After a week of tech earnings results that fueled a market gain, there are still plenty of top shares to buy in the sector ahead of profit reports, according to Morgan Stanley. The firm named a slew of companies that have major upside heading into quarterly results. CNBC Pro combed through top Wall Street research to find more must-own tech stocks heading into earnings. They include: Palo Alto , Docebo, R1 RCM, Tenable and Flywire. Flywire The global payment tech network has one of the “most compelling” risk/rewards around, the firm says. Analyst James Faucette upgraded the stock earlier this week to overweight from equal weight saying that revenue growth concerns are overdone. “FLYW is accelerating the pace and size of new client signings which should drive higher levels of net new contribution vs. historical trends,” he said. Faucette urged investors to remain calm adding that the market has growth deceleration fears all wrong. “In fact, our base case growth assumption could prove conservative given it implies a lower than historical level of net new customer contribution a growth component that we think is primed for acceleration next, ” he said The stock is down 4% this year, but Faucette says shares could be due for a re-rating if growth continues to remain elevated. Flywire is also due to report fourth-quarter earnings in late February. Palo Alto Networks Analyst Hamza Fodderwala said the firm’s recent security checks show cyber threats remain a top priority for IT. That bodes well for Palo Alto in 2024 and beyond, according to Fodderwala. The firm says it sees a long runway for growth for the cyber company as its competitive positioning remains robust, he wrote. Further, Palo Alto is better positioned for AI than investors believe, Fodderwala added. “With large unique data sets and market leadership across multiple major security categories, we think PANW is best positioned among the pure-play security vendors to deliver AI-driven security automation,” he said. Meanwhile shares of the company are up . but the stock still remains extremely attractive, the firm says. “We are doubling down on PANW as our Top Pick given share gain across multiple security categories and growing AI tailwinds from a broader platform,” he wrote. Palo Alto is scheduled to report earnings in late February. R1 RCM The medical technology company was recently named a top pick by analyst Craig Hettenbach. Shares of the company , but Hettenbach says the stock is severely undervalued. “Investors are over extrapolating recent negatives, failing to give RCM credit for a stronger foundation established in the business over the last few years,” he said in the note. Hettenbach says the business has improved since right before the pandemic began. “We emphasize increased diversification, higher margins and technology/AI optionality, along with positive feedback from a customer check,” he added. But investor skepticism remains leaving Hettenbach to pound the table for RCM shares. The firm say new management has the company on the right track with a mix or growth and free “We are Overweight RCM following recent underperformance in the stock,” he said succinctly. The company is due to report quarterly earnings in late February. Docebo “DCBO is at forefront of innovation in Corporate Learning, with a competitive moat & strong positioning to monetize AI via direct products, upsell to higher priced plans & indirect platform benefits. … .With a vision to transform corporate learning and skilling from off-shelf, static content and learning pathways to hyper personalized learning experiences, we believe Docebo is leading the charge with respect to innovation in the enterprise learning market.” Flywire “Most Compelling Risk-Reward in SMID-Cap Fintech. … .FLYW is accelerating the pace and size of new client signings which should drive higher levels of net new contribution vs. historical trends. … .In fact, our base case growth assumption could prove conservative given it implies a lower than historical level of net new customer contribution a growth component that we think is primed for acceleration next year.” R1 RCM “Investors are over extrapolating recent negatives, failing to give RCM credit for a stronger foundation established in the business over the last few years. … .We emphasize increased diversification, higher margins and technology/AI optionality, along with positive feedback from a customer check. … .We are Overweight RCM following recent underperformance in the stock.” Palo Alto Networks “We are doubling down on PANW as our Top Pick given share gain across multiple security categories and growing AI tailwinds from a broader platform. …. .With large unique data sets and market leadership across multiple major security categories, we think PANW is best positioned among the pure-play security vendors to deliver AI-driven security automation.” Tenable Holdings “TENB remains the category leader within its core Vulnerability Management endmarket, but continues to trade at a discount to peers. After underperforming Security peers throughout 2023 on the back of slowing growth, we see opportunity in the recent dislocation in TENB shares vs. Security peers, and point to our above-consensus outlook for a > 28% FCF CAGR through 2025 as reason for optimism as the company pushes towards its long-term targets of 25%+ operating margins and 30%+ FCF margins.”
Top tech stocks to buy from Morgan Stanley
