Wedbush upgrades Ultimate Software (ULTI, $210.34) to ‘Outperform’ with a price target of $242 (up from $212) because it views the 2017 consensus revenue growth estimate of 22.3% as “much too low” given the accelerating pace of the company’s services revenue. The firm looks for 2017 top-line growth of 24.1%.

Ultimate, a provider of cloud-based HCM solutions, could benefit from its successful sales segmentation and more productivity from new sales hires, says Wedbush.

Ultimate reports Q3 results tomorrow after the close. The consensus estimates: EPS of 77 cents on revenue of $196.9 million.

OpCo upgrades VMware (VMW, $77.97) to ‘Outperform’ with a price target of $90, saying the shares undervalue the EPS upside opportunity and over-discount the cloud-related risks.

The firm believes VMware now has a more complete vision for the software-defined datacenter along with improved product diversity. OpCo argues that recent partnerships validate the company as a “critical hybrid cloud partner.”

Nomura upgrades Qualcomm (QCOM, $68.40) to ‘Buy’ with a price target of $80 (up from $55) due to expected earnings accretion from the planned takeover of NXP Semiconductors (NXPI). 

The firm sees 30% accretion from the deal in 2018 and looks for that to lead to P/E multiple expansion. For its new target, Nomura is using a multiple of 13x on estimated 2018 EPS of $6.

IT research firm Gartner releases its top 10 strategic tech trends for 2017:

1-AI & advanced machine learning (ML)

2-Intelligent apps (including advanced analytics)

3-Intelligent things (IoT)

4-Virtual & augmented reality (VR & AR)

5-Digital twins (dynamic software models of a physical thing or system)

6-Blockchain (distributed ledger)

7-Conversational systems (smarter communications across the digital ecosystem)

8-Mesh app & service architecture (supporting multiple devices over multiple networks)

9-Digital technology platforms (including info systems, customer experience & analytics)

10-Adaptive security architecture (including user & entity behavior analytics)

Alphabet (GOOGL, $817.35) reports Q3 EPS of $9.06, beating the consensus estimate by 43 cents. Revenue rose 20% to $22.45 billion, above the consensus of $22.05 billion. 

Ad revenue of $19.82 billion rose 18%, while Other revenue was up 39% to $2.43 billion. Other Bets revenue expanded to $197 million from $141 million in the year-ago period.

Operating margin of 34% rose 100 basis points year over year. 

Aggregate paid clicks were up 33% (consensus: +26%) and CPC declined 11% (consensus: -5%).

Piper Jaffray upgrades F5 Networks (FFIV, $130.53) to ‘Overweight’ with a price target of $141 (up from $125), citing solid FQ4 (Sept.) results and the current product refresh cycle.

Shares of F5 Networks this morning are up more than 9%. Earlier, the stock hit a new 52-week high at $133.

For more on F5, see TechStock Radar—October 26, 2016.

Cowen raises its ServiceNow (NOW, $88.76) price target to $100 from $95 based on improved sales productivity. The firm says ServiceNow is having success in selling a broader portfolio of solutions to large enterprises.

ServiceNow shares this morning are up more than 12%.

NXP Semiconductors (NXPI, $98.66) has agreed to be acquired by Qualcomm (QCOM, $68.20) for $110 a share in cash in a transaction worth $47 billion (including debt). The equity portion of the deal is roughly $39 billion.

Qualcomm is the #3 global semiconductor company (ranked by revenue), while NXP Semi is #7, according to research firm IHS. The combined company is expected to have annual revenue of more than $30 billion. The transaction should close by the end of 2017.

For more on NXP Semi, see TechStock Radar—October 20, 2016.

F5 Networks (FFIV, $119.54) in fiscal Q4 (Sept.) beat on the both the top and bottom lines. The networking solutions vendor had EPS of $2.11, 17 cents above the consensus estimate, on revenue of $525.3 million, vs. the consensus of $520.3 million. 

Product revenue dipped 2% year over year (improvement from a 7% decline in the prior quarter), but was up 9% sequentially. In FQ4, F5 began its BIG-IP appliance family refresh with its new iSeries offerings. 

For FQ1, the company expects EPS of $1.92 to $1.95 (the consensus is $1.86) on revenue of $510 million to $520 million, vs. the consensus of $515.7 million.

