the advance of its rivals.