Two "Prudent" Picks in Technology
12/23/2016 9:00 am EST
Jason Clark, contributing editor to John Buckingham's The Prudent Speculator, reviews a pair of high technology plays that rank among their current favorite investment ideas.
After a tough 2016 for shares of Jabil Circuit (JBL), the electronic manufacturing services provider's stock jumped almost 12% after the company reported its latest quarterly financial results.
Jabil remains on track to return 40% of fiscal 2017 and 2018 operating cash flow to shareholders in the form of buybacks and dividends.
Apple continues to be a major customer of Jabil, which leaves some investors worried about the impact of iPhone volumes being lighter than in the past.
Given the recent missteps of Samsung and the expected overhaul of the future iPhone 8, we don’t believe this will be the case.
However, even if the business declines somewhat, we continue to like JBL's product mix and believe that diversification that comes with the growth in the EMS segment will prove beneficial.
Of course, we also note that the stock presently trades for just 11 times the current EPS estimate for the next 12 months. We have boosted our Target Price for JBL to $36.
Oracle (ORCL) fell more than 4%following the tech titan’s fiscal Q2 2017 earnings release.
While the market was not enthused, we thought that overall the quarter was solid, and we continue to like the upside potential ORCL shares offer investors.
We remain encouraged by the substantial momentum gains in the cloud business and we continue to believe that ORCL has a quality leadership team that will drive top-line growth to the bottom line.
Perhaps even more importantly, we favor the company's solid fundamentals, substantial net cash position, strong free cash flow generation and reasonable forward P/E ratio of 14.8. We have adjusted our Target Price to $50.