In after hours trading, F5 shares are up 5% to $125.50.

Stifel downgrades Apple (AAPL, $114.40 pre market, -3.2%) to ‘Hold’ and reduces its price target to $115 from $130, citing a lack of upside catalysts. The firm believes the stock could be range bound (~$105 to ~$120) over the next two to three quarters.

Stifel is cautious about iPhone sell-through in the latest quarter and ongoing declines in China (-30% in FQ4). 

Plus, the firm isn’t all that impressed with guidance for the December quarter, implying iPhone unit shipments of 75 million to 77 million, because of the extra week in FQ1.

Apple (AAPL, $118.25) reports fiscal Q4 (Sept.) EPS of $1.67, two cents above the consensus estimate, on revenue of $46.9 billion, vs. the consensus of $46.89 billion. Gross margin of 38% was at the high end of the guidance range. 

Services revenue rose 24% to $6.32 billion (13.5% of revenue), above the consensus of $6.1 billion.

Unit Sales by Product:

*iPhone: 45.5 million—consensus: 45.2 million

*iPad: 9.26 million—consensus: 9.3 million

*Mac: 4.88 million—consensus: 5.2 million

For FQ1, Apple expects revenue of $76 billion to $78 billion, vs. the consensus of $74.98 billion, with gross margin of 38% to 38.5%.

Needham initiates Nutanix (NTNX, $29.45) at ‘Buy’ with a price target of $36, saying the company gives investors direct participation in the disruption of the traditional datacenter.

With hyperconverged infrastructure (HCI) from Nutanix, traditional IT storage arrays are collapsed by implementing software-defined architectures to help deliver cloud-like economics for on-prem and hybrid environments, says the firm.

For more on Nutanix, see TechStock Radar—October 18, 2016.

Needham lifts its Gigamon (GIMO, $51.91) price target to $58 from $52 based on continued strong business momentum in network visibility. The firm is particularly bullish on Gigamon’s upcoming cloud IaaS offerings. 

However, Needham recommends being careful going into this week’s Q3 earnings report, as expectations may have gotten a bit ahead of themselves.

The firm expects Gigamon’s cloud story to unfold more in the back half of 2017.

For more on Gigamon, see TechStock Radar—October 5 &13, 2016.

BofA/Merrill remains optimistic about Tableau Software (DATA, $48.31), saying near-term risks associated with the cloud transition, the new CEO, the competitive environment and sales execution are likely priced in at current levels. 

The firm expects sentiment related to the cloud transition and the relatively unknown CEO to improve in the coming quarters. BofA/Merrill maintains its price target of $75.

William Blair upgrades VMware (VMW, $72.91) to ‘Outperform’ based on the company’s positioning in the public cloud, which the firm believes is “materially improving.” 

William Blair likes the current VMW valuation and believes consensus estimates for 2H’16 look too conservative, leaving room for upside.

The positive FQ1 surprise at Microsoft (MSFT, $60.01) was related to the Azure unit, which saw revenue growth accelerate to 116% from 102% in the previous quarter, as the company’s hybrid cloud momentum continues to build, resulting in an annualized revenue run rate of $3.5 billion, says Goldman Sachs.

For FY’17 (June), Goldman raises its EPS estimate to $2.95 from $2.82. The firm maintains its ‘Neutral’ rating, but raises its price target to $60 from $57.

RBC Capital lifts its Proofpoint (PFPT, $75.62) price target to $85 from $80, saying strong results in Q3 show the company is well-positioned to benefit from growth in the email security market, while the success it has had with cross-selling bodes well for its ability to expand its product offerings.  

Proofpoint shares today are up more than 8%.

Proofpoint is a holding in the Tech-Stock Prospector Small-Cap Portfolio, added in September 2013, when the shares were trading at $27.91.

William Blair upgrades Microsoft (MSFT, $60.55 pre market, +5.7%) to ‘Outperform’ based on increasing confidence in the company’s long-term position in the cloud. 

The firm’s field checks indicate Microsoft is increasingly seen as a trusted partner that will help enterprise customers transition to the cloud.

Investors are expected to continue to re-rate Microsoft’s valuation to the upside given accelerating top-line growth and a stable to improving margin profile (driven mainly by improvements in cloud margins), says William Blair.

