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Wall Street’s #1 Analyst Firm Sees Over 40% Upside for These 3 ‘Strong Buy’ Stocks

The investment arm of the Royal Bank of Canada, RBC Capital Markets is a major name in the investment banking world. It is North America’s fifth largest bank, and holds the number 1 spot on TipRanks. RBC has 70 branches in 15 countries across North America, Europe, and East Asia – all important regions for Canadian trade and finance.

RBC’s size and reputation were built on performance, and performance attracts the personnel that maintain the reputation. The bank’s financial market analysts hold prominent positions in TipRanks’ database of over 5,500 analysts, with three of them appearing in the Top 25.

In recent weeks, three of RBC’s top names have submitted reviews of popular tech stocks. All three of these analysts are rated among the top 2% of Wall Street’s experts, and together have the expertise and experience that have made RBC a strong name in international banking.

We’ve used TipRanks’ Stock Screener tool to pull up these three stocks, and find what makes them so compelling.

Splunk (SPLK)

As TipRanks readers know, today’s world is all about data. The ability to collect, collate, and use the masses of information available on every imaginable topic can mark the difference between success and failure. This Silicon Valley tech company has piggybacked on bid data, providing search software for machine-generate databases. Splunk’s product uses an interface styled on web browsers, making it easy and intuitive for users.

Splunk has found its true niche as a business aide, providing IT, Security, and Business Analytics tailored to the user’s needs and system. The niche is a good one, demonstrated by the company’s $1.27 billion in revenue for FY 2018. Like many new start-ups (the company was founded in 2003, and went public in 2012), Splunk is not profitable every quarter. However, Q1 is annually the company’s best, and Q1 2019 showed a healthy profit and a $1.70 EPS – a far cry from the year before, that showed a net loss.

Matthew Hedberg, a top analyst with RBC and rated #15 overall by TipRanks, is impressed with Splunk. He issued an Outperform rating (i.e. Buy), writing, “This past summer we had the opportunity to meet with Splunk’s CTO and came away impressed with the product momentum and vision as the company re-platforms for the next leg of growth. We look forward to seeing the new Data-to-Everything model which should be easier to use, more consumer-like and contain additional mobile features... We are also excited to hear customer feedback on Splunk Unlimited pricing.”

Hedberg set a $160 price target on SPLK, indicating his confidence in a 41% upside potential to the stock. (To watch Hedberg's track record, click here)

SPLK has a Strong Buy from the analyst consensus, too. Of 23 recent ratings on the stock, 21 are Buy, and one each are Hold and Sell. The average price target is $152, slightly below Hedberg’s more aggressive outlook, and suggests a 34% upside from the $113 trading price. (See Splunk stock analysis on TipRanks)

Drobox (DBX)

We know and remember Dropbox as a cool tool for storing and sharing large files, but the company has survived and thrived by becoming more. Dropbox advertises itself as “the world’s first smart workspace,” creating an online place to bring together all the varied work streams of a business team while providing the tools needed to find and use the key data. Dropbox offers versions for both business and individual use, with options ranging from their old familiar storage unit to individual professional packages to full-service virtual office shared spaces.

That DBX has found a happy place in the business world was made clear by the Q2 FY19 earnings, reported in early August. Total revenue showed an 18% gain year-over-year, to $401.5 million, and paying users increased from 11.9 million to 13.6 million. Average revenue per paying user, a key metric for subscription software, increased by $116.66 to $120.48. The company’s cash position remains firm, with $972.8 million available in cash, cash equivalents, and short-term investments at the end of the quarter.

Dropbox was reviewed by 5-star RBC analyst Alex Zukin: “While some in the investor community still view the company as a storage vendor in a commoditizing market, customers are actually paying for the enablement of more efficient business workflows… we see the company as being well-positioned to solve the business process fragmentation problem of modern collaboration while driving knowledge worker productivity.” Zukin set a $30 price target on the stock, suggesting room for a 55% upside. (To watch Zukin's track record, click here)

Zukin’s review is in line with the analyst consensus. DBX’s consensus rating is a Strong Buy, with 8 "buy" and 1 "hold" ratings set in the past three months. Shares sell for $19.40, and the $31 average price target indicates a possible 60% upside. (See Drobox stock analysis on TipRanks)

Lyft (LYFT)

Ridesharing has disrupted the personal transport industry, and Uber has no lack of copycats. Lyft, based in San Francisco, got its start in 2012 and now operates in 650 cities across the US and Canada. The company holds a 28% market share in the US ridesharing market, making it the largest of Uber’s competitors. In addition to ridesharing, Lyft offers its mobile app customers electric scooters and bicycle sharing in selected markets.

Lyft makes its app available to customers across mobile plans and platforms. Versions are available for Android and iOS, and customers can pay by credit card, PayPal, Google Wallet, or Apple Pay. In the company’s 7 years of operation, it has built up over $3.7 billion in assets, and brings in over $2.1 billion in annual revenue.

RBC’s Mark Mahaney, another of the bank’s TipRanks Top 100 analysts, attended a meet and chat with Lyft’s co-founders earlier this week. Mahaney came away impressed with management’s view of Lyft’s near-term prospects, and noted, “Lyft Co-Founders highlighted that Lyft expects to be profitable on an Adjusted EBITDA basis by Q4:21, a year before the Street estimates positive EBITDA. The company noted they would get to profitability from 1) the market becoming increasingly more rational; 2) the company is now focusing on business travel and high value modes, suggesting they will begin offering more premium services; and 3) product innovations…”

In light of the bumped-up expectations for profitability, Mahaney set a $76 price target on LYFT shares, indicating room for a 74% upside. In this, Mahaney is slightly more bullish than most; LYFT stock has an analyst consensus rating of Strong Buy, based on 19 Buys against just 6 Holds. The stock sells for $43, and the average price target, $71, suggests a potential for 63% upside. (See Lyft stock analysis on TipRanks)