3 Tech Stocks With More Upside for 2012 (Update 2)

Updated from 1:14 p.m. ET to include analyst comments from Deutsche Bank about salesforce.com.

NEW YORK ( TheStreet) - 2012 has seen technology stocks zoom to new highs, and investors wonder if names like Apple ( AAPL), Microsoft ( MSFT), and salesforce.com ( CRM) have more room to run.

There are, however, concerns over a slowing European economy, and whether that will hit tech spending, both consumer and corporate. Nonetheless, Apple, Microsoft and Salesforce.com have produced healthy returns for shareholders year-to-date, and many believe there is more to come.

Here are some reasons why these three technology stocks are still worth owning for 2012:

Apple

Powered by strong sales of iPads, iPhones and Macs, Apple has had a remarkable run. In its most recent quarter, Apple had $46.33 billion in revenue, as it sold 37.04 million iPhones, 15.43 million iPads, 5.2 million Macs, and 15.4 million iPods during the holiday quarter. Gross margins during the quarter were 44.7%, compared to 38.5% a year ago.

Piper Jaffray analyst Gene Munster wrote about the new iPad that is being released next week, and believes that iPad sales could be conservative, given the availability of the product and the feature set.

"Better availability of iPad HD would likely drive upside to our March quarter iPad estimate of 9.0m units (-42% q/q). For every additional 1m iPads Apple sells in the March quarter, it adds $580m (2%) in revenue and $0.16 (2%) to EPS relative to our estimate of $9.35 on $34.68b," Munster wrote in a research report. He has an overweight rating and a $670 price target.

Mike Holt, equity analyst at Morningstar, believes that Apple has more room to run, as evidenced by his $560 fair value. A new iPad, dependent on price point and variations, could force Holt to adjust his 56 million unit forecast for 2012.

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Sterne Agee analyst Shaw Wu believes the new iPad is such an important revenue driver to Apple, he recently raised his price target to $620 from $550, based off the announcement. The analyst hiked his iPad estimate from 51 million units to 55 million units for calendar year 2012, but did not change his March estimate of 10 million iPads. "We view the potential inclusion of 4G LTE as key with speeds approaching that of a quality personal computer experience," Wu wrote in a recent research report.

Apple's TV plans could also drive future upside.

"There is an ocean of potential in the television market," Josh Brown, vice president at asset management firm Fusion Analytics and author of The Reformed Broker blog said. Apple is expected to launch a television set, either later this year or in early 2013. If Apple does do a dividend, there could be significant value added in the name. He did note that he has been trimming some Apple from client accounts based on portfolio management, not anything specific to the iPhone maker.

Hedge funds still believe there is additional upside in Apple. A lot of funds were busy scooping up shares during the fourth quarter. Hedge fund managers such as David Einhorn of Greenlight Capital and Steven Cohen of SAC Capital Advisors, for example, all increased their stakes in Apple, according to 13F filings for the period ending Dec. 31, 2011.

TheStreet Ratings rates Apple "buy".

Apple shares are up 32.2% year-to-date, and 53.8% over the past twelve months.

Microsoft

Microsoft is riding the wave of optimism surrounding Windows 8, which will be one of tech's biggest stories this year. The software giant gave a preview of its new operating system at Mobile World Congress in Barcelona this week, ahead of its launch later this year.

Nomura Securities analyst Rick Sherlund wrote in a research report that Microsoft has essentially reached his $32 price target, and thus rolled forward his $37 price target because of the optimism surrounding Windows 8.

"The period between beta release and Release to Manufacturing (we estimate end of July or August) of a major new version of Windows has tended to be the richest sweet spot in the product cycle, driving the stock 21% higher, on average," Sherlund wrote in his note. He rates shares buy.

Sanford Bernstein analyst Mark Moerdler believes there is additional upside to Microsoft, as he says the current share price doesn't factor in growth, and management wasting cash unnecessarily. "We are encouraged by somewhat better cost control on Online, and believe initial strong results from Office 365, increased attach rate and improved piracy supports our thesis," Moerdler wrote in his research report.

Moerdler is increasingly positive on Windows 8, saying it "delivers superb user experience, and is competitive against iOS and Android." He goes so far as to say Windows 8 in many ways "makes Apple iOS and Android look old fashion. He rates Microsoft outperform with a $37 price target.

Fusion Analytics' Brown noted that there has been a fundamental shift in the shareholder base of Microsoft. "There's been a glacial shift in the shareholder base. A lot of value funds own it. I think that's why you're seeing a change of character in the stock," Brown said over the phone. Fusion ranks Microsoft a 98 on technical analysis and an 85 on fundamental, for an overall rating of 93. "This is definitely a name we would be in, and if Windows 8 launches well, that's gravy."

Sherlund noted there is optimism not only from Windows 8, but from Windows Server 8, and Office 15, which are two of Microsoft's highest margin products, along with Windows.

TheStreet Ratings rates Microsoft "buy."

Microsoft's shares are up 22.76% year-to-date and 20.03% over the past twelve months.

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salesforce.com

Salesforce.com is a battleground stock, with bears and bulls on both sides of the fence. Roth Capital analyst Nathan Schneiderman called salesforce.com "one of the most compelling secular growth stories in the enterprise-software space." He has a buy rating and a $165 price target on the stock. Conversely, Morningstar analyst Sunit Gogia has an $81 fair value on the stock, and Fusion's Brown said he would be selling the stock. The average price estimate on Thomson Reuters is $165.60, so this indicates analysts believe there is still more room to the upside.

Business appears to be exceptionally strong at the cloud specialist. Salesforce CEO Mark Benioff and his team recently confirmed that the company signed its first ever nine-figure deal in the early days of the first quarter. Its previous largest deal was with HP ( HPQ).

Several large hedge funds added to or initiated stakes during the fourth quarter. Alkeon Capital Management added 235,991 shares, SAC Advisors added over 80,000 shares, and Libra Advisors initiated a position during the quarter.

Deutsche Bank analyst Tom Ernst Jr. believes there is significant upside from here, as he raised his price target to $215 from $205 after the most recent quarter. He has a buy rating on shares.

Ernst was impressed by the reported billings growth, and noted that " The company is well underway in becoming a strategic vendor of choice for large enterprises, instead of a point solution provider." Ernst is also impressed with salesforce.com's acquisition strategy, saying he believes the large acquisitions done last year are seeing growth of greater than 100%, and are accelerating since salesforce.com acquired the companies, as sales are now being done at the CEO level.

Salesforce.com recently reported strong fourth-quarter earnings and first-quarter 2012 guidance, as the cloud computing company said billings jumped 57% year-over-year.

Salesforce.com was recently mentioned as one of three of the top cloud stocks for 2012.

TheStreet Ratings rates salesforce.com "hold".

Shares of salesforce.com are up 41.4% year-to-date and 3.33% over the past twelve months.

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Interested in more on salesforce.com? See TheStreet Ratings' report card for this stock.

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>>To see these stocks in action, visit the 3 Tech Stocks With More Upside for 2012 portfolio on Stockpickr.

-- Written by Chris Ciaccia in New York

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