Shares of NXP Semiconductors (NXPI, $104.49) today rose 3.4% on heavy volume, spiking in the late afternoon on a Bloomberg report saying “Qualcomm (QCOM) is reaching the final stages of negotiations” to acquire the chipmaker.

NXP Semi shares have been strong since the end of September, when The WSJ first reported the company was in talks with Qualcomm (see TechStock Radar—Sept. 29, 2016)

The two companies are still working out the details on the transaction price, said to be within a range of $110 to $120 a share for NXPI, according to Bloomberg. 

Bloomberg says the deal is now likely to be all cash. However, there is no guarantee that any deal will take place.

For more on NXP Semi, see the October 2016 issue of Tech-Stock Prospector (TSP #176).

Mobileye (MBLY, $38.15) remains Piper Jaffray’s “favorite self-driving play” because of the company’s “safer, more measured approach.” 

Mobileye’s autonomous driving technology addresses key bottlenecks better than the competition, says the firm. Piper maintains its price target of $60.

Pacific Crest upgrades Expedia (EXPE, $124.69) to ‘Overweight’ with a price target of $160, saying investors are under-appreciating the HomeAway business. 

Conversations with property owners reveal “overall high satisfaction” with the HomeAway platform, as well as very limited desire and ability to move to competing platforms, says the firm. Pacific Crest believes that positive dynamic is being overlooked.

Intel (INTC, $37.75) reports Q3 EPS of 80 cents, eight cents above the consensus estimate, on revenue of $15.8 billion, topping the consensus of $15.58 billion.

Revenue by Category:

*Client Computing Group: $8.9 billion  +5% year over year, +21% sequentially

*Data Center Group: $4.5 billion +10% y/y, +13% seq

*IoT Group: $689 million +19% y/y, +20% seq.

*Non-Volatile Memory Solutions: $649 million -1% y/y, +17% seq

*Intel Security: $537 million +6% y/y, flat seq

*Programmable Solutions: $425 million -9% seq

For Q4, Intel expects revenue of $15.2 billion to $16.2 billion, vs. the consensus of $15.86 billion.

Netflix (NFLX, $119.69 after hours, +19.9%) shares are up nearly 20% in after hours trading following a strong Q3 earnings report. 

EPS of 12 cents beat the consensus by six cents, while revenue of $2.29 billion (+31.7% y/y) came in slightly above the consensus of $2.28 billion. 

There are now 86.74 million total streaming subscribers. Subscribers gains for Q3:

*Domestic Net Adds: 370,000  (guidance was 300,000)

*International Net Adds: 3.2 million (guidance was 2 million)

For Q4, Netflix expects 5.2 million global net adds, made up of 3.75 million international and 1.45 million in the U.S.

Shares of Nutanix (NTNX, $30.80), a leading provider of hyperconverged infrastructure solutions, have been volatile since the September 30 IPO at $16.  

On the first trading day, Nutanix stock opened for trading at $26.50 and closed at $37. 

The shares are now down 34% from the post-IPO high of $46.78 reached on October 3, the second trading session.

Hyperconverged integrated systems offer shared compute and storage resources. The systems, based on software-defined storage and compute, feature commodity hardware combined with a unified management interface.

In fiscal 2016 (July), Nutanix’s revenue rose 84% to $444.9 million. At the recent market cap of $4.23 billion, the trailing price-to-sales ratio is 9.5x.

As of July 30, Nutanix had 3,768 end-customers (up from 782 just two years ago), including 657 added during FQ4 alone. There are currently 310 Global 2000 customers.

DA Davidson upgrades Qualys (QLYS, $37.65) to ‘Buy’ with a price target of $47 (up from $36) based on positive momentum in the underlying business. 

With an accelerated pace of innovation in vulnerability management and an increasing focus on marketing, the firm is convinced the company’s growth and margins will eventually accelerate.

For more on Qualys, Tech-Stock Prospector subscribers should see the October 2016 issue (TSP #176).

Expedia (EXPE, $120.82) shares today gained 1.8%, pushing through resistance at $119.77 from late July. The stock has rebounded sharply from the June low of $96.58. 

