Maxim Expert Breaks Down Movement In 4 Tech Stocks

The tech sector is as busy as ever — racing to develop self-driving cars, expand the Internet of Things and, at the same time, protect consumers from hacks into their increasingly virtual lives.

Dan Forman, technology sector specialist at Maxim Group, broke down some of the recently active stocks and their potential to meet market demand.

Advanced Micro Devices, Inc. AMD

Following a major, post-earnings block trade by the firm’s largest shareholder, AMD has been “turning through supply.”

“The stock is working through that supply, and I think that’s why we’ve been on this recent downtrend on the daily since they reported the quarter,” Forman said on Benzinga’s PreMarket Prep radio show.

While he expects a long-term weekly downtrend, his daily analysis argues for higher prices, and if AMD can catch a break from fundamental data, he sees it worth $15 or higher.

“I think the key to the stock is the server piece of the business, because that’s really where the average selling prices are going to come in and drive the gross margins,” he said. “That’s what bulls need to see for this stock to work. AMD, when they do have their server cycle, the stock has traditionally worked very well.”

Related Link: The Symphony Software Foundation: Bringing Open Source To Wall Street

Lumentum Holdings Inc LITE

Lumentum hit 52-week highs on news that it would supply parts for Apple Inc. AAPL’s 3D sensing, but the stock ultimately retreated. Forman attributes the pullback tendency to traders’ high short-term expectations.

“I think we’re working through some overhead supply as investors become increasingly confident,” he said, noting that Lumentum is ripe for more long-term gains. “I think what’s interesting about Lumentum is that, on the optical side where they have a lot of exposure, there’s been this kind of digestion period happening because of their exposure to China.”

Nutanix Inc NTNX

Trading strategies around Nutanix depend on whether investors value it as a software company or an infrastructure company.

“If you believe the mix is shifting to more software and the stock deserves to be valued at a higher multiple, effectively that decision makes you a buyer of Nutanix,” Forman said, noting that bulls regard it the market leader in hybrid.

Bears are discouraged by both overhang from its cancelled relationship with Dell and competition from large rivals, who are driving prices lower and forcing margin compression in Nutanix.

Palo Alto Networks Inc PANW

The last two quarters have seen Palo Alto recovering from a two-plus-year bottom struck amid skepticism around expectations. Forman said it’s only a matter of time before the stock hits new highs.

“In my opinion, the expectations have been reset, and you have a potentially very large product cycle that they can sell into their install base,” he said. “Basically, this is the company with the broadest portfolio in securities software.”

PreMarket Prep is a daily morning show about short-term trading ideas and technical setups. It airs live from 8–9 a.m. ET here, and the podcast is here.

Related Link: Tech Specialist: Overstock An Attractive Takeout Target, Way To Play Bitcoin