All it takes is one positive catalyst to send shares soaring. Whether it’s a solid earnings performance, a comment from management or a recent acquisition, these events can have a drastic effect on share prices. For example, International Business Machines' (IBM) shares are up 3% in the last three days after it unveiled its digital solution GRIT to help veterans transition out of active duty.
For a few other tech stocks, the recent announcement of new products is also generating a positive buzz among investors. Product updates from Fitbit (FIT), Microsoft (MSFT) and Dell Technologies Inc. (DELL) have led to a surge in share prices, with many analysts saying these companies have taken meaningful steps in the right direction.
Let’s take a closer look at these 3 tech stocks rallying on new product announcements.
Fitbit Inc. (FIT)
The wearable fitness device company has seen share prices gain 8% in the last three days after it announced an upgraded smart watch and a plan for a premium subscription service on August 28.
Fitbit has joined forces with eCommerce giant Amazon (AMZN) to add Alexa voice capabilities to its new and improved Versa 2 smart watch. The revamped watch will be available on September 15 with a $199.95 price tag.
The new watch will also include a brighter display, faster processing, the Spotify music app as well as payment capabilities.
“While Versa Lite received good press and consumer reviews, we saw that consumers were willing to pay more for a smartwatch with additional features or look for discounting versus everyday value,” CEO James Park stated.
As part of its efforts to diversify its product offerings, FIT is launching a premium subscription service that offers coaching, sleep tracking, health reports and workouts. The service will be released sometime in the fall for $10 per month or $80 per year.
Roth Capital analyst Scott Searle tells investors that these additions to its product pipeline are “steps in the right direction”, with the service and Versa 2 being largely neglected from the current valuation. “We estimate the service will attract 14 million users paying an average of $14-16 a month. Based on our calculations, a 1% penetration of the active user base would add $0.05-0.08 to the EPS,” he explained. As a result, the two-star analyst reiterated his Buy rating and $8 price target on August 28. Searle thinks share prices could increase 159% over the next twelve months.
In general, the Street takes a less bullish stance on FIT. It has a ‘Hold’ analyst consensus and a $5 average price target, suggesting 61% upside potential.
Microsoft Corporation (MSFT)
The tech giant announced on August 27 that it would be holding a special Surface hardware event in New York City. The news of the October 2 event sent share prices up about 2% in just the last three days.
The announcement has led to speculation among investors as to whether or not the company’s dual-screen device, Centaurus, will be unveiled. MSFT, which has been building the device for two years, teased the innovative product at an internal meeting back in June, demonstrating that the product is nearing release. It should be noted that it’s not one hundred percent certain that the launch will happen in October.
That being said, it’s widely expected that several other Surface products will get a refresh including a revamped Surface Pro that includes a USB-C port as well as the Surface Book and Surface Go Tablet.
Not to mention MSFT announced on August 29 that it's testing a new interface for Windows 10 specifically designed for 2-in-1 laptop convertibles, with it able to automatically activate when the laptop convertible switches into a tablet posture.
Its commitment to not only improving its current products but also to developing new and innovative technologies lends itself to Wedbush analyst Daniel Ives’ conclusion that MSFT shares will only continue to rise. On August 29, the four-star analyst reiterated his Buy rating and $160 price target, implying 16% upside potential.
All in all, other Wall Street analysts echo Ives’ sentiment. MSFT boasts a ‘Strong Buy’ analyst consensus as well as a $154 average price target, indicating 11% upside.
Dell Technologies Inc. (DELL)
Since its December 2018 IPO, Dell has demonstrated that it’s a force to be reckoned with as the stock is up 5% year-to-date. The computer company isn’t stopping there with shares already surging more than 12% in the last five days.
The jump comes after a strong August 29 Q2 earnings release and Dell’s announcement that it is teaming up with Google (GOOGL) to launch Chromebook Enterprise laptops on August 26. These devices will include a variety of Dell’s cloud-based support services that allow admins to have greater control over how these Chromebooks are rolled out inside businesses to meet IT needs.
Enterprises can pick Dell’s 14-inch Latitude 5400 for $699 or the 13-inch Latitude 5300 2-in-1 for $819 which became available on August 27. Both can be configured with Intel’s 8th Gen Core i7 processors, up to 32GB of RAM and with to 1TB of SSD storage.
The collaboration between these two tech giants comes as part of a larger effort to gain market share from Microsoft which has dominated the space.
Not to mention Dell announced on August 26 that its new VMware (VMW) integration will support cloud-native applications so organizations can deploy, run and manage Kubernetes (an open-source system for automated deployment of containerized applications) for critical production workloads alongside traditional applications.
Based on all of the above factors, Raymond James analyst Simon Leopold maintains that Dell is “a nice house in a tough neighborhood”, referring to the global slowdown for the PC market. As a result, he reiterated his Buy rating and raised the price target from $61 to $62, on August 30. The 4.5-star analyst believes shares could gain 20% over the next twelve months.
With 6 Buy ratings vs 4 Holds received in the last three months, DELL has a ‘Moderate Buy’ analyst consensus. Its $62 average price target implies 20% upside potential.
Leave a Comment