The RSI is rising from 65.7. The 50-day moving average, now at $113.75, has turned upward. The 200-day moving average continues to trend downward from $109.67. Expedia shares hit their 52-week high of $140.51 early last November.

For more on Expedia, see TechStock Radar--Sept. 27, 2016.

Twilio (TWLO, $46.25) shares have come down sharply from their post-IPO high of $70.96 reached on September 28, dropping below the 50-day moving average of $56.14. 

On continued weakness, the August 3 low of $37.20 could come into play.

Twilio, provider of a cloud-based communications software platform, went public in June at $15 a share. On the first trading day, the stock opened at $23.99 and closed at $28.79.

For more on Twilio, see the October 2016 issue of Tech-Stock Prospector (TSP #176).

RBC Capital initiates Rapid7 (RPD, $15.42) at ‘Outperform’ with a price target of $19, saying the recent pullback presents a buying opportunity. 

Rapid7’s goal is to enable customers to dynamically manage their cybersecurity environments to mitigate the risk of breaches, says the firm. 

The company is in a unique position to quickly identify threats within the network (and increasingly the endpoint) because of its ability to leverage data generated by customers’ existing infrastructure, says RBC.

In late August, Rapid7 shares hit a high of $19.29. Yesterday’s low was $15.19. As recently as October 5, the stock was at $18.30.

BofA/Merrill upgrades GrubHub (GRUB, $40.74) to ‘Buy’ with a price target of $46 (up from $40) based on expectations for acceleration in the 2H’16 growth rate for gross food sales.

The 2016 consensus revenue estimate of $486.7 million indicates growth of 34.5%.

GrubHub shares have rebounded sharply just since the May low of $21.41. The stock hit an all-time low of $17.77 on January 25. The 52-week high of $44.58 was reached on September 26.

BofA/Merrill upgrades Gigamon (GIMO, $49.77) to ‘Buy’ with a price target of $61, saying security-related network momentum is strong, and could see double-digit growth over the longer term. 

The company’s recent product introductions, such as the GigaSECURE platform, are performing well, leaving Gigamon well-positioned to extend its leadership and grow operating margin, according to the firm.

Cantor Fitzgerald lifts its Amazon (AMZN, $836.31) price target to $1,000 from $835 based on continued strength in the core retail business and sustained momentum in AWS. 

The firm believes e-commerce is at a tipping point, with revenue growth in the U.S. accelerating year over year in the first nine months of 2016. That trend is a big positive for market leader Amazon, which is seeing an increased share of online retail searches and steadily expanding its Prime user base.

UBS continues to expect Netflix (NFLX, $101.26) shares to trade in a range because it doesn’t look for Q3 results and Q4 guidance to resolve the bull/bear debate over potential subscriber growth over the longer term. 

The firm says its checks indicate maturity in the U.S. and Canadian markets, with interest in Netflix picking up across Europe.

CLSA believes the recent weakness in Mobileye (MBLY, $38.36) shares presents an “excellent entry point” to add to positions.

The stock has been weak on fears of increased competition in autonomous driving technology, particularly from NVIDIA (NVDA) and Infineon (IFNNY).

Mobileye (MBLY, $38.70) shares continue to weaken, dropping below the 200-day moving average at $39.03. The RSI is down to 28.8. 

The stock is now well below its August high of $51.15. There is support from June at $33.93.

For more on Mobileye, see TechStock Radar—August 23, 2016.

Citi believes the new Facebook (FB, $130.24) Workplace enterprise messaging service represents another potentially large revenue stream outside of the core advertising business. The firm sees an incremental revenue opportunity of several hundred million dollars.

Citi says Workplace is a reminder that Facebook has numerous opportunities to leverage its global brand, installed use base and its strengths in application development to expand its business beyond core social networking and communications. The firm’s price target is $158.

Twitter (TWTR, $17.56) shares today fell more than 11% on heavy volume following reports that potential acquirers have lost interest.

Takeover chatter started to boost Twitter shares in late September. From a closing price of $18.63 on September 22, the stock last Wednesday surged to a high of $25.25, putting the valuation out of whack with the company’s growth prospects. 

Needham initiates coverage of Zillow Group (Z, $33.54) at ‘Buy’ with a price target of $40 because it expects real estate agents to spend more of their marketing budgets on the platform in the coming years. 

Zillow’s real estate websites remain the go-to destinations for consumers, says the firm. Agents will continue to embrace Zillow to unlock returns on their marketing dollars. Needham believes Zillow’s competition is limited, enabling the company to extend its lead.

OpCo reiterates its Check Point Software (CHKP, $77.76) price target of $94, saying its quarter-end checks with 25 resellers came back positive. 

The security solutions vendor is seeing solid traction for its recently introduced high-end appliances (23800 & 15600) and experiencing easing maintenance discounting pressures, according to the firm.

OpCo believes Check Point is benefiting from customers’ ongoing shift toward security vendor consolidation and overall platform adoption. The company’s subscription-driven business model is lending itself to high levels of predictability and profitability, says the firm.

There was a successful IPO today from Coupa Software (COUP, $33.28), a provider of cloud-based enterprise spend management solutions. 

After the offering was priced at $18, the stock opened for trading at $35 and jumped to an intraday high of $41.61. The shares closed with a gain of 84.9% from the IPO price.

In fiscal 2016 (January), Coupa’s revenue rose 64.6% to $83.6 million. For the six months ended July, revenue was up 74.8% to $60.3 million.

There are 48.1 million shares outstanding, giving Coupa a market cap of $1.6 billion.

Two valuation-based downgrades (DA Davidson & Raymond James) today sent Gigamon (GIMO, $51.81) stock down more than 6% on heavy volume of 2 million shares, 2.6x average daily volume.

Raymond James says there is potential upside from Gigamon’s new hybrid cloud solution, but believes it could take some time to materialize. The firm sees Gigamon’s growth story as now fully reflected in the stock price.

The 50-day moving average is trending upward from $47.74.

Bernstein initiates coverage of Broadcom (AVGO, $169.05) at ‘Outperform’ with a price target of $215, saying the company’s core business franchises are “extremely solid.” 

The firm is particularly positive on the wired infrastructure unit, and says the RF business benefits from robust secular trends and solid competitive positioning. 

In addition, Bernstein says Broadcom has shown a great execution track record in both improving margins and beating expectations.

Acacia Communications (ACIA, $101.98), a provider of optical interconnect products, once again raises Q3 guidance (it just did so on September 26):

*Revenue: $130 million to $133 million, vs. $127 million to $131 million previously

*EPS: 83 cents to 90 cents, vs. 72 cents to 81 cents previously

For more on Acacia, see TechStock Radar—September 26, 2016.

Fortinet (FTNT, $37.29) shares are back at the high end of their recent trading range. There is short-term resistance around $37.50. A gap on the price chart from last October runs up to $42.27.

The RSI is on the rise from 64.7. The stock is above both the 50-day and 200-day moving averages.

Goldman Sachs initiates coverage of Shopify (SHOP, $43.03) at ‘Buy’ with a price target of $53, saying the company is positioned to become a dominant platform for SMB commerce, with sustained customer growth and an increasing share of customer wallets.

For more on Shopify, see TechStock Radar—Sept. 28, 2016.

After rising nearly 18% last week, shares of Mimecast (MIME, $19.26), a provider of cloud-based email security solutions, today showed relative strength, gaining 0.6% (the Nasdaq Composite was down 0.2%).

Mimecast went public in November 2015 at $10 a share. The post-IPO high of $20.10 was reached last Thursday (Sept 29).

For more on Mimecast’s growth profile, see the September 2016 issue of Tech-Stock Prospector (TSP #175).

RBC Capital raises its Western Digital (WDC, $59.43) price target to $65 from $60, saying the company is seeing sustained tailwinds across both the HDD and NAND portfolios.

The firm sees upside to estimates into the end of the year, aided by core HDD tailwinds from an improvement in the PC market and an uptick in NAND demand.

For more on Western Digital, see TechStock Radar—Sept. 29, 2016.

BoFA/Merrill raises its NVIDIA (NVDA, $68.52) price target to $80 from $72, saying the chipmaker has the potential to earn $4 a share over the next three to four years (higher than its previous estimate of $3) because it believes deep learning technology could drive upside as emerging applications take hold. 

The fiscal 2017 (January) consensus EPS estimate stands at $1.85.

For more on NVIDIA, see TechStock Radar—August 12, 2016.